INDEPENDENT STRATEGIC ANALYSIS OF

AUSTRALIA’S GLOBAL INTERESTS

Indian Ocean: A Sea of Uncertainty

FEBRUARY 2012
 About Future Directions International

Future Directions International (FDI) has two roles: to ensure that Australians recognise they are part of a
two-ocean continent and that West Australians see themselves belonging to a dynamic, national entity
in a developing region of the world.

Much of Australia’s external focus has centred on the Pacific, Southeast and Eastern Asia. With its
developing wealth, increasing population, evolving trade and shipping capabilities and expanding
geographic, political and security significance, however, the Indian Ocean and its littoral states will play
an increasingly important role in Australia’s future.

Western Australia is entering an unprecedented period of wealth and development. For this to be
sustained, however, West Australians need to understand the challenges and opportunities they face,
nationally, regionally and globally.

To achieve these outcomes, leaders and their policy makers and implementers need to be aware of the
geo-strategic complexities of their region. With this in mind, FDI has established four areas of research
that embrace the following:

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FDI will continue to ensure that its product is passed to an increasing number of Associates who will
benefit from its future looking research. In so doing, FDI is establishing itself as an Australian centre of
excellence in these four areas.

Launched in 2000 as the Centre for International Strategic Analysis (CISA), by the then former Governor
OF7ESTERN!USTRALIA-AJOR'ENERAL-ICHAEL*EFFERY!#!/-IL #6/-#2ETD &$)HASSINCEGROWN
over the past decade to become a respected Australian research institute. As a Perth-based independent
research institute for the strategic analysis of Australia’s global interests, FDI has proven itself to be a
centre of ongoing influence in shaping public discussion and government policy.

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First published February 2012

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Mr Tas Luttrell
Indian Ocean: A Sea of Uncertainty
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Indian Ocean: A Sea of Uncertainty
 Contributors

David Alexander
FDI Research Assistant.

Dr Ameer Ali
Lecturer, Economics, Murdoch University, Perth.

Dr Rupakjyoti Borah
Senior Lecturer, Department of Geopolitics and International Relations, Manipal University, Karnataka, India.

Dr Y.J. Sithara N. Fernando

Visiting Research Fellow, Institute of Chinese Studies, New Delhi, India.

Dr Vivian Louis Forbes

Map Curator, University of Western Australia, Perth.

Professor Sandy Gordon

Professor, ARC Centre of Excellence in Policing and Security, Canberra.

CAPT David L.O. Hayward (Retd)

Defense Research Analyst, Royal United Services Institute (RUSI) of Australia.

Jasmine Hughes
FDI Research Assistant.

Major General John Hartley AO (Retd)

CEO and Institute Director, Future Directions International.

Paula Hanasz
Consultant, Noetic Solutions Pty Ltd, Canberra.

Dr Jabin T. Jacob
Assistant Director, Institute of Chinese Studies, New Delhi.

Leighton G. Luke
Manager, FDI Indian Ocean Research Programme.

Ciara O’Loughlin
FDI Assistant, Indian Ocean Research Programme

Sergei DeSilva-Ranasinghe
Manager, FDI South and West Asia Research Programme.

Dr David A. Robinson
Lecturer, School of Communications and Arts, Edith Cowan University, Perth.

Jason Thomas
Adjunct Research Fellow, Australian Sustainable Development Institute, Curtin University, Perth.

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 Contents

Foreword 5

Chapter One: An Overview

Critical Issues in the Indian Ocean Region to 2020 9
United in Disunity? Pan-regional Organisations in the Indian Ocean Region 19
Co-operation in the Indian Ocean Region:
Towards the Co-existence of IOMAC and IOR-ARC 23

Chapter Two: Piracy

Peak Piracy Season Here Again; Solutions Lie on Land, Not Water 31
Somali Pirates and Islamist Militias Joining Forces – An Attractive Proposition? 35
The Piracy-Illegal Fishing Nexus in the Western Indian Ocean 41

Chapter Three: South Asia

India, Australia and the United States in the Indian Ocean Region:
A Growing Strategic Convergence 49
South Asia: A Cold War “Quadrilateral” Redux? 55
India’s Rise as a Great Power, Part One: Regional and Global Implications 57
India’s Rise as a Great Power, Part Two: The Pakistan-China-India Dynamic 63
The Sri Lankan Election and Tamil Politics after the LTTE 69
Sri Lanka’s Stability Critical to New Delhi’s Indian Ocean Ambitions 75
The Politics of Sri Lanka-Tamil Nadu Relations 77
Pakistan’s Strategic and Foreign Policy Objectives 81
Afghanistan: Shooting and Chewing Gum at the Same Time 87
Afghanistan: Implications of the Karzai and Khan Assassinations 91

Chapter Four: China in the Indian Ocean Region and Beyond

Differing Perceptions of China’s Role in the Indian Ocean 95
China in the Indian Ocean: A Case of Uncharted Waters 101
China-India Rivalry in the Maldives Set to Intensify 109
China Investment Spurs Bangladesh Development 111
China’s Rise: South Pacific Perspectives
– New Zealand and Australian Security Perceptions of China 113
The Future of China-Pakistan Relations after Osama bin Laden 117

Chapter Five: South-East Asia

The Hate/Love Triangle in the Timor Sea:
Australia, Indonesia and East Timor – Part One 123
The Hate/Love Triangle in the Timor Sea:
Australia, Indonesia and East Timor – Part Two 131
Burmese Days: The Beginnings of Change in a Land Apart? 137

Chapter Six: Middle East

A New US Persian Gulf Strategy? 143
Yemen: An Uncertain Future 147
Closing the Strait of Hormuz – An Ace up the Sleeve or an Own Goal? 151
An Increasing Arc of Influence: Iran in the Indian Ocean Region 155

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Indian Ocean: A Sea of Uncertainty
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 Foreword

The Indian Ocean is critical to global trade and food and energy security. Resources increasingly are being
exploited by its littoral and island states. It is also a stage for the pursuit of global strategic and regional
military and security interests. As the region emerges to become one of the twenty-first century’s leading
strategic theatres, it will once again be at the crossroads of global trade, economic growth and potential
crises. It is a region in which instability and conflict can quickly arise from imprecise border delineations,
internal conflicts, issues of energy and resource security and changing national interests.

Over one-third of Australia’s coastline borders the Indian Ocean. Security of lines of trade and the
development of both on-shore and off-shore assets are essential to Australia’s economy and development.
The Indian Ocean and its littoral and island states are poised to play an increasingly important role in
Australia’s future. Future Directions International seeks to determine how events in those states have an
impact upon Australia’s interests.

For all the above reasons, a detailed knowledge of the evolving nature of the Indian Ocean and its littoral
states is essential. Accordingly, the FDI Indian Ocean Research Programme asks the following questions:

“What are the key developments in the Indian Ocean region’s littoral and island states over the coming
decade and what impact might they have on Australia’s interests in the region? How might Australia best
respond to the challenges and opportunities which they present?”

This publication brings together a collection of papers analysing various aspects of international relations
in the context of the Indian Ocean region. In addition to those written by FDI staff and research assistants,
many of the papers presented here were produced by leading FDI Associates – all of whom are experts in
their fields.

I trust you will enjoy this selection of papers and encourage you to visit the FDI website (www.futuredirections.
org.au) and peruse the full range of FDI publications across all of our research areas.

Major General John Hartley AO (Retd)

Institute Director and CEO
Future Directions International

Indian Ocean: A Sea of Uncertainty

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Indian Ocean: A Sea of Uncertainty
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 Chapter One

An Overview

Indian Ocean: A Sea of Uncertainty

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Indian Ocean: A Sea of Uncertainty
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 Critical Issues in the Indian
Ocean Region to 2020
13 September 2010
Leighton G. Luke, Manager
1
CHAPTER
Ciara O’Loughlin, FDI Research Assistant
Indian Ocean Research Programme

Summary
This paper seeks to identify a number of the critical issues that are likely to play a major role in the Indian
Ocean Region over the next ten years. First, however, the region must be defined, before key issues are
examined. Among the issues considered are potential geopolitical rivalries, the competition for influence
and resources, the problem of failed or failing states, piracy, population growth, extremism and potential
flashpoints.

Defining the Region

Covering an area of just over 68.5 million square kilometres and bounded by landmasses on three sides, the
Indian Ocean is the world’s third-largest ocean.

The Indian Ocean region, though complex, is a discrete geographical entity. In comparison to the world’s
other oceans, defining the exact boundaries of the Indian Ocean has been something of an imprecise
science and has been a long-standing source of disagreement for hydrological experts. Nevertheless, by
drawing wherever possible on the general consensus of experts in the field of maritime boundaries, FDI
delimits the Indian Ocean by the following points:

A: latitude 60°S (the northernmost limit of the

Southern Ocean);

B: Cape Agulhas (the southernmost point of the

African continent);

C: the Suez Canal;

D: the northernmost reaches of the Persian Gulf;

E: the Strait of Malacca;

F: from the Singapore Strait to the eastern boundary

of the Timor Sea (including the Java, Flores and
Banda Seas that lie within the archipelagic waters of
Indonesia); and

G: the west coast of Tasmania (but not including the Figure 1: Limits of the Indian Ocean
waters of Bass Strait).

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 In addition to Australia and its External Territories, FDI defines the Indian Ocean region as comprising the
following states (Indian Ocean Region “key states”):

Africa Middle East South Asia South-East Asia Island States

South Africa Saudi Arabia Pakistan Malaysia Madagascar
Mozambique Yemen India Singapore Mauritius
Tanzania Oman Bangladesh Indonesia Seychelles
Kenya United Arab Sri Lanka East Timor Réunion (France)
Emirates
Somalia Qatar Burma Mayotte (France)
Djibouti Bahrain Thailand Comoros
Eritrea Kuwait Maldives
Sudan Iran British Indian Ocean
Territory (UK)
Egypt

The following states, either adjacent to, or dependent on, the Indian Ocean (Indian Ocean Region “peripheral
states”) are also influenced by events in the region:

Africa Middle East Asia

Ethiopia Jordan Nepal
Zambia Iraq Bhutan
Malawi The Palestinian Territories Afghanistan
Lesotho Syria
Botswana Israel
Zimbabwe Lebanon
Uganda Iraq
Rwanda
Burundi
South Sudan

On the basis of this conceptual framework, the Indian Ocean Region is comprised of 36 key states, and
20 peripheral states. The region also includes numerous island territories of littoral and other states. These
territories generate valuable Exclusive Economic Zones (EEZs) and strategic outposts for the regional and
extra-regional states that control them.
Wealth in the Indian Ocean Region
The Indian Ocean Region contains an abundance of minerals, oil and natural gasses. The Indian Ocean
Region’s littoral states contain more than two-thirds of the world’s known oil reserves, 35 per cent of the
world’s gas reserves, 60 per cent of uranium, 40 per cent of gold, 80 per cent of all diamond deposits and
a large variety of other mineral substances. These natural resources have created a great degree of wealth
in some key Indian Ocean Region states, while others have either been lacking in resources, or, for socio-
historical reasons, have been unable to capitalise on such potential sources of wealth, largely due to conflict
or poor governance.

The Indian Ocean Region contains a huge diversity of economies. The figures for the Gross Domestic Product
(GDP) of the Indian Ocean’s key states vary enormously from India’s estimated 2010 GDP of US$1,367.2
billion and that of Australia at US$1,192.9 billion – twelfth and thirteenth-largest in the world, respectively

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– to the likes of Somalia, East Timor, Djibouti, the Maldives, Zimbabwe and Comoros. The International
Monetary Fund estimates Comoros’ 2010 GDP to be US$0.564 billion, the lowest of the Indian Ocean
Region’s key states, putting it in 177th place in the global rankings of 183 national GDPs.1

Given the relatively miniscule populations of many of the Indian Ocean’s island states and territories, a more
accurate measure of wealth disparities within the region is GDP per capita. On that basis, the key states of the
Indian Ocean Region with the highest per capita GDP are Qatar, Singapore, Australia, Kuwait and the United
Arab Emirates, with global rankings of first, fourth, tenth, fourteenth and eighteenth places respectively.2
Conversely, the Indian Ocean states with the lowest per capita GDP are Mozambique, Madagascar, Eritrea
and Somalia,3 with per capita GDP of US$981, US$905, US$676 and US$298, respectively. All four states
are, or recently have been, in a state of conflict and/or disarray, largely as a result of warfare or civil upheaval.

Despite the poverty of states such as Mozambique, Somalia, Djibouti, Eritrea and Sudan, five of the Indian
Ocean Region’s key states – Australia, India, Indonesia, Saudi Arabia and South Africa – are members of the
G20. This standing provides these wealthier Indian Ocean states with a position of influence which has the
potential to be used for their collective advantage.
Governance in the Indian Ocean Region
Just as there is a huge variance of cultures and economies in the Indian Ocean Region, there is also a great
diversity in governance. Many of the Indian Ocean Region’s African states possess governments that are
non-existent, weak or corrupt. Relative to their other African counterparts, South Africa, Tanzania, Kenya,
Seychelles and Mauritius have the most stable governments. All are republics providing for regular elections.

Mozambique, Egypt, Rwanda and Madagascar perhaps form a second category of the next most stable
African key states. Since the enactment of its new constitution on 20 November 1999, Mozambique,
though stable and with some notable successes, has also faced some electoral controversies. As presidential
republics, both Egypt and Rwanda hold regular elections, though presidential elections in Egypt remain
effectively one candidate affairs and in both countries opposition parties have raised questions about
government interference in the electoral process.

Madagascar’s post-1992 democratic record recently faced a challenge when, in March 2009, the
democratically elected President, Marc Ravalomanana, stepped down, handing over government to the
military, which then transferred power to opposition leader and former mayor, 36-year old Andry Rajoelina.
At the time of publication, the situation remains unclear and the possibility of tangible appears uncertain.

The third political category of the Indian Ocean Region’s African states includes the likes of Eritrea, Djibouti
and Sudan. Democratic government is absent in Eritrea, where 2001 elections were postponed indefinitely,
in Djibouti, which is effectively a one-party state, and in Sudan which, despite the 2010 elections, remains
largely under the authoritarian control of President Omar al-Bashir.

As a long-term failed state, Somalia is perhaps best thought of as occupying a category of its own. Somalia’s
civil war resulted in the complete collapse of its central government. The country has existed in a state of
anarchy since 1991. Although the internationally-recognised Transitional Federal Government – backed by
the United Nations, Ethiopia and the West – has been in place since 2004, it lacks resources and effectively
has no control beyond central Mogadishu. There is no central justice system and the growing influence of
pirates and Islamist militias such as al-Shabaab pose further challenges to its meagre authority – a situation
which looks likely to continue.
1 Based on 2010 forecasts calculated by the International Monetary Fund in US dollars at current prices. Available from the
IMF World Economic Outlook Database 2010. <http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/index.aspx>
2 Based on 2010 forecasts calculated by the International Monetary Fund in US dollars using the Purchasing Power Parity
method. Available from the IMF World Economic Outlook Database 2010.
3 Somalia figure from the National Accounts Estimates of Main Aggregates calculated by the Economic Statistics Branch of the
United Nations Statistics Division using 2008 data, all others from the International Monetary Fund, as above.

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 Governance of the Indian Ocean Region’s key Middle Eastern states takes a different form to that of their
African neighbours. With some exceptions, most of these states, though far more stable than the African
nations listed above, are not representative democracies. They vary from constitutional monarchies (Bahrain
and Kuwait), to absolute monarchies (Saudi Arabia and Oman), republics (Yemen and Iraq), a theocratic
republic (Iran) and a federation (the United Arab Emirates). Qatar has begun the first moves from an absolute
monarchy to a constitutional monarchy.

The Asian states of the Indian Ocean Region are comprised predominantly of republics, federal republics
and parliamentary democracies. Notable among these is Burma, where, despite parliamentary elections,
the military junta remains very much in control. The aftermath of Sri Lanka’s civil war and, in particular, the
government offensive and victory in 2009, has arguably resulted in reduced faith in the country’s democratic
institutions. The most recent example is the vote by Parliament – in the face of an Opposition boycott –
to amend the 1978 constitution by removing the two-term presidential limit and granting the president
ultimate authority over all public service, judicial and police appointments. The changes permit incumbent
president Mahinda Rajapakse to seek re-election for an unlimited number of terms in office and further
consolidate the powers of an already strong executive presidency.

The array of government institutions amongst the states of the Indian Ocean Region is indicative of the
region’s diversity and may also suggest differences in political values. The political, cultural and economic
variances between Indian Ocean Region states need to be better understood in order to facilitate greater
dialogue, prosperity and co-operation within the region.

Critical Issues to 2020

The Indian Ocean region is a dynamic, evolving strategic theatre which, having moved on from relative
obscurity during the Cold War, will be increasingly at the forefront of geopolitical developments in the
twenty-first century. Looking towards 2020, a number of likely critical issues stand out. These will be the
subject of separate future Strategic Analysis Papers which will examine them in more detail. For now, it is
sufficient to consider them in general terms. In no particular order of significance, the likely critical issues
are:
Interrelations of – and Possible Rivalry between – the Region’s Three Major Powers
Looking out to 2020, relations between the three major powers of the Indian Ocean region
– India, China and the United States – will continue to evolve in complexity, heightened by the possible rise
of India and China and a perceived decline of US power in the region.

The perception of US strategic decline warrants caution and should not be taken too literally. Of the three
powers – indeed, of all the world’s leading powers – the United States alone has the ability to project
significant and sustained force into the region. It is a capability which, to 2020 at least, other powers can
only aspire to. Furthermore, the US presence is viewed positively by most, if not all, South and South-East
Asian governments, which recognise it as a bulwark against Chinese expansion and assertiveness.

US economic linkages with the region are also welcomed, as they provide an economic dimension to regional
security. Indeed, it has been argued by some, such as former US Ambassador Dr Robert Sutter that, while
it may appear counterintuitive, the United States’ trade deficit with Asia actually works in everyone’s favour
by providing a market for Asian products. For its neighbours, China is, on the other hand, more of a peer
competitor. It thus brings regional economies into a (mostly) stable, Western-dominated system, which, in
turn, benefits the US national interest.

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In the broadest possible sense, while a rising China seeks to counter the dominance of the United States
and assert itself as the regional hegemon, an emerging India seeks, in turn, to balance against China. This
is a situation which can serve US interests well, as the two regional rivals are left to do the work and take
all or most of the risks involved. India’s naval expansion is a case in point, as it adds additional weight to the
US naval presence.

For the above reasons, the India-China rivalry may not be the principal fault line of regional tectonics.
Although the two states have encountered difficulties in the past and the potential remains for further
clashes – probably more so along their land borders rather than in the waters of the Indian Ocean – their
relationship is perhaps ultimately overshadowed by the opportunities and challenges of the evolving China-
US relationship.
Competition for Influence and Resources
The Indian Ocean Region contains substantial quantities of energy resources. This is particularly so in the
case of oil, coal and natural gas. Crucially, it is also a transit zone for much of the world’s energy resources.

The Indian Ocean Region contains some of the world’s fastest growing populations and economies, such as
India and Indonesia. China, while not an Indian Ocean Region state, is also dependent upon, and seeking
to influence, the Indian Ocean Region.

These dynamics, and the finite nature of the globe’s fossil energy supplies, have created a growing sense of
“energy nationalism”, in which states compete for access to increasingly scarce energy resources.

It is in this context, and on the basis of historical animosities, that China and India in particular have sought
to gain greater influence in the region. Key sites of competition in a list which will undoubtedly expand over
the coming decade include Mozambique, Tanzania, Sri Lanka, Nepal, Bangladesh, Burma and the Maldives.

In addition to energy considerations, there is currently competition, and the potential for intensified
competition, between Indian Ocean states seeking to attain greater shares of the region’s fisheries and
fresh water resources.

Other states, some of them extra-regional actors, will also compete for the region’s resources. Examples
include South Korean attempts to purchase farmland in Madagascar and the expansion of both China and
India into the resources sectors of various African countries.

There is also more general competition between Indian Ocean states for power and influence within
the region. While this competition for influence is inextricably linked to competition for resources, other
geostrategic motives may also be significant, particularly as leading states such as India and China seek to
balance against each other and smaller states choose to bandwagon with one or both for security.

It is important to recognise, however, that the states of the Indian Ocean Region have significant common,
and far less controversial, interests. If such interests are recognised, the capacity for co-operation would
undoubtedly be enhanced. Examples of commonalities that will increasingly be recognised by the region’s
states in the coming years are the co-operative confrontation of unconventional security threats for the
preservation of maritime trade routes and resource management co-operation. Indeed, this has already
begun, with the multinational efforts to combat piracy undertaken in the western Indian Ocean. The 1960
Indus Waters Treaty between India and Pakistan and the East African Nile Basin Initiative, while certainly not
perfect, can provide templates for this purpose.

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 Failed and Failing States

The ongoing presence of current failed or failing states, such as Somalia and Afghanistan, and the existence
of internal problems in other states, such as Yemen and Pakistan, which could lead to them also becoming
failed or failing states, will continue to undermine regional – and global – security over the coming decade.

Both Yemen and Pakistan will continue to be frontline states in attempts to confront or control non-state
actors such as al-Qaida, the Taliban, Lashkar-e-Tayyiba and other Islamist extremist groups.

Those groups, and others like them, will themselves continue to challenge a perceived Western cultural
and geopolitical dominance and to overthrow regional governments seen as being allied with the West or
otherwise “un-Islamic”.

For better or worse, states such as those above will continue to anchor Western forces – including those of
the US and Australia – in the region.

In the case of Somalia, militia groups such as al-Shabaab will continue to challenge the limited authority of
the Western-backed Transitional Federal Government. The accompanying instability and otherwise limited
economic opportunities will likewise allow piracy to continue unimpeded.
Piracy
Piracy in the Indian Ocean Region is concentrated in – but not confined to – the waters of the Gulf of Aden,
southern Red Sea, much of the Arabian Sea and the western Indian Ocean along the east African coast as
far south as Madagascar and as far east as the Seychelles archipelago.

Barring an end to the Somali Civil War and the return of some form of meaningful civil authority capable
of patrolling the nation’s territorial waters and enforcing the rule of law, thus providing a framework for
long-term economic growth, piracy looks likely to continue to be one of Somalia’s few growth industries.

Over the next decade, international attempts to control Somali piracy will continue. It is very likely that
the number of nations taking part in the various naval forces will expand. Given the vast, and increasing,
distances to be patrolled, the obvious economic attractiveness of piracy and the anarchic conditions in
Somalia, it remains to be seen just how effective those forces will be.

As United Nations Secretary-General Ban Ki-moon noted in a March 2009 report to the UN Security Council:

‘… in the long term the issue of piracy and armed robbery at sea off the coast of Somalia will be
resolved only through an integrated approach that addresses the conflict, lack of governance
and absence of sustainable livelihoods on land in Somalia’.4
Population Growth and People Movements
Based on the FDI definition of the states in the Indian Ocean Region, the region has a population of
approximately 2.4 billion people. Populations range from India, with a population of 1.21 billion – and
predicted to overtake China as the world’s most populous country by 2030 – to the Seychelles, with a
population of just 85,000.5

4 Report of the Secretary-General Pursuant to Security Council Resolution 1846 (2008), United Nations Organisation: New
York, 16 March 2009, ss. 48 & 59.
5 Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population
Prospects: The 2008 Revision <http://esa.un.org/unpp/>

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Further complications from population growth will be felt in countries where youthful populations outstrip
economic growth rates, resulting in increased unemployment. In addition to negative sociological effects,
it is a situation which could also have far-reaching political consequences as disenchanted youth query
the legitimacy of governments that are seen as having failed them through an unwillingness or inability to
ensure a reasonable standard of living. Indian Ocean Region states likely to be confronted with this situation
include, among others, Djibouti, Comoros, Yemen and Bahrain, the latter both facing the exhaustion of
their oil reserves over the next ten to fifteen years.

Looking out to 2020, both Pakistan and Afghanistan in particular are experiencing high population growth
rates at a time of great political instability, which does not offer a promising outlook for the future. Indeed,
growth rates in Pakistan may actually exceed the UN estimates.

South Asia is also predicted by 2025 to be home to the majority of the world’s megacities. These megacities
will contain populations of 10 million or more inhabitants. Of what the UN predicts will be the ten largest
megacities in 2025, five are located in South Asia and all will have populations greater than 19 million:
Mumbai (Bombay), Delhi, Dhaka, Calcutta and Karachi.6

The distribution of food to such megacities will be a significant problem, as it will need to be transported
from poorer quality farmland located further away from the ever-expanding population centres, given that
the expanding cities generally push outwards into the productive farmland on their outskirts.

In the event that food distribution networks to the megacities do breakdown for an extended period of time
(such cities are, of course, agricultural consumers, not producers), the likely consequences could include
starvation, rioting, political upheaval and, potentially, mass migration.

The population movements that could result from large-scale famines would produce massive geopolitical
challenges to such an extent that many, if not most, governments would struggle to cope with the influx
of refugees.

The many consequences of population growth will be examined in later Strategic Analysis Papers by FDI’s
Global Food and Water Crises and Indian Ocean research programmes.
Increasing Militarisation
In the years to 2020 and beyond, increasing militarisation and arms build up among many of the region’s
major actors will be a continuing feature of the geopolitical landscape.

Key points in this regard include the Iranian nuclear programme (and the responses to it of the Gulf States,
Israel and the US) and a possible China-India arms race. The latter point is in light of India’s naval expansion
as it acquires the INS Vikramaditya aircraft carrier and its construction of a new naval base at INS Kadamba
on the Arabian Sea, together with China’s development of a blue-water navy to protect shipping routes and
ensure the reliability of its energy supplies coming through key chokepoints such as the Strait of Malacca.
Proliferation of Militant Islamist Movements
The growth and spread of militant Islamist movements will continue to pose challenges to authorities across
the Middle East, East African and South Asian sub-regions, where it is very closely related to issues (either
real or perceived) of governance and population growth/economic opportunities. In the first instance, local
governments are seen by Islamists, who call for the return of a pan-regional Islamic caliphate, as being too
closely allied with the West. Pakistan and Saudi Arabia are perhaps the two most well-known examples,
6 Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, 2008, Urban
Agglomerations 2007. <http://www.un.org/esa/population/publications/wup2007/2007urban_agglo.htm>

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 but it is a situation which the governments of Bangladesh, the Maldives and even Sri Lanka could find
themselves confronted with over the next decade. Within South-East Asia, Indonesian Islamists, too, are
receptive to the idea of a caliphate.

In the second instance, Islamism may prove attractive to un- and under-employed youth in states such as
Yemen or Djibouti, which are experiencing high rates of unemployment and population growth. The growth
of schools, or madrassas, dedicated to extremist ideologies and targeting disenfranchised youth is a related
problem and one which is already being experienced in Sri Lanka and Indonesia.
Potential Flashpoints
While it is difficult to predict future flashpoints with any degree of certainty, a number of potential flashpoints
standout:
Somalia
On both land and sea, the situation in Somalia appears unlikely to be resolved in the immediate future.
Somali pirates will continue to threaten maritime security in the Gulf of Aden and western Indian Ocean,
while Islamist militants, such as al-Shabaab, will continue to pose a threat to security on land. Al-Shabaab
has already attacked villages in neighbouring Kenya and has threatened to attack the Kenyan capital,
Nairobi, and was responsible for the July 2010 bombings carried out in Kampala, Uganda. Given that
Ethiopia is seen by al-Shabaab as being responsible for its removal from power in 2006 when, as the Islamic
Courts Union, it held power in Mogadishu, the group may choose to target Ethiopian centres in the future.

Equally, the group’s admiration for al-Qaida could bode ill for stability in the wider region, particularly since,
in February 2010, al-Shabaab offered Somalia to al-Qaida for use as a training ground.
Yemen
A number of significant challenges will continue to confront Yemen, reducing the prospects for lasting
stability. The government of President Ali Abdullah Saleh is facing the continuing Houthi rebellion in the far
north of the country, a growing secessionist movement in the south, a declining economy as oil revenue
peaks, a youthful and underemployed population and the destabilising presence of the “al-Qaida in the
Arabian Peninsula” grouping. All of these factors will continue to undermine stability in a strategically
located country, potentially making it difficult for the West to avoid greater involvement in Yemen.
Iran and the Strait of Hormuz
The Iranian Government’s nuclear programme and its antipathy towards the West will continue to make it
a focus of attention, as will domestic issues such as a reform movement, power plays within the governing
élite and the pressures placed on it by a youthful population, large numbers of whom now doubt the
legitimacy of that élite.

While the current leadership of Supreme Leader Grand Ayatollah Ali Khamenei and President Mahmoud
Ahmadinejad appears to enjoy a strong position despite the recent “Green Movement”, moderates and
reformists have held power previously and will again jostle with hardliners for primacy at some point in the
future. Adding to the possible confusion is that fact that there is no consensus among conservatives: clerics
in the ruling power structure are distrustful of President Ahmadinejad, suspecting him of attempting to
curtail their influence.

An expansionist, nuclear-armed Iran headed by a reinvigorated hard-line leadership that has reclaimed some
its lost legitimacy would be a potential flashpoint of the highest order capable of, or at least attempting to,
cut the flow of energy shipments through the Strait of Hormuz or undermining regional stability through
proxies such as Hezbollah.

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Pakistan

Without a resolution to many of the pressures under which Pakistan finds itself, the outlook for this key
South Asian state will remain uncertain. In addition to the pressures of population growth and the perennially
turbulent relationship with India, Islamabad is also confronted by Islamist extremist groups and the spectre
of the Taliban in the North-West Frontier Province (Khyber Pakhtunkhwa) and the Federally Administered
Tribal Areas. The situation in Afghanistan is, of course, closely related. Over the next decade, as now, any
resolution, or absence of one, on the Afghan side of the porous border will have an effect on Pakistan’s
internal security.
Egypt
Tensions between the ruling National Democratic Party of President Hosni Mubarak and the rise of the
Muslim Brotherhood grouping could have a profound effect on Egypt over the coming decade. This is
particularly the case in light of President Mubarak’s age and the presumed eventual succession to the
presidency of his son, Gamal, at the same time as the Muslim Brotherhood gains in popularity and profile.
Although not a political party as such, since religious based parties are banned under the 1971 Constitution,
independents aligned with the Muslim Brotherhood hold the second-largest number of seats in the People’s
Assembly and are effectively filling the vacuum left by weak opposition parties. If Egypt were to enter into
a sustained period of political uncertainty – a situation hinted at by Mohamed ElBaradei, a former Director
General of the International Atomic Energy Agency and rumoured candidate for the 2011 presidential
election, who has called for a boycott of the poll – the Muslim Brotherhood may be able to assert itself more
fully by agitating for an end to the ban on religious parties and ultimately forcing a realignment of Egyptian
foreign policy away from the West.

*****

This paper has sought to offer a précis of what are likely to be some of the most critical issues and states
in the Indian Ocean region over the next ten years, based on current situations and trends and noting the
inherent difficulty in forecasting even the immediate future in a highly dynamic environment. The issues
identified, and the actors involved, will be the topics of subsequent FDI Strategic Analysis Papers, in which
they will be analysed in more detail.

*****

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Indian Ocean: A Sea of Uncertainty
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 United in Disunity?
Pan-regional Organisations in the
Indian Ocean Region
30 April 2010
Leighton G. Luke, Manager
Indian Ocean Research Programme

Summary
Although the Indian Ocean region is home to a veritable alphabet soup of sub- and intra-regional
groupings (which will be the subject of a separate forthcoming Strategic Analysis Paper), there are
– or have been – few truly pan-regional organisations. This is reflective of the fact that the Indian Ocean
region is more of a geographical entity than a political one.

In addition to their region-wide focus, those few organisations generally share another trait: from auspicious
and promising beginnings, their effectiveness has invariably waned, even ending in the demise of the
organisation. The Indian Ocean Rim-Association for Regional Co-operation (IOR-ARC), for instance, is
now at just such a turning point. Largely moribund, if it cannot be rejuvenated during next year’s Indian
presidency, it will most likely meet the same fate as its predecessors. The Indian Ocean Naval Symposium, on
the other hand, may be able to buck the trend; it could yet go from strength to strength.
Analysis
Unlike the Pacific, there are few truly regional organisations in the Indian Ocean region. This in no small
measure is due to the fact that the region is more of a geographical entity, rather than any kind of political
community. The majority of the region’s states have tended to view the Indian Ocean – and their place in it –
as a number of different sub-regions with only the most tenuous links or commonalities. It is a situation that
has been compounded by Cold War tensions, national rivalries, the fallout of colonialism and, most of all,
simply the sheer size and diversity of the region – a point emphasised by Australia’s then-Foreign Minister,
Senator Gareth Evans, in a May 1995 speech given in New Delhi:

‘… the region is so diffuse … it contains sovereign states ranging in size from India with over
900 million people, to Seychelles with less than 80,000 people. Economies range in size from
over $250 billion for our two countries [India and Australia], to less than $400 million for the
Maldives and Comoros.’

The figures may have changed, but with momentum once again building for greater regional
co-operation – just as it was fifteen years ago – a review of pan-regional groupings in the Indian Ocean
area is timely. It is worth noting that, in addition to Australia and India, the two most vigorous proponents
of regional (and, for that matter, sub-regional), organisations have been two of its smaller states: Mauritius
and Sri Lanka.

s Indian Ocean Rim-Association for Regional Cooperation (IOR-ARC)

The IOR-ARC was launched as the Indian Ocean Region Initiative in Mauritius in 1997. The launch followed
discussions such as the first Inter-Governmental Meeting of the Indian Ocean Rim Initiative held in Mauritius
on 31 March 1995 and the International Forum on the Indian Ocean Region, held in Perth in June that
same year. The principle objective of the IOR-ARC is to facilitate enhanced economic co-operation between
members, with a particular focus on trade and investment liberalisation.

The IOR-ARC currently comprises 18 members (Australia, Bangladesh, India, Indonesia, Iran, Kenya,
Madagascar, Malaysia, Mauritius, Mozambique, Oman, Singapore, South Africa, Sri Lanka, Tanzania,

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 Thailand, the United Arab Emirates and Yemen). Five countries are dialogue partners (Egypt, Japan, China,
France and the United Kingdom); Turkey has applied to become a dialogue partner but its application has
been deferred by the IOR-ARC in order to further consider the criteria for dialogue partners. After joining in
1999, the Seychelles withdrew in July 2003. The Seychellois Government presumably felt that it was getting
insufficient return on its IOR-ARC investment.

At the present time, the Indian Ocean Research Group, with nodes in Perth and Chandigarh, northern India,
and the Indian Ocean Tourism Organisation are the only groupings that have observer status.

In addition to a Secretariat, High Level Task Force and the biennial Council of Ministers meetings, the IOR-
ARC comprises three working groups: the Working Group on Trade and Investment (WGTI), the Indian
Ocean Rim Business Forum (IORBF), and the Indian Ocean Rim Academic Group (IORAG). It is within the last
grouping that the Indian Ocean Research Group has observer status.

Despite a well-conceived structure and the initial enthusiasm of members, little of substance has been
achieved by the IOR-ARC and the organisation is now largely moribund. Within the IOR-ARC, Australia has
funded two major research reports, Barriers to Trade in Indian Ocean Rim Countries (2003) and Foreign
Direct Investment in the Indian Ocean Rim (2001), in addition to a project to develop training and reference
materials for trade negotiators, policy-makers and industry groups from developing countries within the
organisation. Over the course of the 2000s, however, the national focus shifted away from the wider Indian
Ocean region and interest in the IOR-ARC dwindled.

In South Africa, too, the focus has moved away from the Indian Ocean to become more concentrated on
internal and African affairs. The words of then-President Nelson Mandela, speaking on a 1995 official visit
to India, now seem very distant:

‘The natural urge of the facts of history and geography … should broaden itself to include
the concept of an Indian Ocean Rim for socio-economic co-operation and other peaceful
endeavours. Recent changes in the international system demand that the countries of the
Indian Ocean shall become a single platform.’

The other third of the “big three”, India, has demonstrated similar ambivalence towards the
IOR-ARC. It has moved from being – along with Australia – a key driver of the organisation’s establishment
to focussing more closely on issues in the South Asian sub-region. India will assume the role of Chair in
2011 and much will hinge on its ability to revitalise the IOR-ARC. A failure do so and to engage with
other member states in the process – particularly Australia, as it re-engages with the Indian Ocean – and
important prospective members such as Saudi Arabia and Pakistan, would almost certainly consign the IOR-
ARC to history, albeit via a slow, lingering death.

s Indian Ocean Tuna Commission (IOTC)

Headquartered in the Seychelles, the Indian Ocean Tuna Commission was established in 1993 under the
auspices of the United Nations Food and Agriculture Organisation (FAO), entering into force three years
later. It superseded the Indo-Pacific Tuna Development and Management Programme (IPTP), which was
established in Colombo, Sri Lanka, in 1982.

The IOTC is charged with managing tuna and tuna-like species within the waters of the Indian Ocean and
encouraging the conservation and sustainable development of the region’s tuna fisheries, in accordance
with the United Nations Convention on the Law of the Sea.

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The largest regional organisation in the Indian Ocean, IOTC members can be either Indian Ocean island or
littoral states, or countries whose fleets fish in the Indian Ocean. All IOTC members must also be members
of the United Nations. As such, the IOTC’s membership, which currently stands at 28, also includes a
number of extra-regional countries: Australia, Belize, China, Comoros, Eritrea, the European Union, France,
Guinea, India, Indonesia, Iran, Japan, Kenya, Madagascar, Malaysia, Mauritius, Oman, Pakistan, Philippines,
Seychelles, Sierra Leone, South Korea, Sri Lanka, Sudan, Tanzania, Thailand, the United Kingdom and
Vanuatu. Senegal, South Africa and Uruguay are not full members, but have the status of Co-operating
Non-Contracting Parties. The Maldives has announced it intends to join the IOTC in that same capacity.

The most recent session of the IOTC took place from 1-5 March 2010, at Busan, South Korea. Although the
IOTC and its various working groups conduct a large number of programmes, including fish tagging and
data gathering, it does receive criticism. The World Wildlife Fund describes the decision taken at Busan to
close an area off the Somali coast to long-line and purse seine fishing vessels for one month as ‘laughable’,
saying that the area was effectively already closed due to piracy. The EU had expressed its disappointment
with the IOTC after the 2009 session, noting that the organisation failed to achieve ‘the genuine multilateral
co-operation expected of it.’ Nevertheless, with the backing of the FAO’s Regional Fishery Bodies programme
behind it, the IOTC fulfils an important role and is unlikely to fold.

s Indian Ocean Naval Symposium (IONS)

The Indian Ocean Naval Symposium, instituted in 2008, offers a template for a naval version of a pan-
regional organisation, which could also be replicated for land, air and police forces. Membership is open to
all regional Chiefs of Navy and has attracted participants from across the region and beyond. The IONS has
attracted a great deal of interest and could conceivably go from strength to strength. The biggest threat to
its continuing success is the possibility that, as it was inaugurated by India, it could be perceived by some
as being dominated by New Delhi. Holding the 2009 IONS in Sri Lanka and the 2010 symposium in the
United Arab Emirates should go some way towards countering such views, as would the full participation
of Pakistan, also slated for the 2010 event.

In addition to India and Australia, past participants have included Burma, Djibouti, Egypt, Eritrea, France,
Indonesia, Kenya, Kuwait, Madagascar, Malaysia, Maldives, Mauritius, Mozambique, Oman, Qatar, Saudi
Arabia, Seychelles, Singapore, South Africa, Sri Lanka, Sudan, Tanzania, Thailand and the United Arab
Emirates.

The United States, United Kingdom, Brazil and China have all expressed interest in the IONS. Possibly
because of its potential as a component of strategic policy, India has, however, been less enthusiastic about
the prospect of Chinese participation, remaining wary of encroachment.

s Indian Ocean Centre for Peace Studies and the Indian Ocean Centre

The Indian Ocean Centre for Peace Studies (IOCPS) was established at the University of Western Australia in
the 1990s by the late Professor Kenneth McPherson. The IOCPS received funding from the Commonwealth
Government and published a multi-disciplinary research journal, the Indian Ocean Review. A particular
IOCPS achievement was hosting the 1995 International Forum on the Indian Ocean Region, which preceded
the establishment of the IOR-ARC. When government funding was withdrawn, IOCPS moved, along with
Professor McPherson, across town to Curtin University of Technology, where it was renamed the Indian
Ocean Centre. Both Centres fulfilled research and policy advisory roles.

As had been the case with IOCPS, institutional politics and internal in-fighting weakened the Indian Ocean
Centre, which was closed by the university in 2002. Both centres nevertheless had strong reputations;
Professor McPherson went on to head the South Asia Institute at Heidelberg University, Germany.

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 s Indian Ocean Zone of Peace (IOZOP) and Zone of Peace, Freedom and Neutrality (ZOPFAN)

The Indian Ocean Zone of Peace was a Sri Lankan proposal brought before the United Nations General
Assembly in 1971, while the Zone of Peace, Freedom and Neutrality was a Malaysian proposal also put
forward that year. As a result, the following year the United Nations formed an unwieldy 44-member Ad
Hoc Committee on the Indian Ocean, which was intended as the first stage in implementing the Zone of
Peace proposal.

The wider goal of both IOZOP and ZOPFAN, conceived as they were in the post-colonial Cold War context,
was to reduce superpower rivalries in the region, but failed to take into account the fact that, far from
viewing the US presence in the region as a threat, a number of states – Australia included – actually viewed
it as being beneficial. Indeed, the proposals were strenuously opposed by the US, UK and France.

Under such circumstances, consensus was difficult to achieve. The end of the Cold War and the display of
multinational unity during the first Gulf War effectively ended the concept.

s Organisation for Indian Ocean Marine Affairs Co-operation (IOMAC)

Another unsuccessful Sri Lankan initiative, the Organisation for Indian Ocean Marine Affairs
Co-operation (IOMAC), was established in 1985 in concert with the United Nations Educational, Scientific
and Cultural Organisation. Headquartered in Colombo, the remit of IOMAC was to foster the development
of Indian Ocean states through dialogue and technical co-operation. Despite the fact that it was open to
states that were users of the Indian Ocean as well as the region’s island and littoral states, the 1990 Arusha
Agreement, which formalised the organisation, was signed by just nine countries: Indonesia, Iran, Kenya,
Mauritius, Mozambique, Nepal, Pakistan, Sri Lanka, and Tanzania.

A more specialised sub-group, the IOMAC Technical Co-operation Group (TCG), received more support,
with 28 countries participating in at least some way: Australia, Bangladesh, Burma, China, Egypt, France,
Germany, India, Indonesia, Iran, Iraq, Kenya, Malawi, Malaysia, Mauritius, Netherlands, Nepal, Norway,
Pakistan, Romania, Russia, Saudi Arabia, Seychelles, Sri Lanka, Tanzania, Thailand, United Kingdom and the
United States. Despite the widespread interest in the TCG, disputes between members ultimately reduced
its effectiveness, to the point where IOMAC essentially became defunct. The fact that two of the largest
states in the region, India and Australia, did not formally sign up also reduced its impact, although it is
unlikely that IOMAC would have been any more effective, or long-lived, had either or both signed the
Arusha Agreement.

*****

As the above outline shows, the Indian Ocean region has not been altogether fertile ground for pan-
regional organisations; sub-regional groupings have perhaps fared somewhat better, as will be discussed
in a future Strategic Analysis Paper. Nevertheless, the situation is not due to a lack of effort or goodwill
– at least initially – and, despite their obvious differences and disparities, a large number of the region’s
states do, or have, had an interest in establishing truly regional organisations. It may very well be the case,
therefore, that a less formal, “track two” format could offer an ideal vehicle with which to begin the larger
process of reinvigorating pan-regional discussion in the Indian Ocean.

*****

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 Co-operation in the Indian Ocean
Region: Towards the Co-existence
of IOMAC and IOR-ARC
7 June 2011
Dr Y. J. Sithara N. Fernando
FDI Associate

Summary
The waters of the Indian Ocean connect four major land bodies: Africa, Asia, Australia and Antarctica. The
Indian Ocean “rim” consists of 29 littoral countries and six island countries. The Indian Ocean “region”
can either be limited to the “rim” countries mentioned above or it can be expanded to include land-locked
countries dependent on the Indian Ocean. Thus, the number of states that comprise the Indian Ocean
“region” can vary from a minimum of 35 “rim” states to a maximum of 52 states when all the landlocked
countries that already are, or could become, dependent on the Indian Ocean are included.1 East Timor,
which had been a part of Indonesia, emerged as an independent state in 2002. The United Kingdom and
France have territorial possessions in the Indian Ocean.2 This FDI Associate Paper examines two efforts at
institutionalising international co-operation in the Indian Ocean region, the Indian Ocean Marine Affairs Co-
operation (IOMAC) and the Indian Ocean Rim-Association for Regional Co-operation (IOR-ARC), and makes
a case for the co-existence and complementarity of IOMAC and IOR-ARC.
Indian Ocean Marine Affairs Co-operation (IOMAC)
The IOMAC programme of co-operation was developed on the basis of the identification of national priorities
at the Preparatory Meeting in June 1985, and deliberations thereon at the Consultative and Final Phases of
the First Conference (IOMAC-I) in July 1985 and January 1987. In view of the considerable range of varying
national requirements and the wide scope of activities envisaged, it was found necessary to draw from
the programme salient items of common interest which were brought together in a more focussed plan
of action. For purposes of practical implementation, the Secretariat undertook to prepare and implement
a work programme under the guidance of the Standing Committee. The programme of co-operation was
based on the deliberations of the Consultative Phase of the First Conference and provided an identification
of areas for co-operation in respect of each of the principal sectors of IOMAC activity: marine science,
technology and ocean services; living resources; non-living resources; ocean law, policy and management;
marine transport and communications; and the marine environment.

The Second Conference (IOMAC-II) reviewed the programme of co-operation and provided an appraisal
and supplementary guidelines for future activities. In the plan of action, specific areas of co-operation were
identified for implementation on an immediate, medium- or long-term basis. The First Conference noted
that certain items for immediate implementation could of necessity also have a medium- and/or long-
term character. The rapid implementation of a wide-ranging work programme was a major achievement
of IOMAC. Initiation of a number of new activities in areas not fully addressed by earlier and existing
programmes, as well as organisational mandates, served to demonstrate the usefulness and effectiveness
of a collective regional undertaking committed to serving national needs. IOMAC organised comprehensive
programmes of activity in each of the principle sectors through expert meetings followed by practical
measures. Up to the mid-1990s, the following were the salient aspects of IOMAC activities:
1 Roy-Choudhury, R., ‘IOR-ARC: The Indian Ocean Rim-Association for Regional Co-operation’, Asian Strategic Review 1996-97, Institute for Defence Studies Analyses
(IDSA): New Delhi, 1997, Note 4. The 29 littoral countries are: Australia, Bahrain, Bangladesh, Burma, Djibouti, Egypt, Eritrea, India, Indonesia, Iran, Iraq, Israel, Jordan,
Kenya, Kuwait, Malaysia, Mozambique, Oman, Pakistan, Qatar, Saudi Arabia, Singapore, Somalia, South Africa, Sudan, Tanzania, Thailand, United Arab Emirates and
Yemen. To the above list must be added East Timor, which subsequently became an independent state. If the Red Sea is not considered part of the Indian Ocean,
the number of littoral countries would be reduced to 23. The six island countries are: Comoros, Madagascar, the Maldives, Mauritius, Seychelles and Sri Lanka. The
12 land-locked countries that have been traditionally dependent on the Indian Ocean are: Afghanistan, Bhutan, Burundi, Ethiopia, Lesotho, Malawi, Nepal, Rwanda,
Swaziland, Uganda, Zambia and Zimbabwe. In addition, the five Central Asian republics – Kazakhstan, Kyrgystan, Tajikistan, Turkmenistan and Uzbekistan – could also
be included in this list.
2 Schofield, C., ‘A Complex Mosaic: Maritime Jurisdictional Claims in the Indian Ocean’, Indian Ocean Survey, Vol. 3, s. 1 & 2, 2007, p. 3, Endnotes 3-4. The UK’s
British Indian Ocean Territory (BIOT) consists of the Chagos Archipelago, which includes the atoll of Diego Garcia. France’s Indian Ocean territorial possessions include
Réunion Island, Tromelin Island, Mayotte Island, Bassas da India, Europa Island, Glorioso Islands, and Juan de Nova Island.

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 1) Marine Science, Technology and Ocean Services: On a proposal made by Tanzania, the Conference
adopted the Resolution on a New Era of Indian Ocean Exploration which called for a systematic, co-ordinated
long-term collective international effort to explore the Indian Ocean along the lines of the International
Indian Ocean Expedition (1962-1965). This new effort, however, was required to concentrate on near-
shore areas and to give emphasis to the needs of developing states, as well as to secure their participation.
Taken in the light of the seaward extension of national jurisdiction and the new framework for the conduct
of marine scientific research under the Law of the Sea Convention of 1982, the IOMAC Declaration of a
New Era of Indian Ocean Exploration was expected to go some way in providing reassurance to developed
nations conducting marine scientific research, as much as to strengthen the capabilities of developing Indian
Ocean states in this field. A major IOMAC international marine science symposium was held in 1992.
This provided an opportunity to review existing programmes, national priorities and new avenues for co-
operative activities in the region. In addition to the important IOMAC-UN Technical Workshops held in
Colombo (1986) and Karachi (1989) on space technology applications, IOMAC prepared a manual on
Remote Sensing Applications for the Indian Ocean region, began initiating a number of pilot projects, and
held a training workshop in the region in 1992.

2) Living Resources: The IOMAC-I Preparatory Meeting, as well as the First Conference at its Consultative
Phase in 1985, and the Final Phase in 1987, for the first time took cognisance at intergovernmental level
of the rapid development of a major industrial-scale distant-water tuna fishery in the Indian Ocean in the
early 1980s, and called for the early establishment of an appropriate regulatory body for the management
of Indian Ocean tuna. Subsequent IOMAC meetings, especially at the Standing Committee, kept relevant
developments under review, and acted as a catalyst for deliberations on the establishment of such a body,
which eventually emerged under the auspices of the Food and Agriculture Organisation (FAO) in the form
of the Indian Ocean Tuna Commission (IOTC).

In January 1989, a group of IOMAC fisheries and legal experts met in Jakarta to prepare common positions
for intergovernmental deliberations on the subject. In this context, IOMAC had consistently maintained the
importance of the participation of distant water fishing nations (DWFNs) in a future management regime
that would ensure its effectiveness, as well as emphasising the importance of the increased participation
of developing Indian Ocean states in harnessing the resource. Furthermore, the Seventh Meeting of the
IOMAC Standing Committee adopted a Declaration banning the use of large-scale drift nets in the Indian
Ocean.

3) Non-Living Resources: In July 1988, the IOMAC Meeting on Offshore Prospecting for Mineral Resources in
the Indian Ocean, hosted by the Government of Pakistan in Karachi, generated a strong intergovernmental
mandate for initiating a programme of co-operation in this field, with the collaboration and assistance of
states with technologically advanced capabilities in this field.

4) Ocean Law, Policy and Management: IOMAC regularly conducted marine affairs management training
in collaboration with the International Ocean Institute (IOI). The annual IOMAC-IOI Marine Affairs Training
Programmes were held in Arusha, Kuala Lumpur, Cairo, and Mauritius. Each 10-week course accommodated
25 participants from developing Indian Ocean states and provided training in integrated ocean/marine
affairs management to mid-level career officers responsible for managing marine activities in their countries.

5) Maritime Transport and Communications: The Second Conference endorsed a number of proposals
made by the IOMAC Meeting of Experts in Shipping and Port Development hosted by the Government of
Kenya and held in Mombasa in August 1990. In July 1991, the Seventh Meeting of the Standing Committee
adopted, and recommended for governmental approval, terms of reference for the IOMAC Association of
Shipping and Port Authorities. It was envisaged that some of the co-operative measures identified would be
taken up for implementation by the Association.

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6) Marine Environment: Dumping of hazardous waste and toxic materials, pollution of the sea by oil,
and potential adverse impacts on the marine environment of proposed deep seabed mining were the
relevant issues here. In 1988, the Third Meeting of the IOMAC Standing Committee reviewed these specific
aspects of concern to Indian Ocean countries and recommended that the Secretary-General identify an
effective mechanism to monitor and develop regional capabilities of coastal states for prevention of such
environmental hazards with assistance from the competent international agencies.

Following consultations between the International Maritime Organisation (IMO) and the IOMAC Secretariat,
the Seventh Meeting of the Standing Committee requested the Secretariat to take necessary steps in
consultation with the IMO, United Nations Environment Programme and other interested entities for the
early establishment of an Indian Ocean network. In the mid-1990s preparatory work was under way for the
convening of an Indian Ocean Environment Conference which was expected to review the health of the
Indian Ocean, identify environmental problems, and determine a common programme for co-operation in
this field.

7) The Interests and Needs of Land-Locked States: Accommodation of the interests of land-locked nations
in the context of marine affairs was recognised very early by IOMAC as a logical corollary to the rights of
land-locked countries in respect of access to living resources, and access to and from the sea. Although a
technical meeting on the subject was planned under the joint co-ordination of Uganda and Nepal, this was
deferred in favour of an expert study on key issues and trends.

8) Training, Information and Other Fields Relevant to Co-operation in Marine Affairs: Work on the
establishment of an Indian Ocean Marine Affairs and Aquatic Resources Information System (IO-MAARIS)
commenced in 1987, at the Second Meeting of the Standing Committee. The Committee reviewed and
endorsed the IOMAC/United Nations Conference on Trade and Development/United Nations Development
Programme sponsored Mission Report, which detailed three major components of the proposed system:
the institutional element involving the creation of three nodes in the region as a first step; a training and
educational element; and an outputs element. The IOMAC Information Workshop held in Jakarta in February
1990 reviewed and identified a number of practical measures for putting into operation the proposed
information system. The Secretariat also published an Indian Ocean Newsletter which provided an update
on IOMAC activities and other related developments.3

By 1998, however, only six states (Indonesia, Kenya, Mauritius, Mozambique, Pakistan and Sri Lanka) had
ratified the 1990 Arusha Agreement (IOMAC II), even though a further three (Iran, Nepal and Tanzania) had
signed it. In accordance with Article 16 of that agreement, it required ratification by a minimum of eight
states to enter into force. Moreover, major Indian Ocean states such as India, Australia and South Africa had
not become members of IOMAC for a variety of political reasons.4

Indian Ocean Rim-Association for Regional Cooperation (IOR-ARC)

The IOR-ARC Charter consists of 11 Articles outlining the fundamental principles, objectives, membership,
institutional mechanism, national focal points, the Indian Ocean Rim Business Forum (IORBF) and Indian
Ocean Rim Academic Group (IORAG), and financial arrangements. The Charter makes it clear that the focus
of the association is on economic co-operation. Article 2(iv) excludes from the deliberations ‘bilateral and
other issues likely to generate controversy and be an impediment to regional co-operation efforts’. Article
2(iii) stipulates that all decisions are to be taken on the basis of consensus. The Chairman’s Report on Indian
3 Jayawardene, H.W., ‘The Indian Ocean Marine Affairs Co-operation (IOMAC)’, in Peter Bautista Payoyo, (Ed.), Ocean
Governance: Sustainable Development of the Seas, United Nations University Press: Tokyo, New York, Paris, 1994.
<http://www.unu.edu/unupress/unupbooks/uu15oe/uu15oe0n.htm>.
4 Roy-Choudhury, R., ‘Maritime and Naval Cooperation in the Indian Ocean’, Asian Strategic Review 1997-98, Institute for
Defence Studies and Analyses (IDSA): New Delhi, 1998, p. 262.

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 Ocean Rim Initiative (IORI) Working Group Meetings, delivered to the Second IORI Inter-Governmental
Meeting, held in September 1996, clarified that the Charter is not a treaty; the IOR-ARC is not a preferential
trading bloc; and that member states are committed to the principle of non-discriminatory treatment to one
another, and, on the basis of Most Favoured Nation status, to all those who are also World Trade Organisation
members. Articles 2(ii) and 4 of the Charter kept open the possibility of further expansion of membership,
but limited it to sovereign states of the Indian Ocean rim. The Working Group on Membership established at
the first Ministerial Meeting, held in March 1997, was to go into all issues relating to membership and other
forms of association such as observership, guest status, and dialogue partnership. The Work Programme
endorsed by the first Ministerial Meeting consisted of the following ten projects:

1) Co-operation in Standards and Accreditation;

2) Indian Ocean Rim Business Centre and Indian Ocean Rim Network (IORNET);
3) Investment Facilitation and Promotion;
4) IOR Chair in Indian Ocean Studies and Associate Fellows;
5) Trade Promotion Programme and IOR Trade Fair;
6) Development, Upgrading and Management of Seaports, Maritime Transport, Insurance and Re-
insurance;
7) Human Resource Development Cooperation;
8) Working Towards Complementarity: A Comparative Analysis of Existing Multilateral and
Regional Economic and Trade Policy Arrangements and Processes;
9) Tourism Promotion and Development; and,
10) Technology Enhancement in the Indian Ocean Region

According to Article 2(vii) of the Charter, the Work Programme was to be undertaken by member states
on a voluntary basis. In accordance with the tri-partite nature of IOR-ARC, Article 9 of the Charter gives
IORBF and IORAG a major role in establishing priorities of economic co-operation, co-ordination of the Work
Programme, and the mobilisation of resources for its financing, and provides that the IORBF and IORAG may
meet together with the Council of Ministers and the Committee of Senior Officials as mutually decided.
Articles 5, 6 and 7 of the Charter set out the institutional arrangements of IOR-ARC to consist of a Council
of Ministers, a Committee of Senior Officials and a Secretariat. The Council is to meet at least once in two
years and Committee is to meet as often as required. The Council is to formulate policies, review progress
and take decisions on new areas of cooperation. The Committee will establish priorities of economic co-
operation, coordinate the Work Programme, and mobilize financial resources. The Secretariat, set-up
in Mauritius, was to avoid excessive bureaucracy and function as a ‘pilot mechanism’ for co-ordination,
servicing and monitoring of policy decisions.5

The second Ministerial Meeting was held in Maputo, Mozambique in March 1999. Meetings of the IOR-
ARC Committee of Senior Officials (CSO), IORBF and IORAG were held in Mauritius in 1998; Mozambique
in 1999 and 2000; and Oman in 2001 and 2002. The third Ministerial Meeting was held in Oman in 2001.
By 2002, IOR-ARC had 19 member countries, five dialogue partners and one observer.6 Sri Lanka hosted
the Council of Ministers meetings in 2003 and 2004 in Colombo. The tenth Ministerial Meeting was held in
August 2010 at Sana’a, Yemen. At present there is a proposal to carry out a review of the IOR-ARC Charter
and there is also an effort to move the association towards a Preferential Trading Arrangement.7
5 Roy-Choudhury, R., 1997, op cit, pp. 121-126, 133-136.
6 Kelegama, S., ‘Indian Ocean Regionalism: Is there a Future?’, Economic and Political Weekly, June 22, 2002, p. 2422.
The 19 members were: Australia, Indonesia, India, Sri Lanka, Singapore, Malaysia, Oman, Yemen, Kenya, Tanzania, South
Africa, Mozambique, Mauritius, Madagascar, Thailand, Bangladesh, Seychelles, United Arab Emirates, and Iran. The five
dialogue partners were: Egypt, Japan, China, United Kingdom and France. The one observer was the Indian Ocean Tourism
Organisation.
7 The Island, 8 August 2010, ‘10th Council of Ministers Meeting of the Indian Ocean Rim-Association for Regional
Cooperation: Lanka Calls for Realistic Assessment of the Opportunities and Challenges’. <http://www.island.lk/index.
php?page_cat=article-details&page=article-details&code_title=3993>.

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Conclusion

In a paper published in 2002, the late Professor Kenneth McPherson noted that the focus of IOR-ARC had
narrowed to a focus on trade facilitation and argued that the agenda of IOMAC, an initiative which has
done a great deal of work on marine and maritime issues, was worth revisiting by IOR-ARC.8 At present, as
evidenced by the fact that the four key components of the IOR-ARC roadmap are trade liberalisation, trade
and investment facilitation, economic and technical co-operation, and trade and investment dialogue, the
agenda of IOR-ARC continues to be dominated by trade issues.

However, its current agenda also shows signs of broadening. This includes co-operation in combating
Marine Pollution and Ocean-related Disaster Management, an Instrument for the Establishment of the
Fisheries Support Unit, and a Maritime Transport Council. That is to say, the current agenda of IOR-ARC is
showing signs of broadening to include environmental, living resources and maritime transport issues. As
evidenced by the section on IOMAC in this paper, these are areas in which IOMAC has done a substantial
amount of work.

Therefore, this paper proposes that IOR-ARC utilise the work already done by IOMAC on these issues. This
will have the additional benefit of avoiding duplication and saving scarce resources. In this regard, an eight
volume compendium titled IOMAC Official Documents to be found at the IOMAC Secretariat in Colombo,
Sri Lanka, which contains a comprehensive set of documents on IOMAC activities, should prove to be
extremely helpful, not only to policymakers, but to all who have an interest in greater international co-
operation in the Indian Ocean region. This compendium could be a valuable resource for IOR-ARC’s planned
expansion into the above mentioned areas. The two organisations should build on complementarities and
forge a synergy, with IOR-ARC drawing upon IOMAC’s long-standing track-record and specialisation. Given
the widening scope of IOR-ARC’s activities, this could be a highly sensible course of action to take.

*****

8 McPherson, K., ‘SAARC and the Indian Ocean’, South Asian Survey, Vol. 9, 2, (2002), pp. 258, 260.

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Indian Ocean: A Sea of Uncertainty
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 Chapter Two

Piracy

Indian Ocean: A Sea of Uncertainty

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Indian Ocean: A Sea of Uncertainty
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 Peak Piracy Season Here Again;
Solutions Lie on Land, Not Water

22 April 2010
2
CHAPTER
Leighton G. Luke, Manager
FDI Indian Ocean Research Programme

Summary
The winter monsoon has once more come to a close in the western Indian Ocean, bringing calm seas and
fair weather. Unfortunately for vessels transiting the region’s sea-lanes, the benign conditions also bring
with them a marked rise in piracy. From April onwards, Somali pirates enter their peak season, challenging
once again the resources of local states, the skills of ships’ masters and the collective will of international
naval forces. In the absence of a viable national government and genuine economic alternatives, there is
unlikely to be a speedy solution to the problem.
Analysis
In the first three months of 2010, the International Maritime Bureau’s
Piracy Reporting Centre received 19 reports of actual and attempted
attacks in the Gulf of Aden and Western Indian Ocean. Although
alarming, the figure is at least not significantly worse than the 17
attacks recorded by the International Maritime Organization over
the first quarter of 2009.1 With the onset of calmer conditions, the
figure is once again set to soar.

The Somali piracy “industry” is a direct consequence of the 1991

collapse of the country’s last functioning national government.
With the end of the Cold War and the beginnings of a unipolar
international order, the dictatorship of Mohamed Siad Barre, which
had been propped up first by the Soviet Union, and then the United
States, lost its backing and was overthrown.

With no replacement for the despotic Barre regime, and no interest

in finding a consensus among the loose coalition of protagonists,
Somali society soon degenerated into an anarchic collection of Source: BBC News/International Maritime
warlords deriving their power from traditional clan-based allegiances.

The current President of the Transitional Federal Government of Somalia (TFG), Sheikh Sharif Sheikh Ahmed,
explained in a March 2010 address to the Royal Institute of International Affairs at Chatham House, that:

‘The lack of government resulted in a generation that did not find education, that did not find
employment, that did not find a way to learn the good traditions and customs of the Somali
people. The hunger, poverty and refugees all had an impact on the new generation that grew
up since, as you know. In the absence of the responsibility of a government, many young
people were neglected who should have been on the path to a good and bright future’.2

1 ‘Reports on Acts of Piracy and Armed Robbery against Ships, First Quarterly Report 2009’, 22 September 2009, International
Maritime Organization: London, Annex 1.
2 ‘Somalia at a Crossroads and the Duty of the International Community’, address given by HE Sheikh Sharif Sheikh Ahmed,
Pres ident of the Transitional Federal Government of Somalia to the Royal Institute of International Affairs, Chatham House,
London, 8 March 2010.

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 At about the same time, and in the absence of any meaningful Somali government, foreign fishing vessels
moved in to exploit the country’s rich fisheries, frequently employing illegal methods such as nets with
superfine mesh. The resulting over-fishing depleted the resource and deprived local fishermen of their
livelihoods. Worse still, the United Nations Environment Programme reported in 2005 that European firms
had been dumping toxic waste along the Somali shoreline,3 further affecting fish stocks and leading to
illness in local populations.

In response, local fishermen resorted to a vigilante approach and began demanding compensation for their
plundered resources from foreign fishing vessels. Before long, warlords operating in a number of coastal
areas saw an economic opportunity and any vessel became fair game, including ships delivering food aid
from the World Food Programme to long-suffering Somali civilians.

Initially only affecting coastal waters, the pirates’ success – they are nothing if not savvy businessmen – has
meant that, with better weaponry (such as assault rifles and rocket-propelled grenade launchers) and vessels
(the so-called “mother ships”, often ex-fishing trawlers), their operations were able to move progressively
further out from the coast and were able to accost substantially larger ships such as the supertanker, Sirius
Star. Pirates have even inadvertently attacked patrolling foreign naval vessels. The HNLMS Tromp of the
Royal Netherlands Navy, for instance, was confronted by two pirate skiffs on 17 March 2010.

The pirates’ reach has extended such that, in the last piracy season, in addition to targeting vessels in
Kenyan and Tanzanian waters, they were operating well within the territorial waters of the Seychelles, a
distance of some 1,600 kilometres from the African coast. Another recent hijacking, on 23 March, was even
further offshore. BBC News reported that, at a distance of 1,800 kilometres from Somalia, the MV Frigia
was much closer to India than it was to Africa. In the pirates’ most recent attack, on 18 April, saw 77 Thai
fishermen taken hostage when their Djibouti-based vessel was accosted some 2,200 kilometres from the
Somali coast. The moves further out into the western Indian Ocean have been an unintended consequence
of the presence of multi-national naval forces in the Gulf of Aden, the pirates’ original prime hunting
grounds. In the broad expanses of the western Indian Ocean, the distances involved are simply too vast to
be monitored comprehensively.

The ransoms paid by ship owners are also part of the problem. Whilst relatively small sums to pay when
compared to the overall value of the hijacked ships and cargoes – not to mention crews – the very visible
wealth accumulated by the pirates only serves to reinforce the attractiveness of piracy. At the same time,
the fact that ransoms are paid has also had the effect of pushing up subsequent demands to record levels,
thus perpetuating the cycle.

Operating from a number of different ports along the Somali coast, the pirates are constrained by weather
patterns, at least insofar as they affect sea swells and wind conditions. As a result, pirate attacks increase
markedly in the northern spring and autumn after the winter and summer monsoons pass, winds drop and
sea states become calmer. April, May, October and November are the peak operating months for Somali
pirates in the western Indian Ocean.

While multi-national naval flotillas have a role to play in preventing and thwarting attacks and ensuring
goods can travel freely on the open seas – and they have certainly not been without successes – they are
ultimately short-term solutions and can only last as long as the political will to contribute to them exists. In
the longer term, a more lasting solution to the problem of piracy will need to be found on land.

3 The Environment in the News, ‘Waste Dumping off Somali Coast May Have Links to Mafia, Somali Warlords’, United
Nations Environment Programme, 16 March 2005.

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The keys to the solution are, first, a functioning national government with the will and the capacity to
enforce the rule of law both on land and in Somalia’s territorial waters, as it applies to both locals and
foreign fishing vessels – something the semi-autonomous Puntland regional government has attempted
to do, albeit with limited success to date. Second, and largely contingent on the above, is the revival of
a formal economy. Despite the long-running state of anarchy, the country has something of a thriving
informal economy. Although that is certainly to the credit of ordinary Somalis, given the circumstances
which they have endured since even before the fall of the Barre regime, it is insufficient to provide anything
more than the most basic standard of living (unless, of course, one happens to be a warlord or a pirate).

Despite the immense destruction visited upon it over the last 19 years, Somalia is not without some economic
potential. If stable government were to return, the country could present opportunities for astute (and wary)
foreign investors. Potential prospects could include livestock and agriculture, as well as fishing and fish
processing. Given that the current practice of piracy originated among fishermen whose livelihoods were
threatened, a revival of the Somali fishing industry – once a source of valuable export earnings – could offer
a good starting point.

That, however, as noted above, is very much contingent on having a functioning, stable government, which
has succeeded in overcoming and disarming the country’s Islamist militias. As United Nations Secretary-
General, Ban Ki-moon, noted in a March 2009 report to the UN Security Council:

‘The lack of enforcement capacity and resources to address the problem of piracy off the coast
of Somalia, however, are of major concern not only to Somalia, but to some of the other most
affected littoral States of the Indian Ocean and the Gulf of Aden. This highlights the need to
identify an integrated approach between the operational responses at sea and those on land.
In the long run, this can be achieved with a stable Somali Government capable of effectively
controlling its territory and seas … in the long term the issue of piracy and armed robbery at sea
off the coast of Somalia will be resolved only through an integrated approach that addresses
the conflict, lack of governance and absence of sustainable livelihoods on land in Somalia’.4

On the other hand, though, even if Somalia’s commercial fishing and canning industries could be revived,
the rewards accrued by workers in those industries pale into insignificance compared to the proceeds of
piracy, not to mention the possible cachet of a danger-filled life on the high seas versus a rather more
humdrum existence as a fisherman or factory-hand. Under such circumstances, Somali pirates will naturally
be reluctant to abandon their lifestyles.

Ultimately, however, in the absence of a meaningful national government and a productive economy in
Somalia, piracy will continue to expand further out into the Indian Ocean. Indeed, it will probably be
Somalia’s only growth industry for quite some time.

*****

4 Report of the Secretary-General pursuant to Security Council resolution 1846 (2008), United Nations Organisation: New
York, 16 March 2009, ss. 48 & 59.

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Indian Ocean: A Sea of Uncertainty
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 Somali Pirates and Islamist Militias
Joining Forces - An Attractive
Proposition?
22 October 2010
Leighton G. Luke, Manager
Indian Ocean Research Programme

Summary
Concerns have been expressed over possible links between Somalia’s pirates and the country’s shore-based
Islamist militias. The general consensus, however, is that this is yet to happen. Given the consequences of
such links and their attractiveness to the militias, the situation needs to be closely monitored.
Analysis
Somali piracy in its modern incarnation had its beginnings in the early 1990s with the fall of the Mohammed
Siad Barre dictatorship and the implosion of the Somali state. At that time, fishermen banded together
to form local de-facto coastguards up and down the coast of Somalia in an attempt to counteract the
overfishing of Somali waters by European and Asian fishing vessels and the apparent dumping of hazardous
waste by Swiss and Italian firms. Indeed, pirate groups such as the National Volunteer Coast Guard actually
adopted names to that effect.

It is worth noting, however, that the pre-1991 Somali fishing industry was by no means an economic
powerhouse. Little of the small annual catch was exported and local demand for seafood was low. Based
on 1990 figures, the United Nations Food and Agriculture Organisation reports the fisheries industry as
accounting for only two per cent of Somalia’s Gross Domestic Product and employing a total of just 90,000
persons in both the primary and secondary sectors of the economy.1

Confirming the long-standing potential of the Somali fisheries industry, however, and its ability to grow
despite the chaos of the last nineteen years, the annual catch has grown from an estimated 11,000 tonnes
in 1980 2 to an estimated 30,000 tonnes in 2005.3 Although per capita consumption increased ten-fold over
the two decades to 2003, from 0.16 to 1.6 kilograms per year,4 fish proteins still account for only 1.6 per
cent of the total per-day proteins consumed.5 Even allowing for such increases, the Somali fishing industry
remains small-scale and is chiefly composed of local fishermen using canoes and small motorised craft to
fish inshore waters. The more lucrative offshore waters, home to valuable deep-sea species such as tuna and
mackerel, continue to be the domain of foreign fishing vessels, as they have been since before the fall of the
Siad Barre Government. Now, however, they are invariably unlicensed and come from a far wider range of
countries than was the case before.

In any event, the profits to be made from piracy soon led to a shift in focus away from the ostensible
protection of resources and the environment to piracy as a business practice. The absence of any
governmental authority, the proliferation of warlords and the ready availability of weapons also contributed
significantly to the change of focus. From its initial small beginnings, piracy soon escalated. The northern,
semi-autonomous Puntland region in particular has earned notoriety for being home to some of the most
well-known pirate towns: Garowe, Hobyo, Harardhere and Eyl.

1 United Nations Food and Agriculture Organisation, ‘Fishery Country Profile: The Somali Republic’, January 2005, p. 2.
2 ‘Foreign Fishery Developments: Somali Fishery Industry has Potential for Growth’, Marine Fisheries Review, Vol. 12, 44,
December 1982, Table 1: Somali Fish Catch, 1971-80, p. 25.
3 United Nations Food and Agriculture Organisation, 2009, FAO Yearbook Fishery and Aquaculture Statistics, 2007, FAO
Fisheries and Aquaculture Information and Statistics Service: Rome, p. 64.
4 ‘Fishery Country Profile: The Somali Republic’, pp. 5-6.
5 FAO Yearbook Fishery and Aquaculture Statistics, p. 64.

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 Despite the presence in Somali waters of a flotilla of vessels from many of the world’s navies, the only
period when the piracy “industry” has slowed down has been during times when something approaching
a functioning government has had control. This was particularly the case in 2006, when the Union of
Islamic Courts (UIC) controlled the south of the country and imposed sharia law. With the ousting of
the short-lived UIC “government” later that same year, piracy again surged upwards. More recently, an
anti-piracy campaign launched by the Puntland Government has led to a slowing of piracy in that area,
with Government sources claiming to have jailed more than 200 pirates in 2009,6 while the capture of
Harardhere by the Hizbul Islam militia in May 2010 resulted in the town’s pirates fleeing to nearby Hobyo.
An Attractive Proposition?
For Somalia’s militia groups, forging links with the country’s pirates could seem an attractive proposition. It is
a proposition which would provide two key benefits: to tap into the profits to be made from ransoms and,
no less importantly, the ability to target Western shipping interests in a particularly visible and devastating
manner.

Reports have already circulated of links between the pirates and Islamists, dating to the time of the UIC’s
ascendency, whereby co-operation was alleged to:

‘... take a variety of forms ranging from training to technology supplies, and provision of safe-
houses and safety areas. The UIC use the pirates to train their own forces in naval tactics so that
they can provide protection for arms being smuggled into Somalia from Eritrea’.7

A youth-oriented offshoot of the UIC, al-Shabaab, is the now the most powerful militia group in Somalia
and is suspected to be in receipt of funds from pirates. These funds are obtained from the ransoms
paid to pirates and are most likely forwarded by al-Shabaab supporters among members of the Somali
diaspora who, as something approaching “shareholders”, receive a portion of the profits in exchange for
contributing finance and intelligence to the pirates’ activities. Confirming such claims is difficult, however.
As Tsvetkova notes,

‘... although data is scarce, it has been reported that money from piracy ransoms has helped
pay for the war in Somalia, including funds to the US terror-listed al-Shabaab. These hardliners
... have a certain degree of control over several pirate groups and provide operating funds and
specialist weapons in return for a share of ransoms’.8

Even if the above were confirmed to be true, it is still not inconceivable that groups such as al-Shabaab
might accept payment in exchange for the turning of a blind eye to the pirates’ business activities, which
would normally be prohibited under sharia law. Such payments would be very similar in manner and
purpose to those allegedly made to Puntland President Abdullahi Yusuf by pirates as a ‘goodwill gesture’.9
Like the Puntland authorities, the militias would not be directly involved in piracy, but would certainly
benefit from it in a financial sense.

Being able to receive a share of the profits made from ransoms would offer Islamist militias an additional
source of funding with which to pursue their activities. A development of that kind would be of concern to
neighbouring countries such as Kenya, Ethiopia and Djibouti. It would also concern Uganda and Burundi,
both of which maintain forces in Somalia under the African Union Mission in Somalia (AMISOM) banner – the
6 Garowe Online, 9 January 2010, ‘Puntland president delineates government achievement’.
7 Tsvetkova, B., ‘Securitising Piracy off the Coast of Somalia’, Central European Journal of International and Security Studies,
Vol. 3, 1, May 2009, p. 49.
8 Ibid. p. 49.
9 Middleton, R., 2008, ‘Piracy in Somalia: Threatening Global Trade, Feeding Local Wars’, Chatham House Briefing Paper AFP
BP 08/02, p. 5.

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July 2010 suicide bombings in the Ugandan capital, Kampala, were launched by al-Shabaab in retaliation for
the presence of Ugandan forces in the country. In view of its declaration of support for al-Qaida, a cashed-
up al-Shabaab would also pose a threat to other states confronting Islamist extremists: Yemen, Afghanistan,
Pakistan, Mauritania and Niger.

Equally disturbing from a Western and regional security point-of-view is the prospect of Somali Islamists
destroying oil shipments or gaining access to weaponry from hijacked ships – a consideration at the forefront
of United States officials’ minds during the 2008 hijacking of the Ukrainian-flagged MV Faina, which was
carrying a cargo of Russian T-72 tanks, rocket launchers and ammunition en-route to Mombasa. Although
Somalia is awash with weaponry, al-Shabaab fighters equipped with tanks would be more than a match for
the forces of AMISOM and the beleaguered Transitional Federal Government in Mogadishu.

In the event, as yet highly unlikely, that US or coalition forces were to attempt a seaborne landing in
Somalia, and that such a landing led to the continuing presence of a “sea base” composed of maritime
forces and equipment, Islamist militias such as al-Shabaab would no doubt come to view such a sea base as
an iconic, and tempting, target. With their activities likely to be impeded by such a concentration of vessels,
the pirates, too, would probably be pleased to see a sea base depart. Under such circumstances, inherent
Somali nationalism and a broader common interest could serve to transcend differences of motivation and
clan, bringing together militias and pirates against a common foe, with a pooling of resources, personnel
and know-how to counter the threat to both business and ideology posed by the foreigners.
Business First
While links between pirates and Islamists might not be without attraction, if they were to eventuate, they
are likely to be more attractive for the latter. For Somalia’s pirate groups, they are likely to be rather less
appealing, as such links would bring a much greater level of interest from foreign powers: they would simply
be bad for business.

Somali pirates have been at pains to present themselves as businesspeople, generally treating their hostages
well in anticipation of ransom payments. In this sense, piracy is a business and the pirates are simply using a
business model that conducts a risk-reward analysis and then makes a decision accordingly. Getting involved
with Islamist groups would introduce an ideological dimension and, given that al-Shabaab is a proscribed
terrorist organisation, would make the payment of ransoms considerably more questionable.

As things stand, there is essentially a level of tolerance which exists in relation to Somali piracy. The costs of
sending naval vessels into the Gulf of Aden and western Indian Ocean is still within the tolerance level of the
contributing governments. Equally, shipping companies continue to use the sea lanes near Somalia because
it is still profitable to do so, despite the increased insurance premiums and the ransoms to be paid. They
have made a business decision that the risk of using these waters is lower than the returns available. Paying
a ransom of a few million dollars to release a tanker containing several hundred-million dollars’ worth of oil
is a substantially cheaper option than losing the cargo altogether.

If al-Shabaab, for example, were to hijack a ship, the United States and other coalition forces would be likely
to get much more involved. Al-Shabaab involvement would quickly push Somali piracy over the tolerance
threshold of Western and regional governments, with the only question possibly being “for how long?”,
as it could involve a prolonged commitment. Regardless, ‘pirates know that if they were to be identified
as undertaking political activity, they would be subject to a much greater response from the international
community’.10

10 Middleton, R. and Quartapelle, L., May 2010, ‘Le conseguenze della pirateria nel corno d’Africa’ [‘The consequences of
piracy in the Horn of Africa’], Osservatorio di Politica Internazionale: Note 11, Senato della Repubblica: Rome, p. 5.

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 In the absence of any real economic alternatives or governmental authority, piracy in the waters off Somalia
will continue as long as it falls within the tolerance levels of governments and companies to pay the
premiums and ransoms, no crews are killed and Islamists don’t start hijacking ships. It is therefore in the
pirates’ best interests not to jeopardise their business by crossing that threshold.

Rather more likely than links with Islamist militias is the connection between pirates and organised crime in
the form of “transnational crime syndicates”. Chatham House Africa analyst Roger Middleton notes that
‘it is also likely that they are plugged into an international network that feeds information from ports in the
Gulf, Europe and Asia back to Somalia’.11 That international network is suspected to include personnel in
key positions relaying information such as ship departures and cargoes to pirate groups in Somalia. Playing
an equally important role are those members of the Somali diaspora, often based in Kenya, Djibouti, the
United Arab Emirates, the UK, United States and Canada who, ‘... offer funds, equipment and information
in exchange for a cut of the ransoms .... With help from the network, Somali pirates have brought in at least
US$30 million in ransoms so far this year [October 2008].’12

Somali piracy and organised crime are also suspected to be linked in other endeavours, namely the smuggling
of people, arms and drugs.13 – all of which are easily smuggled to and from Yemen across the Gulf of Aden.
Somali pirates are reputed to be particularly fond of the narcotic qat; a leaf stimulant generally disapproved
of by the Islamists, who tend to view it as a prohibited substance much like alcohol, despite its widespread
use in other parts of the Islamic world.

Another factor mitigating the likelihood of a pirate-Islamist alliance is the complex, clan-based nature of
Somali society, still a powerful force after almost two decades of anarchy. Many of the leaders of the pirate
groups come from the north-east of the country and have little clan relationship or other affiliation with
their counterparts in militias such as al-Shabaab, who tend to hail from the south. They are therefore far
more likely to support the authorities in Puntland14 (who themselves have been accused of tacitly supporting
piracy).
Not Such a Big Slice of the Cake
From the point-of-view of the Islamist militias, another factor against their joining forces with the pirates – in
addition to the prohibition on piracy as a criminal activity under sharia law (and al-Shabaab has claimed to
oppose the practice) – is the possibility that the payments simply may not be large enough to make it worth
their while. As sizeable as the ransoms are, they must still be shared out among a number of parties. The
pirates themselves can only claim but a share, as too, would the Islamist militias.

As Somali piracy has grown to become the business it is today so, too, has the number of people involved,
all of whom require their share of any payout. For instance, a 2008 report by the BBC cites information
collected by the United Nations from pirates based in Eyl, as allocating ransom profits in the following
manner:

s Maritime militia (pirates involved in the actual hijacking): 30 per cent

s Ground militia (armed groups who control the territory where the pirates are based): 10 per cent
s Local community (“goodwill” payments to elders and officials): 10 per cent
s Financiers (who provide the boats, fuel, communications equipment, weapons, interpreters and
negotiators): 20 per cent
s Sponsors (who underwrite the costs of the operation): 30 per cent
11 Middleton, 2008, p. 6.
12 Associated Press, 12 October 2008, ‘Somali piracy backed by international network’.
13 Potgieter, T. and Schofield, C., ‘Poverty, Poaching and Pirates: Geopolitical Instability and Maritime Insecurity off the Horn of
Africa’, Journal of the Indian Ocean Region, Vol. 6, 1, June 2010, p. 97.
14 Middleton and Quartapelle, 2010, p. 5.

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In addition to the above, the report notes that the first pirate to board a vessel receives a double share (or
sometimes a vehicle), and that the families of any pirates killed in action also receive a share as compensation.15
Other parties involved in the process – and therefore requiring payment – include those individuals providing
information and equipment from overseas. The teams of lawyers, specialist negotiators, risk consultants
and security contractors who are invariably based in London, the centre of the world’s shipping industry, are
usually paid through insurance claims on the part of the shipping companies.

By the time other overheads, such as the hiring of crews, ships and helicopters with which to deliver the
ransom, are factored in, the profits have been well and truly “divvied-up”, leaving at best ten per cent for
whichever militia happens to control the pirate town in question. While the militias are unlikely to turn
down such payments – having firstly accepted the ongoing presence of the pirates, that is – the sums
involved are probably not likely to be sufficient to tempt them to branch out into joint piracy operations.
In Conclusion
Despite the concerns surrounding the worrying notion that Somalia’s pirates and Islamist militias have begun
to co-operate, the evidence to date suggests that, on balance, this has not yet occurred. Given the anarchic
quality of Somali politics, the absence of a meaningful central government and the complex nature of clan
loyalties, it is a development which cannot be completely ruled out in the future.

Paradoxically, however, those same factors could also continue to act as impediments to closer links between
the two groups, as would the fact that only a small share of the profits would be available to the militias.
At the end of the day, ‘terrorists are still most likely to turn to other terrorists for help: they recognise that
co-operating with other kinds of criminals exposes them to security risks’,16 not to mention the inherent
difficulties of reconciling differences in motivation and ideology.

Given the potentially adverse security and economic consequences of such an alliance, it is nonetheless a
situation which deserves to be monitored as closely as possible.

*****

15 Harper, M., 24 May 2009, ‘Chasing the Somali piracy money trail’, BBC News.
16 Murphy, M., ‘Contemporary Piracy and Maritime Terrorism, Chapter Three: Assessing the Threat’, Adelphi Papers, Vol. 47,
388, June 2007, p.77.

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Indian Ocean: A Sea of Uncertainty
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 The Piracy-Illegal Fishing Nexus in
the Western Indian Ocean

10 February 2011
Jasmine Hughes
FDI Research Assistant

Summary
Illegal, unregulated and unreported fishing (IUU) inhibits the managed recovery of the world’s oceans
from severe fish depletions. It is estimated to lead to billions of dollars worth of lost annual economic
benefits, creates significant environmental damage due to unsustainable fishing practices and has wider
consequences for food supply.1

In the case of Somalia, the arc of piracy which is spreading ever further outwards into the western Indian
Ocean has its roots as a response to the overfishing of Somali waters by European and Asian fishing vessels
and the alleged dumping of hazardous waste by Swiss and Italian firms following the collapse of the Somali
state in 1991.
Analysis
Principally occurring on the high seas and in the remoter oceans of the world, such as the Southern Ocean,
IUU fishing is also common in the exclusive economic zones (EEZs) of coastal states that simply do not have
the resources, money or political will to address the problem.2 While the level of illegal fishing seems to
have no significant relationship with indicators such as fish price or EEZ size, it does exhibit a significant
connection with World Bank governance indicators such as government effectiveness, regulatory quality,
the rule of law and control of corruption.3 The 2005 World Bank report Turning the Tide, highlighted the
direct link between over-fishing and poverty. The Director of the Bank’s Environment Department maintained
that ‘poor governance, lack of regulations and lack of enforcement present a barrier to effective fisheries
management.’

Discord and a lack of communication and co-operation also contribute to allowing IUU fishing to flourish in
certain areas. In the Indian Ocean, the waters around Somalia are rife with illegal fishing due to the absence
of a functioning government and lack of any coastal protection or enforcement on the part of the state.
As many pirates are former fishermen, some linkages have also been drawn between illegal fishing, and its
effect on local fishermen, and the current security issues related to piracy in Somalia waters.

Around 40 per cent of the world’s population relies on fish as its main source of protein.4 This means that
fishing security is a highly important issue and illegal fishing, being a threat to global fish stocks, is a vital
piece of the fisheries security puzzle. There is currently a raft of varied and wide-ranging actions being taken
regarding IUU fishing (both by independent states and interstate organisations and agencies), with varying
degrees of success. Despite the many protocols and conventions that are currently being implemented, there
remains a great deal to be done in order to quell illegal fishing in the western Indian Ocean and beyond.

1 Agnew, D., Pearce, J., Pramod, G., Peatman, T., Watson, R., et al, 2009, ‘Estimating the Worldwide Extent of Illegal Fishing’,
p. 1.
2 Macdonald, I., ‘Threats from Illegal Fishing’, in Fish, Aquaculture and Food Security: Sustaining Fish as a Food Supply, Brown,
A.G. (ed.). Record of conference conducted by the ATSE Crawford Fund, Parliament House, Canberra, 11 August 2004, p.
40.
3 Agnew et al.
4 MacDonald, p. 40.

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 Extent and Implications of Illegal Fishing
Regional Estimate of Illegal Fishing – averaged over 2000-2003

Lower Higher Lower Higher

% of total
Reported estimate of estimate of estimate estimate
regional
Catch illegal catch illegal catch of value of value
catch
(t) (t) (US$M) (US$M)
West Indian
2,165,792 52% 229,285 559,942 206 504
Ocean
East Indian
2,263,158 44% 467,865 970,589 421 874
Ocean
Source: Agnew et al, p. 2.

The economic impact of IUU fishing on coastal states includes not just the direct loss of value in terms of
catches, but other forms of revenue associated with the wider fishing industry. The affected coastal state
loses revenue that could have been accrued in the form of landing fees, licence fees, taxes and other
levies which are payable by legal fishing operators. Other indirect impacts include the loss of income and
employment in other industries and activities in the supply chain upstream and downstream from the
fishing operation itself. IUU fishing depresses the demand for fishing gear, boats and equipment and other
inputs that might otherwise be present, as well as having a negative impact on fish processing, packaging,
marketing and transport.

Other than its economic impact, illegal fishing also has the potential to seriously deplete global fish stocks.
It is detrimental to the marine ecosystem as it reduces biodiversity and can even have an impact on state
and regional security considerations. Less conspicuously, as MacDonald notes, IUU fishing may introduce
exotic diseases to marine environments that are unable to withstand them. Collectively, all of these impacts
can eventually result in less fish in the sea, thus increasingly threatening the food security of the 2.4 billion
people who rely on fish as their main source of protein.5 This also creates a domino effect where greater
reliance is placed on land resources, creating greater environmental stress there. A lack of food security can
also make it increasingly difficult for states to maintain stability, as starvation often equals unrest. Somalia
is an interesting case study in regard to the implications of uncontained illegal fishing, with a suspected
correlation between the increase in illegal fishing in Somali coastal waters and the increasing prevalence of
piracy.
Piracy in the Horn of Africa – Caused by Illegal Fishing?
Somali pirates in the Horn of Africa are a significant maritime security issue. Their motivation is not particularly
mysterious: money is obviously the impetus. The history of how it began is, at least partly, connected with
the illegal fishing and dumping of toxic waste, including radioactive material, in Somali waters. Many of
the Somali pirates claim to have previously been local fishermen who only resorted to hijacking after illegal
fishing operations intimidated them with the destruction of gear, attacks by high pressures hoses and the
ramming of their vessels.

Due to the absence in Somalia of a functioning government with maritime surveillance and enforcement
agencies and capabilities, the country’s waters are essentially unpoliced. The Food and Agriculture
Organisation of the United Nations (FAO) estimates that around 700 foreign fishing vessels are engaged in
unlicensed fishing in Somali waters. IUU fishing vessels come from both within the region (Kenya, Pakistan,
Saudi Arabia, Sri Lanka and Yemen) and outside it (Belize, France, Honduras, Japan, South Korea, Spain and
Taiwan).

5 Ibid., p. 40.

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Some perceive these pirates as disenfranchised fishermen who have turned to piracy as informal
“coastguards” levying ransoms as “fines”. Many of the pirate gangs, or “companies”, have taken such
names as “Somali Marines”, “Central Somali Coast Guard”, “Defenders of Somali Territorial Waters” and
“Ocean Salvation Corps”, suggesting that many of the pirates see this as part of their narrative. Despite
the fact that Somali seas are teeming with tuna, shark, lobster, deep-water shrimp and whitefish, not much
of a fishing industry was ever developed due to traditional Somali culture being based almost exclusively in
pastoralism; seafood was little prized in the Somali diet. So, while some pirates started out as humiliated
fisherman reclaiming their seas, many did not.

The culture of piracy is now so entrenched in Somali society that many younger men have only ever aspired
to piracy and probably have never considered fishing as a potential trade. The narrative of Somali pirates
being protectors of their territorial waters also does not fit with the reality of an operation that is moving
both farther south and east, with the area between the Seychelles and Tanzania becoming a prime hunting
ground and attacks now taking place even further south in the Mozambique Channel. It does seem likely
that illegal fishing was one part of the root cause of Somali piracy but, just as importantly, so too was the
lack of governance and economic opportunities on land amid the chaos of post-1991 Somalia.

In regard to the international response to piracy, there appears to be a correlation between countries
contributing (or planning to contribute) naval vessels to counter-piracy operations and those whose fishing
fleets are exploiting the opportunities the area provides. It is worth considering whether the European
Union’s Operation Atalanta Naval Force Somalia (EU-NAVFOR) might perhaps also have the added advantage
of protecting European vessels accused by Somali pirates and international organisations alike of illegal
fishing or of dumping of toxic waste in Somali waters.

The current EU-NAVFOR fleet is comprised of warships from Spain, Italy, France, Germany and Belgium,
several of which are known to have, or to have had, illegal fishing vessels in the area. While definite
numbers regarding the origin of illegal fishing vessels in Somali waters are difficult to obtain, during a
hearing regarding Operation Atalanta at the European Parliament in April 2009, representatives from French
and Spanish ship-owner organisations told of approximately 40 EU fishing boats operating in the Indian
Ocean. To date, Operation Atalanta has not reported any illegal fishing. Some European vessels captured by
Somali pirates, such as the Alakrana in October 2009, were alleged by the Somalis to be involved in illegal
fishing. The allegation was supported by watchdog groups such as fishsubsidy.org. In Violence at Sea: Piracy
in the Age of Global Terrorism, Peter Lehr of St Andrews University, describes the situation as a “resources
swap”, with Europeans and Asians poaching US$300 million in fish annually and Somalis, in return, taking
US$100 million in ransoms.
Actions Taken
In recent years, a number of regional and international measures have been initiated to combat IUU fishing.
A legal framework, regulatory environment and a mandate regarding IUU fishing has been provided by the
United Nations Security Council. In 2001, the FAO introduced the ‘International Plan of Action to Prevent,
Deter and Eliminate IUU Fishing’. The plan called for bilateral, regional and international co-operation to
deal with IUU fishing. This was especially the case for shared fisheries that required co-ordination between
countries.

In 2003, after a roundtable on sustainable development at the Organisation for Economic

Co-operation and Development (OECD), a number of ministers decided to form a high seas task force to
combat IUU fishing. Launched in 2003, the Task Force included fisheries ministers from Australia, Canada,
Chile, Namibia, New Zealand and the United Kingdom, together with the Earth Institute, IUCN-World
Conservation Union, WWF International and the Marine Stewardship Council. The goal of the Task Force
is to set priorities among a series of practical proposals for confronting the challenge of IUU fishing on

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 the high seas. A series of expert panels have been convened to identify the legal, economic, scientific
and enforcement factors that permit IUU activity to thrive. The panels are then to determine key points of
leverage that can be brought to bear at national, regional, and global levels to minimise the incentives to
carry out IUU fishing on the high seas.

The Indian Ocean Commission, part of an EU-funded regional project for fisheries surveillance in the South-
West Indian Ocean, is an intergovernmental organisation comprising Comoros, Madagascar, Mauritius,
France (for Réunion) and the Seychelles. Although it was originally conceived to encourage trade and
tourism, it has now expanded its objectives to include economic development and fisheries management.

Regional Fisheries Management Organisations (RFMOs), sometimes called Regional Fisheries Organisations,
also have a considerable role in the fight against IUU fishing. As international organisations dedicated
to the sustainable management of fishery resources in a particular region of international waters, or of
highly migratory species, RFMOs keep lists of IUU vessels, enabling them to take enforcement action when
encountered. The Pew Environment Group, however, points out that, due to the majority of RMFOs not
sharing their IUU vessel lists, port states are only obliged to enforce their own list. Together with different
countries having different obligations depending on the RFMOs they are a party to, loopholes are created
that are then exploited by IUU operators. The main loophole is that the regional focus of port state measures
allows IUU-listed vessels to move to other regions to avoid sanctions. RMFOs also have problems in regard to
their consensus approach. Although nations like Russia, Uruguay and Spain are involved as members, some
of their fishing vessels are among the worst offenders.6

In March 2010, the Indian Ocean Tuna Commission held its annual meeting, said to be the most successful
in years. The meeting saw the adoption of several new resolutions initiated by the EU. These resolutions
included adopting a Port State Control and Inspection Scheme that reflects the recent FAO Agreement on
Port State Measures to Prevent, Deter and Eliminate Illegal, Unreported and Unregulated Fishing.

In most East African and south-west Indian Ocean states, national responses to maritime safety and security
are in their infancy. Very few of these countries have paid sufficient attention to growing maritime threats,
including IUU. Most frequently, this is due to factors such as poor governance, a lack of maritime domain
awareness and command and control capability, fragile regulatory and judicial structures, a lack of political
will, deficient interagency co-ordination and inconsistent relationships with international partners. Although
most of the nations are signatories to various International Maritime Organisation conventions and protocols,
many have failed to take concrete measures to ratify these.

One particular organisation, the United States Africa Command (AFRICOM), is a Unified Combatant
Command of the United States Department of Defence that is responsible for US military operations and
military relations with 53 African states. AFRICOM has recently opened a US-funded (but locally staffed)
maritime security and counter-narcotics centre in Cape Verde. While the US sees projects such as the security
centre as assisting African nations to enhance their own security capabilities and thus allow them to patrol
their own territorial waters, some remain suspicious of US motives. AFRICOM is unpopular within some
African states due to a perception that it is an example of the US furthering its strategic interests through
force (in this case, an interest in Africa’s oil, minerals and markets), and raises concerns in such circles about
the militarisation of US-African relations. While there remains a lingering distrust of AFRICOM, what can be
achieved through it will be restricted.

Other organisations currently working on the problem of IUU include the Stop Illegal Fishing Programme,
which operates across Africa, and the Marine Stewardship Council, an international non-profit organisation
that runs a certification and eco-labelling programme for traceable, sustainable seafood. The Seychelles
6 Ibid., p. 42.

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held a forum on sustainable fishing on 22-23 November 2010, hosting fifty fisheries ministers from African,
Caribbean and Pacific Island countries. One of the challenges discussed by the forum was the high incidence
of illegal, unregulated and unreported fishing and the need for improved fishery management.

Australia’s response to illegal fishing has been largely committed to the Southern Ocean area, due to the
more criminally sophisticated IUU fishing occurring in that area, which targets Patagonian toothfish stocks
around the Heard and Macdonald Islands. In contrast, the illegal fishing in Australia’s Indian Ocean waters
is mainly carried out by traditional or smaller scale Indonesian vessels, which particularly target sharks for
the Asian shark fin market.

Australia is very involved internationally in the response to IUU fishing. Although at the forefront in terms
of demanding proactive management and enforcement, it remains, as Senator Macdonald noted, only one
small element in the fight against a vast problem.
Conclusions
In order to have lasting success against IUU fishing, international co-operation is needed on the matter.
International actions such as the creation of a global record of fishing vessels could help impede illegal
fishing, but will only work if states do not try to protect vessels originating from their own country, as this
would undermine any progress on the issue.

The strengthening of regional co-operation would also help to build a more effective deterrent against IUU
fishing. Many illegal fishing vessels can currently evade punishment through the use of transhipment and the
resupply of vessels that are not traceable. They are also helped by weak port controls and irresponsible flag
states. Having measures only being taken against vessels, and not the nationals or companies involved, also
means that those higher up in the illegal fishing food chain are able to continue their business unimpeded.

It is vital that coastal states ratify their own national maritime strategies. This would require sustained political
will, the strengthening of relevant institutions and enforcement mechanisms, upholding of the rule of law
and the devoting of adequate financial and human resources. Such measures would, however, be difficult
for states with low governance indicators. Given that what happens on land affects what occurs at sea, if a
government is not effective on land, it will be significantly more difficult for it to be able to implement the
measures needed to deter illegal fishing vessels from entering its waters. In the case of Somalia, a viable
national government and genuine economic alternatives are necessary prerequisites.

In order for true progress to be made, long-term strategies must be developed both regionally and
internationally to deal with the maritime issues. They must also help the governments of coastal states
improve order on land, thereby enabling them to combat the illegal fishing that occurs within their waters.

*****

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Indian Ocean: A Sea of Uncertainty
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Chapter Three

South Asia

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Indian Ocean: A Sea of Uncertainty
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 India, Australia and the United
States in the Indian Ocean Region:
A Growing Strategic Convergence
12 May 2011
3
CHAPTER
Dr Rupakjyoti Borah
FDI Associate

Summary
Despite the lack of success of a number of past initiatives, now may be the time to consider an India-
Australia-United States trilateral security architecture. Such an arrangement would not only benefit all three
countries themselves, but also the Indian Ocean region as a whole. Under such an arrangement, the three
countries would be better placed to synergise their efforts, given their large number of common interests.
It would thus contribute to a stable, peaceful and multi-polar Indian Ocean region.
Analysis
Given the emerging security scenario in the Indo-Pacific region, where all three countries face challenges
from terrorism and non-traditional security threats such as piracy, drug trafficking, serious communicable
diseases, illegal immigration and environmental security, it is timely to explore the merits of a trilateral
regional security architecture consisting of India, Australia and the United States.

In November 2009, then Prime Minister Kevin Rudd visited India. During his visit it was jointly agreed to
elevate the Australia-India relationship to the level of a strategic partnership. A Joint Declaration on Security
Co-operation was issued, with both countries committing to boosting defence and security co-operation,
regional and multilateral co-operation, economic engagement, co-operation in energy, climate change and
water resources and the increasing of science and education links through knowledge partnership.

Despite booming trading ties – with exports worth $18.2 billion, India became Australia’s
third-largest export market in 2009 – there are still a few areas of concern. The incidents of attacks on Indian
students in Australia did a great deal of damage, especially in India where the stories were latched on to
by the media. The attacks did a significant amount of damage to Australia’s education industry, given that
there are more than 90,000 Indian students in Australia – and many more waiting in the wings. Australia has
emerged as the second-most sought after destination for Indian students, overtaking the United Kingdom.
Indian students make up the second-largest group of students in Australia after the Chinese; the education
sector is Australia’s third-largest foreign exchange earner after coal and iron ore.
Shared Interests
One of the most seminal developments of the twenty-first century has been the rapid economic and military
rise of China. It is the world’s fastest growing economy and has come out of the world economic meltdown
largely unscathed. India is not too far behind, with the second-fastest growing economy.

The economic potential of China and India is aptly illustrated by the Carnegie Endowment report The G-20
in 2050, which says that ‘by 2050, the United States and Europe will be joined in economic size by emerging
markets in Asia and Latin America. China will become the world’s largest economy in 2032, and grow to be
20 per cent larger than the United States by 2050.1

’India, Australia and the United States have their own anxieties about China, which was reflected in the
setting up of a new grouping on the sidelines of the ASEAN Regional Forum (ARF) meeting in Manila: the
Quadrilateral Initiative in May 2007, involving Japan, Australia, India and the United States. Although the
Quadrilateral Initiative soon fizzled out as none of the countries wanted to antagonise China, something
similar could be resurrected between the US, Australia and India in the near future.
1 Dadush, U., & Stancil, B., November 2009, ‘The G20 in 2050’, Carnegie Endowment for International Peace.

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 Indian strategic planners have been voicing concerns over China’s so-called “string of pearls” strategy,
seeing it as an attempt to enclose India in the Indian Ocean region. China has funded ports and refuelling
stations in Pakistan (Gwadar), Sri Lanka (Hambantota), Bangladesh (Chittagong), and Burma (Sittwe and
Kyaukpyu), much to India’s chagrin. Recent media reports from China indicate that it has developed its first
stealth fighter, the Chengdu J-20, and an anti-ship ballistic missile that could sink US aircraft carriers. The
newly-developed “D” version of China’s DF-21 medium-range missile could potentially change the balance
of power in the Asia-Pacific by forcing US vessels to operate at a greater distance from potential conflict
zones.

Maritime co-operation is one of the most important areas of co-operation between India, Australia and the
United States. The Indian Navy in the post 9/11 period has participated in escort and joint patrolling activities
in the region. India’s location places it adjacent to one of the world’s most vital sea-lanes stretching from
the Suez Canal and the Persian Gulf to the Strait of Malacca, through which 55,000 ships and much of the
oil from the Gulf region transit each year. Conservative estimates suggest that US$200 billion worth of oil
passes through the Strait of Hormuz annually and US$60 billion through the Malacca Strait.

It was only after the end of the Cold War that India and the US – the world’s two largest democracies –
started getting closer to each other. Although India’s nuclear tests gave a temporary jolt to the relationship,
President Bill Clinton’s visit to India in March 2000 signalled that the US-India relationship had come of age.
India’s location, strong economy and huge pool of highly qualified technical talent have helped to make
it increasingly important to the US. The Indo-US civilian nuclear deal is ample testimony to the changed
dynamics of the relationship between the two countries. The signing of the bilateral Agreement for Co-
operation Regarding the Peaceful Uses of Nuclear Energy on 10 October 2008 effectively marked the end
of India’s nuclear isolation.

In June 2010, the Indian and US Governments held the inaugural Indo-US Strategic Dialogue in Washington,
which focussed on five major areas: strategic co-operation; energy and climate change; education and
development; economics, trade and agriculture; and science, technology, health and innovation. Though
the two countries would not like to admit it, they share concerns about the rise of China, not only in Asia,
but also on the global stage.

Meanwhile, India, Australia and the US are co-operating in fora like the East Asia Summit, where the US will
join at the top level from this year. Another area of co-operation is disaster relief. In the aftermath of the
2004 Boxing Day Tsunami, the US, Indian and Australian navies co-operated on an unprecedented scale in
the rescue and relief efforts.

Though principally bilateral in nature, anti-terror co-operation is yet another area of

co-operation among the three countries. In August 2003, the Australian and Indian Foreign Ministers signed
a Memorandum of Understanding on counterterrorism and, in 2007, the two nations set up a bilateral
Defence Information Sharing Arrangement to share information in the areas of counter-terrorism, maritime
security and peacekeeping. Meanwhile, counter-terrorism co-operation between the US and India has
yielded rich dividends. In June 2010, a four-member team from India’s National Investigation Agency (NIA)
interrogated US national David Coleman Headley, who stands accused of helping to plan the 26/11 Mumbai
terror attacks.
Is a Trilateral Security Architecture Feasible?
Given the common security interests of India, Australia and the US in the Indian Ocean region, a trilateral
security architecture could definitely be firmed up. It may take the form of something akin to the TSD
(Trilateral Strategic Dialogue) between Japan, the US and Australia which was announced in 2005 as a
means to evolve a more cohesive security mechanism between the three allies. The three countries were to
a large extent also successful in allaying China’s concerns that this initiative was directed against it.

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The main motives behind the TSD can be summarised as:

s To accelerate the transformation of the traditional bilateral security politics of containment into a
more co-operative multilateral security diplomacy;

s To ensure a joint response to future emerging non-military threats; and

s To ensure that Japan pursues its own national security agenda as a self-confident regional power.

An India-Australia-US trilateral security architecture could also be some sort of a revival of the now-defunct
Quadrilateral Initiative. It would help to achieve interoperability of forces and serve as a bulwark against the
growing assertiveness of China in the region, a common concern of all three countries.

In fact, as the 2009 Defence White Paper, Defending Australia in the Asia-Pacific Century: Force 2030,
notes, ‘China will also be the strongest Asian military power, by a considerable margin. A major power of
China’s stature can be expected to develop a globally significant military capability befitting its size.
But the pace, scope and structure of China’s military modernisation have the potential to give its neighbours
cause for concern if not carefully explained, and if China does not reach out to others to build confidence
regarding its military plans.’

During his trip to China in November 2009, US President Barack Obama had broached the idea of a G-2 (the
US and China), but it was promptly dismissed by China. Since then, the rift between the US and China has
widened. Obama’s tour of the Asian democracies – India, South Korea, Japan and Indonesia – in November
2010 was seen as sending a message to China that the US would not hesitate in working with other Asian
countries that share an apprehension of China in order to prevent a China-dominated Asia.

Indeed, China has, during recent times, adopted an increasingly assertive posture. During the visit of Chinese
Premier Wen Jiabao to India in December 2010, he refused to address India’s core concerns: the disputed
border, the issue of handing out stapled visas for people from the Indian province of Jammu and Kashmir
who want to visit China and the issue of huge Chinese investments and presence in Pakistani-occupied
Kashmir (PoK).

A trilateral security architecture would allow the intensification of defence ties among the three countries.
In the field of defence, India and the US have held over 60 joint exercises in the last decade. Earlier, Russia
was the supplier of choice for the Indian defence market. That has, of course, changed in the last decade
and many US defence firms have entered the lucrative Indian market. India has bought American military
equipment including the C-130J, Harpoon missiles and maritime surveillance aircraft. It is noteworthy that
American firms bagged Indian military contracts worth nearly $8.7 billion between March 2008 and October
2010. The Indian Air Force (IAF) has recently inducted its first Lockheed Martin C-130J Super Hercules at
Hindon air force station, near New Delhi. It is the first of six C-130Js ordered under a US foreign military
sale in late 2008. Two American aircraft – Lockheed Martin’s F-16 and Boeing’s F/A-18 E/F – are in the fray
along with the European Eurofighter, Swedish Gripen, French Rafale and Russian MIG-35 for the IAF’s $11
billion medium-multirole aircraft (M-MRCA) deal for 126 fourth generation combat aircraft.

India, Australia and the US can co-operate to protect the sea lanes of the Indian Ocean region. They also
have a common interest in maintaining security and stability in countries like Indonesia. The importance
of Indonesia in American security calculations in the Indian Ocean region was highlighted by the fact that
US President Barack Obama visited Indonesia in his Asian democracies tour of November 2010. India and
Indonesia have historical and cultural ties, dating back to centuries. It is noteworthy that Indonesian President
Susilo Bambang Yudhoyono was the Chief Guest at India’s sixty-second Republic Day celebrations in late-
January 2011. As next-door-neighbours, Australia also has a deep interest in the stability of Indonesia.

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 The Indian Navy occupies a strong position in the region between the Strait of Hormuz and the Strait of
Malacca, home to some of the world’s most important, and vulnerable, sea lines of communication. Every
day, 15.5 million barrels of oil, roughly 40 per cent of the entire global oil trade, passes through the Strait
of Hormuz, while an estimated 11 million barrels pass through the Malacca and Singapore Straits every day.
Besides military threats like sea mines, maritime terrorism, and internal conflicts, India, Australia and the US
share an interest in combating non-military threats like piracy, accidents and oil spills.

India’s steadily increasing naval strength would enhance trilateral efforts to address such as those above.
It is acquiring the augmented and retrofitted 45,000-tonne displacement Kiev-class aircraft carrier Admiral
Gorshkov – renamed INS Vikramaditya – while at the same time construction has already begun on India’s
indigenous 37,500-tonne displacement aircraft carrier. Both these aircraft carriers are expected to join service
before 2015. The indigenously built carrier is expected to operate nearly 30 aircraft including the Russian
MiG-29Ks fighters, Kamov-31 helicopters and the indigenous Light Combat Aircraft (LCA). The Navy is
also considering a plan to go in for a second indigenous aircraft carrier which will have a displacement of
50,000-tonnes and will be equipped with CRATOBAR (Catapult Assisted Take Off But Arrested Recovery)
capability.

The trilateral security architecture may also facilitate increased co-operation between the three countries
with respect to energy security, especially in the field of nuclear energy. As India’s economy booms, one
thing that India is perennially short of is energy. With ever-increasing demand for fossil fuels, India’s only
recourse seems to be to look for alternate sources of energy, including nuclear. Although, at present, India
generates only 4.7 gigawatts of nuclear power, which constitutes only about three per cent of its total
electricity generation, it has an ambitious plan to increase that to 60 gigawatts by the year 2035. In the
light of the waiver granted to India by the Nuclear Suppliers’ Group (NSG) in September 2008, it has signed
nuclear deals with countries like the United States, Russia and France.

Australia has 40 per cent of the world’s known uranium deposits and has signed a nuclear deal allowing
Beijing to import Australian uranium for power stations. It has, however, refused to supply uranium to India
until New Delhi signs the Nuclear Non-Proliferation Treaty (NPT). India has criticised the NPT for discriminating
against states not possessing nuclear weapons on 1 January 1967 and because the treaty does not contain
serious disarmament obligations for existing nuclear powers.2 The issue of uranium sales has been an irritant
in Indo-Australian relations for far too long and it may now be time for Australia to rethink the issue.

Given India’s huge population and the increasing use of fossil fuels which has led to a disastrous impact
on its environment, it is imperative that countries like the United States and Australia help India reduce its
dependence on fossil fuels and instead help it focus more on clean sources of energy. In August 2009, the
first long-term liquefied natural gas (LNG) supply deal was reached between Australia and India with India’s
Petronet LNG signing a 20-year deal for gas from the massive Gorgon project. The deal was signed between
Gorgon joint venture partner Exxon Mobil Corp and Petronet, India’s largest LNG importer, under which
Exxon Mobil will supply about 1.5 million tonnes per annum of its share of LNG.

2 Fidler, D.P., & Ganguly, S., ‘India Wants to Join the Non-Proliferation Treaty as a Weapon State,’ Yale Global Online,
27 January 2010.

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Conclusion

India has recently been elected as a non-permanent member of the United Nations Security Council with
the support of 187 out of 191 member countries. It has also mounted an intense campaign for permanent
membership of the UNSC, a bid which Australia has supported. In a major development, during US President
Barack Obama’s visit to India in November 2009, he announced Washington’s support for India’s campaign
– giving yet another push to the improving ties between the three countries.

While occasionally there will be areas of divergence, a trilateral security architecture involving India, Australia
and the US would definitely yield benefits to all three nations and to the Indian Ocean region as a whole. It
would allow the three countries to synergise their efforts given their common interest in ensuring a stable,
peaceful and multi-polar Indian Ocean region. If successful, it may well come to serve as a template for
regional co-operation and be expanded to include other likeminded partners.

*****

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Indian Ocean: A Sea of Uncertainty
Future Directions International
 South Asia: A Cold War
“Quadrilateral” Redux?

15 August 2011
Professor Sandy Gordon
FDI Associate

Summary
For significant periods during the Cold War, South Asia and the Indian Ocean region were locked in the
embrace of a four-power, “quadrilateral” structure. On one side were India and the former Soviet Union
– New Delhi then had a “tilt” towards Moscow. For much of the period, Pakistan stood beside the US
against Soviet and “leftist” influence in the region, being at one point even a member of the Central
Treaty Organisation (CENTO). After the Sino-US rapprochement in 1972, China, Pakistan and the US found
themselves ranged in broad terms against India and the former Soviet Union: the “quadrilateral” in effect
re-emerged as a “pentagon”. All of that, of course, changed with the collapse of the Soviet Union in 1991,
which opened out the long process of rapprochement between India and the US.
Analysis

Towards A New “Quadrilateral” Structure?

When the US distanced itself from Pakistan after the Soviet withdrawal from Afghanistan in 1989, Pakistan
immediately turned to its Chinese and Gulf friends for strategic and financial support. The former was a
pre-existing relationship, but one that had been overshadowed by the US relationship, while the latter was
assisted by creeping Wahhabism within Pakistan.

Now that the US is contemplating both its inevitable withdrawal from Afghanistan and the increasingly
troubled relationship with Pakistan, Islamabad is again dusting off its China and Gulf options. Some in
Pakistan, particularly in the military, also wish to reassert Islamabad’s policy of seeking strategic depth against
India in Afghanistan, where New Delhi is garnering influence through its US$1.2 billion aid programme.

So, we have the prospect of a South Asia-Indian Ocean region with the US and India drawing inevitably closer,
while Pakistan reasserts and renovates its long-term strategic relationship with China and seeks strategic
depth in Afghanistan through its old Taliban links. Thus, the four could form the primary relationships of a
new “quadrilateral” structure, with a secondary, but still important, set of relationships between Pakistan
and leading Gulf States.
But Is It That Simple?
Of course, it rarely is. Reassertion of the kind of locked-in, “quadrilateral” structure that pertained during
significant periods of the Cold War would provide none of the participants with the degree of flexibility
needed to manoeuvre across the difficult fault lines surrounding Afghanistan.

First, Pakistan will need to conduct its China relationship against a background of growing tension between
the current governing élite (whether military or civilian) and the increasingly influential forces of extreme
Islam. The tensions emanating from this dualism in the Pakistani disposition were recently on show with
Chinese accusations that the Uighur insurgents-cum-terrorists who mounted a series of attacks in Xinjiang
were trained in Pakistan. Although Beijing subsequently backed away from the accusation, the incident
illustrates that China would take a very dim view of any Pakistani attempt to revisit its policy of re-establishing
the “Taliban forte” version of Afghanistan.

Besides, there are very real doubts that Islamabad could again produce such an outcome in Afghanistan even
if it wanted to do so. Pakhtuns constitute about 40 per cent of the Afghan population, with the balance
made up of Tajiks, Hazaras, Uzbeks, Baluchs and others. Dari is spoken by 50 per cent of the population and
is the lingua franca of the country. These non-Pakhtun groups have little incentive to be seduced or coerced
into a relationship with Pakistan – on the contrary.

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 Pakistan’s previous success in installing a Pakhtun, Taliban regime was initiated during a vicious civil war in
which there were virtually no other external players. Even when the US departs Afghanistan, circumstances
this time round are likely to be less conducive to the installation of an outright pro-Pakistan regime in
Afghanistan. There will be a stronger Iranian presence and the likely continuation of US, Western and Indian
influence, at least over the short-to-medium term. Even more importantly, the government in Islamabad
would be aware that a fully “Talibanised” Afghanistan would likely produce “blow-back” into Pakistan and
the consequent “Talibanisation” of that country also.

So, Pakistan’s best option may be to insert itself into the peace process as a key interlocutor in bringing
the Taliban to the table, a strategy it is already to an extent following. But this means that it will need to
continue to support stability in Afghanistan and will consequently be restrained in the way it chooses to
support the Taliban.

India also faces challenges in the unfolding scenario. For New Delhi, the very worst outcome would be
“Talibanisation” of the entire Af-Pak region. To avoid this, New Delhi may also have to back a compromise,
which would involve a voice for Pakistan and the Taliban in any negotiations. The alternative – a total lock-
out of Pakistan and the Taliban – would risk prolonged war, an eventual catastrophic collapse and may not,
in any case, be acceptable to the Americans, who are clearly seeking a way out.

Added to this, India simply does not have the resources or strategic reach to “go it alone” in Afghanistan.
Moreover, any policy that would lead to the alienation of Islamabad could involve the shutting down of the
crucial land and aerial links across Pakistan into Afghanistan. Although Washington maintains the bluff that
this would not be a significant strategic setback, it most certainly would.
Conclusion: Same Bottle, Different Wine
While the broad shape of a “quadrilateral” is re-emerging (albeit with the players differently arranged), we
are unlikely to return fully to the kind of “locked-in” scenario that froze South Asia and the Indian Ocean
region for so many years during the Cold War. All members of the new quadrilateral will want to maintain
greater flexibility than that, each for their own reason.

China will want to avoid a fully “Talibanised” Af-Pak region and is therefore likely to seek to restrain Pakistan
from outright support for the Afghan Taliban. India cannot “go it alone” in Afghanistan. It will ultimately
have to support US and Western strategies in Afghanistan and ensure that Pakistan is not pushed too far
and consequently destabilised. Pakistan will be restrained in fully following its previous strategy of backing
the Taliban against all others, since it could trigger the “Talibanisation” of Pakistan, would be resisted by
China and would be unlikely to succeed, at least in the short-to-medium term.

The US, while having expressed a clear, long-term strategic commitment to India, ultimately also requires
a “judicious compromise” in Afghanistan so it can leave with dignity and preserve some broader stability
in South/South West Asia, which in turn closely affects Gulf stability and provides a bulwark against Iran.

All this, of course, assumes that the present disposition in Pakistan, in which the current military-political
élite retains its tentative hold against the Pakistani Taliban and other extremist Islamist forces, remains in
place. While greatly to be desired, this is by no means certain.

*****

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 India’s Rise as a Great Power,
Part One: Regional and Global
Implications
7 July 2011
Dr David A. Robinson
FDI Associate

Summary
In the decades to come, India will continue its rise to great power status aided by the United States, which
sees it as helping to keep the global strategic balance in Washington’s favour. Following a strategy of “poly-
alignment”, India will subsequently look to project greater power beyond its borders. This will particularly
be the case in the Indian Ocean region, viewed by New Delhi as being essential to India’s economic and
social stability.
Analysis
Over the last decade there has been an increasing focus on India’s economic and military expansion, and its
consequences for South Asia and the world. India is rapidly rising to become a great power, but its ascent
depends on maintaining relative domestic stability, and carefully crafting its policies towards the United
States and its neighbours, Pakistan and China. All four states are nuclear powers, so the consequences of
any conflict between them are potentially dire. India has found the post-Cold War international environment
amenable to the expansion of its bilateral ties with all the major powers simultaneously, and has thus pursued
a strategy of “poly-alignment” – seeking to be a “bridging power” between the sometimes competing
poles of the United States, Russia, China and the European Union. This inverts India’s traditional non-
alignment policy, allowing India to reap the benefits of closer economic and strategic ties while maintaining
the same spirit of balanced international relations. To a degree, this arises from uncertainty about the shape
of the emerging international order, and India’s own lack of a credible vision of its place in that environment.
Nonetheless, its growing wealth and population is now enabling India to build up its military might and, as
Harsh V. Pant of King’s College London, has noted, as ‘a multi-cultural, multi-ethnic democracy … India is
being asked to shoulder global responsibilities in consonance with its rising global stature’.1 As Indian power
increases it will inevitably challenge existing political, economic and military patterns but, as Pant argues:

‘India continues to be ambivalent about power, it has failed to develop a strategic agenda
commensurate with its growing economic and military capabilities … throughout history, India
has failed to master the creation, deployment and use of its military instruments in support of
its national objectives’.2

From independence in 1947, Indian Prime Minister Jawaharlal Nehru pursued a strategy of non-alignment
that sought to avoid participation in the Cold War, prioritising multilateral institutions and the Non-Aligned
Movement. Indian policy was also always opposed to the use of military force in international relations.
However, as India begins to assert itself as a regional power, it is today moving to convert its “brown-water”
navy into a “blue-water” navy and is expanding the reach of its air force, moving beyond border control
and demonstrating greater concern for strategic issues, such as the protection of shipping lanes. While
maintaining constructive relations with the United States, India has also been involved in trilateral dialogue
with China and Russia, increasingly sharing their vision of a multipolar world based on consensus among
the major powers. India has also become a non-voting member of the Shanghai Co-operation Organisation
(SCO), through which China and Russia have sought to strategically counterbalance NATO advancement
into the Middle East and Central Asia. At the same time, it is China’s conventional and nuclear capabilities
that many argue remain the primary military threat to India’s security and the key motivation for India’s
1 Pant, H.V., ‘A Rising India’s Search for a Foreign Policy’, Orbis, Vol. 53, 2, Spring 2009, p. 252.
2 Ibid., pp. 252-5.

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 nuclear weapons programme, while the United States, under the G.W. Bush Administration, negotiated a
substantial deal that would assist India’s own “civilian” nuclear development. India’s other major challenge
comes from its unstable neighbour Pakistan, with which full-scale war and nuclear exchange have been
avoided, despite clashes in the Kargil region of Kashmir in 1999, and attacks on India by Pakistani-backed
terrorists in 2001 and 2008.

The collapse of the Soviet Union and the 1991 Gulf War confronted India with an unprecedented financial
crisis, as it simultaneously lost access to Eastern European markets, global oil prices spiked, and over 100,000
Indians were repatriated from the Gulf region, thus precluding their remittances. These economic shocks
forced a dramatic re-think of Indian economic and foreign policies. Under Prime Minister Narasimha Rao,
India steered towards greater economic liberalisation and diplomatic diversity. The Rao Government sought
greater engagement with the United States and China, as well as making overtures to Israel and seeking
improved relations with South-East Asia through a “Look East” policy. Since then, India’s average gross
domestic product growth rate has hovered at around seven per cent, and the Asian Development Bank
predicted that, in spite of the global financial crisis, India’s growth would remain around 6.5 per cent for
the foreseeable future. Not only has India maintained this remarkable economic growth, but Daniel Twining
highlights that, in the next two decades, India’s population ‘will surpass China’s to make it the world’s most
populous country, and its rapidly expanding middle class may constitute up to 60 per cent of its 1.3 billion-
plus people’.3 Internationally, the Indian diaspora now numbers over 20 million, and is relatively affluent,
successful, and well-integrated – spreading India’s “soft” cultural influence. The approximately 3.7 million
Indian nationals now living in the six states of the Gulf Co-operation Council alone remit around $8 billion
annually.

Despite India’s meteoric economic development, it can be said that India has both the best of the First World
and the worst of the Third World within its borders, and faces unprecedented human security challenges.
India now has 410 million people living below the United Nations’ poverty line – 37.2 per cent of its
population and actually 100 million more people than in 2004. Millions of India’s rural poor are faced with
food price inflation of up to 17 per cent. Sixty per cent of Indian labour is still agricultural, and the integration
of hundreds of millions of peasants into a modern economy may be an extremely painful process.

While Indian infrastructure such as roads, civil aviation, ports, and telecommunications have experienced
noticeable improvements in recent years, electricity, railways, and irrigation all still need significant
investment. India continues to lag in social infrastructure, such as education and healthcare. These social
inequalities have fuelled the widespread “Naxalite” Maoist insurgency affecting vast areas throughout
eastern and central India, and whose 20,000 insurgents Prime Minister Manmohan Singh identified as the
‘greatest internal security threat’ facing the nation.

These internal issues pose the first challenge to India’s rise as a great power, as external projection must
be based on a firm foundation of domestic stability. The requirements for domestic stability also shape
India’s international needs. Pant asserts that, ‘the biggest challenge for India remains that of continuing to
achieve the rates of economic growth that it has enjoyed in recent years. Everything else is of secondary
importance.… Unless India can sustain this momentum, its larger foreign policy ambitions cannot be
realised.’4 The process of diversifying and securing access to the international energy sources which fuel
economic growth is therefore a vital element in avoiding domestic social and political turbulence.

3 Twining, D., 10 May 2010, ‘Diplomatic Negligence: The Obama administration fumbles relations with India’, Weekly
Standard, Vol. 15, 32. <http://weeklystandard.com/articles/diplomatic-negligence>.
4 Pant, H.V., ‘Indian Foreign and Security Policy: Beyond Nuclear Weapons’, Brown Journal of World Affairs, Vol. 25, 2,
Spring/Summer 2009, p. 226.

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In this context, Indian oil and gas companies have been encouraged to invest abroad, and have the long-
term aim of producing tens of millions of tons of oil a year overseas by 2025. India has thus been developing
strategic relationships with major oil-producing Gulf countries like Saudi Arabia, Kuwait and the United
Arab Emirates, Central Asian states such as Turkmenistan, and increasingly, Iran, as potential sources of
energy. Multinational oil and gas pipeline projects have been high on India’s agenda for over a decade,
though poor relations with its neighbours Pakistan, Bangladesh and Burma have prevented such a scheme.
The United States has used its significant leverage to insist India chooses between pipeline projects or a US-
supported nuclear energy programme.

The United States has been particularly concerned by India’s relations with Iran, which the international
community has worked to isolate for some time. In this case, the US is battling the logic of supply and
demand, as Iran has the world’s third-largest reserves of oil, is nearby to India, and India is a resource-
hungry customer. But India and Iran also have a convergence of other economic and strategic interests.
The “Road Map to Strategic Co-operation” signed by Indian Prime Minister Atal Bihari Vajpayee and
Iranian leader Mohammad Khatami in 2003 also mapped out co-operation for increased bilateral trade,
and developments like Iran’s Chahbahar port complex, the Chahbahar-Fahranj-Bam railway link, and a
Marine Oil Tanking Terminal. The broader aim of these facilities is a North-South Transport Corridor with
Russia that would help to facilitate the flow of goods across Central Asia, taking cargo from Iran’s ports of
Bandar Abbas or Chahbahar via rail to the Caspian Sea and on to Russia’s Caspian ports. This route would
significantly reduce travel time and transport costs for exporters like India. India and Iran also share concerns
about Sunni Islamist power in Afghanistan and Pakistan; there have been reports of a strategic deal allowing
Indian access to Iranian military bases and equipment in the event of war with Pakistan. Politically, Iran has
recognised Kashmir as a legitimate part of India, while New Delhi is thought to have transferred sensitive
nuclear and rocket technology to Tehran, with direct security consequences for Europe and the United
States.

With energy pipelines still far from reality, and only a nascent civilian nuclear programme, India remains
highly dependent on energy imports and increasingly seeks to secure shipping lanes for the transportation
of oil, from Iran and Burma to as far abroad as Sudan and Nigeria. Nearly half of global seaborne trade
passes through the Indian Ocean, around 40 per cent of offshore oil production comes from the Indian
Ocean, and 65 per cent of the world’s oil and 35 per cent of its gas reserves are found in the littoral states
of the Ocean. This makes the region, in general, strategically significant. With India’s ever-growing reliance
on imported energy, any disruptions in the Indian Ocean (which are particularly feasible at “choke points”
such as the Strait of Hormuz, the Gulf of Aden, the Suez Canal and the Strait of Malacca), can lead to
serious consequences for the Indian economy. While a key danger is interruption of supply during a time of
war, today non-state actors, such as organised criminals, pirates or terrorists, are also an increasing threat.
As India increasingly sees itself as a great power, and defines its security in terms of the entire Indian Ocean
basin, its strategic frontiers will stretch from the African coast to the Strait of Malacca and the South China
Sea and, potentially, as far south as Antarctica. Continentally, India already looks to the economic and
strategic importance of Central Asia, and has made moves to consolidate its strategic footing, including
two airbases in Tajikistan.

The US Government’s recent National Intelligence Council Global Trends 2025 report projects that, ‘Maritime
security concerns are providing a rationale for naval build-ups and modernisation efforts, such as China’s
and India’s development of blue-water naval capabilities’.5 Indeed, India spent $10.5 billion between 2004
and 2007 on creating the world’s fourth-largest military, and is projected to spend more than $45 billion
on arms purchases between 2009 and 2013. These will include long-range aircraft, aircraft carriers and
nuclear submarines that are intended to make India a formidable force in the Indian Ocean. The Indian
5 Erickson, A.S., & Collins, G.B., ‘China’s Oil Security Pipe Dream: The Reality, and Strategic Consequences, of Seaborne
Imports’, Naval War College Review, Vol. 63, 2, Spring 2010, p. 89.

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 Navy is planning over the next decade to create a fleet of 130-140 vessels comprising three aircraft carrier
battle groups, and has created a Far Eastern Naval Command, headquartered on the Andaman Islands
– 190 nautical miles from rumoured Chinese facilities at Burma’s Great Coco Island. Meanwhile, India’s
longer-term plans involve constructing a fleet capable of projecting power into the South China Sea. There
is also much speculation around India’s production of the new Surya ICBM, which may use technology from
India’s civilian space programme. India’s Agni medium-range ballistic missile programme currently consists
of missiles with varying ranges of upwards of 700 kilometres; 2,000 kms; and 3,000 kms. The Surya project
will result in missiles with ranges of 5,000 kms, which can hit Chinese targets; 8,000-12,000 kms, which
can reach the United States and Europe; and 20,000 kms, which will have a global reach. These will have
the option of a nuclear payload and, potentially, multiple warheads. The reported 12,000km-range Surya-2
in particular is tailor-made to target the United States. This expansion of India’s missile capacity may create
increased tensions with China, and may hinder co-operation with Europe and the United States.

Today, the United States remains the key external actor in the Indian Ocean, with its military presence
stretching from North and East Africa to the Persian Gulf and Arabian Sea, east to Singapore, and southwards
to Diego Garcia. As Donald Berlin concludes, ‘America’s raw power in the region has made it imperative that
New Delhi court the United States’.6 From the time of Indian independence, some American analysts already
saw the potential for India to compete for influence with Communist China but, as India took its non-aligned
path, the US found a willing ally in Pakistan, which provided military bases in exchange for economic and
military aid. The US relationship with Pakistan led to Islamabad taking financial and political actions against
India following the 1965 and 1971 Indo-Pakistani wars, despite Pakistan being the aggressor. Eventually,
President Reagan made moves to close the gap with India in an effort to wean New Delhi away from
dependence on Moscow, thus the 1982-1991 period witnessed a gradual warming of US-Indian relations.
The collapse of superpower competition in 1991 then allowed the United States to move away from its
Pakistani ally and engage with India. By March 2000, President Clinton made this new relationship clear
while visiting India, stating that, ‘we are convinced that it is time to chart a new and purposeful direction in
our relationship’.7 This was enacted through the “Next Steps in Strategic Partnership” agreement of January
2004, which announced expanded co-operation in civilian nuclear activities and space programmes, as well
as missile defence. A senior official made the strategic design of this relationship clear, announcing that
the US ‘goal is to help India become a major world power in the twenty-first century …. We understand
fully the implications, including military implications, of that statement’.8

As part of this emerging relationship, the United States has subsequently held joint military operations with
India, encouraging it to actively patrol the Indian Ocean and the South China Sea, and President G.W. Bush
sponsored agreements facilitating the development of India’s nuclear programme. President Bush signed
the US-India Peaceful Nuclear Co-operation Bill into law in December 2006, which will result in up to $40
billion in trade with India in defence and energy products. Contrary to non-proliferation goals, the deal
leaves India free to develop its military nuclear capabilities and increases its ability to access uranium and
nuclear technologies. Some supporters of the deal, such as the Carnegie Endowment’s Ashley Tellis, see it
as President Bush’s ‘greatest foreign policy achievement. This success, if sustained through wise policies and
skilful diplomacy by future administrations, will portend enormous consequences for the future balance
of power in Asia and globally to the advantage of the United States’.9 Subsequently, under the Obama
Administration, the Indian Government signed a $2.1 billion contract with the US for eight long-range
maritime reconnaissance aircraft, capable of anti-submarine and anti-surface naval warfare.

6 Berlin, D.L., ‘India in the Indian Ocean, Naval War College Review, Vol. 59, 2, Spring 2006, p. 66.
7 Mian, Z., 27 September 2005, ‘A Story of Leaders, Partners, and Clients’, Foreign Policy in Focus, Washington, DC. <http://
www.fpif.org/articles/a_story_of_leaders_partners_and_clients>.
8 Ibid.
9 Tellis, A.J., ‘What Should We Expect from India as a Strategic Partner?’, in Henry Sokolski (Ed.), Gauging U.S.-Indian Strategic
Co-operation, Carlisle, PA: Strategic Studies Institute, US Army War College, March 2007, pp. 233-4.

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Conclusion

Since independence India has pursued non-alignment or poly-alignment, and has spurned the use of force
as a tool of foreign policy. Despite India’s advocacy of a non-polar world, Indian policymakers nonetheless
recognise the benefits of American sponsorship. Both nations agree that it serves neither US nor Indian
interests for a powerful, authoritarian China to dominate the Asian landmass or for radical Islamic forces to
wage wars that threaten the security of both states. Thus, as the United States perceives strategic advantage
from assisting India’s rise to great power status, and India is receiving tangible military and economic benefits
from this relationship, for the foreseeable future, India’s continued ascendance will be supported by the
global hegemon.

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Indian Ocean: A Sea of Uncertainty
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 India’s Rise as a Great Power,
Part Two: The Pakistan-China-
India Dynamic
14 July 2011
Dr David A. Robinson
FDI Associate

Summary
In considering India’s rise as a great power, this paper focuses specifically on India’s relations with its
strategically significant neighbours, Pakistan and China. Though India’s increasing projection of influence
may change the regional dynamics, the fundamental balance of power among India and its neighbours
will not change dramatically in the near future. Pakistan is already overwhelmed by the military strength of
India, thus its strategic outlook will remain unchanged, while China and India have increasingly intertwined
relations and evenly-matched conventional and nuclear forces, ensuring relative regional stability.

Analysis

The Problem of Pakistan

India’s geographically closest and most frequently problematic relationship is with its neighbour and prodigal
twin, Pakistan. India’s rise as a great power will have its most immediate impact on the extremely dangerous
stalemate which exists between the two states. Many security concerns converge in Pakistan, as: the state
has been a key supporter of the Taliban in Afghanistan, factions of which the Pakistani Army is now fighting
in a de facto civil war; elements within the state support Islamic terrorist organisations that periodically
attack India, provoking regional crises; and, the Pakistani Army has a growing nuclear arsenal, which could
be vulnerable to misuse by malicious elements within the state. India and Pakistan engaged in wars in
1965 and 1971, with crises about continuing Pakistani support for insurgents in the disputed Indian state
of Jammu and Kashmir erupting periodically, and threatening war in 1990. Following Indian and Pakistani
nuclear tests in May 1998, Pakistani incursions across the Line of Control in the Kargil region of Kashmir
led to another limited war, and the veiled nuclear threat by Pakistani Foreign Secretary Shamshad Ahmed
that, ‘We will not hesitate to use any weapon in our arsenal to defend our territorial integrity’.1 Major
terrorist attacks in Jammu and Kashmir on 1 October 2001 and in the Indian capital Delhi on 13 December
2001 again threatened war, though merely resulted in major military manoeuvres by India, code-named
Operation Parakram. The lack of military retaliation by India despite grave provocation seems to suggest
that India is successfully deterred by Pakistan’s nuclear capability, and this in turn only fuels the eagerness of
some elements within Pakistan to provoke India. Pakistan has adopted an “asymmetric nuclear escalation
posture”, which has deterred Indian conventional military power and thus enabled Pakistan’s ‘aggressive
strategy of bleeding India by a “thousand cuts” with little fear of significant retaliation’.2

India is four times larger and seven times more populated than Pakistan. As Pakistan averages only 300 miles
in width, it is susceptible to a central assault that would split the country in two. A number of important
Pakistani cities also lie close to the international border in the Indus River basin. As Pakistan is thus extremely
vulnerable to conventional attack by India’s larger military, it defines such an attack as an existential threat
to the Pakistani state. Pakistani Lt. Gen. Khalid Kidwai thus outlined that Pakistan would use its nuclear
weapons if: India attacks Pakistan and conquers a large part of its territory; India destroys a large part of
Pakistan’s land or air forces; India blockades Pakistan in an effort to strangle it economically; or, India pushes

1 Ganguly, S., ‘Nuclear Stability in South Asia’, International Security, Vol. 33, 2, Fall 2008, pp. 55-56.
2 Narang, V., ‘Posturing for Peace? Pakistan’s Nuclear Postures and South Asian Stability’, International Security, Vol. 34, 3,
Winter 2009/10, p. 39.

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 Pakistan into a state of political destabilisation.3 This asymmetric escalation posture is designed for a rapid
first use of nuclear weapons against conventional attacks, thus leaving India without the ability to punish
terrorist attacks through conventional retaliation. As elements within Pakistan continue to provoke India,
this creates an extremely dangerous imbalance reliant on India’s restraint to maintain peace.

Vipin Narang notes that, ‘Scholars who study the South Asian nuclear balance have argued that if a limited
clash between India and Pakistan were to expand into a full-scale conventional war, escalation to the nuclear
level would likely result’.4 Most of the “war-game” scenarios played out by the US military also foresee any
conventional conflict between India and Pakistan escalating to the use of nuclear weapons within the first
12 days.5 New analyses of this eventuality reveal that a conflict between India and Pakistan, in which 100
nuclear bombs were dropped on cities and industrial areas within the two countries, would kill more than
20 million people from the blasts, fires and radioactivity. In addition, the explosions could produce enough
smoke to cripple global agriculture. Smoke generated by burning cities could create a climatic response that
immediately reduces sunlight, cools the planet, and reduces precipitation worldwide. This “nuclear winter”
would reduce or eliminate agricultural production over vast areas, simultaneously decreasing crop yields
nearly everywhere. Approximately one billion people worldwide today live on marginal food supplies and
would be directly threatened with starvation.6 While some analysts maintain that nuclear weapons would
be used in only a measured way, the chaos, fear and interruption of communications that would follow
nuclear war’s commencement leads some to doubt that attacks would be limited in any rational manner.
Additionally, Pakistan could face a decision to use its entire nuclear arsenal quickly or lose it to Indian forces
which seize its military bases. Thus, unrestrained nuclear war in South Asia potentially has cataclysmic
regional and global consequences.

Following the terrorist attack by Kashmiri militants in December 2001 and the subsequent military standoff
with Pakistan in Operation Parakram, the Indian Army announced a new limited war doctrine in April 2004
called the Cold Start doctrine, which aims to allow conventional retaliation without posing an existential
threat to Pakistan. Under Cold Start, the Indian army would avoid delivering a catastrophic blow to Pakistan,
and instead make shallow territorial gains, 50-80 kilometres deep, that could be used in post-conflict
negotiations. This doctrine aims to deny Pakistan the justification of “regime survival” for employing nuclear
weapons in response to a conventional Indian attack. However, Walter C. Ladwig III foresees that, ‘An
operational Cold Start capability could lead Pakistan to lower its nuclear red line, put its nuclear weapons
on a higher state of readiness, develop tactical nuclear weapons, or undertake some equally destabilising
course of action’.7 The danger of escalation is further compounded by the relatively immature “command
and control” and early warning systems of both the Indian and Pakistani nuclear arsenals. There also remains
the danger of nuclear accident as, if one nation accidentally detonates a nuclear warhead on one of its own
military bases, it probably will not have adequate surveillance intelligence to know that it has not been
attacked by its enemy, and thus may falsely “retaliate” against the other country.

Meanwhile, in the context of the continuing conflict in Afghanistan, Pakistan believes that the United
States would intervene to prevent war, as it relies on Pakistani troops along the Afghan border and supplies
for American forces are transported through Pakistan. Thus, Pakistan believes the only potential military
action available to India is air-strikes against Islamist training camps, which itself is not a serious problem,
and may actually help Islamabad by killing destabilising jihadists while generating massive support among
Pakistanis for their government. The dual problems of nuclear escalation and American reliance on Pakistan
for counter-insurgency meant that following terrorist attacks in Mumbai by Pakistani group Lashkar-e-Taiba
on 26 November 2008, which killed 163 people, India was unable to respond with conventional military
3 Ladwig III, W.C., ‘A Cold Start for Hot Wars? The Indian Army’s New Limited War Doctrine’, International Security, Vol. 32,
3, Winter 2007/08, p. 168.
4 Ibid., p. 167.
5 Ricks, T.E., 24 June 1998, Wall Street Journal, ‘India-Pakistan Nuclear Rivalry’. Cited at <http://www.defencejournal.com/
aug98/indiapakrivalry.htm>.
6 Robock, A., & Toon, O.B., ‘Local Nuclear War, Global Suffering’, Scientific American Magazine, January 2010, p. 79.
7 Ladwig, ‘A Cold Start for Hot Wars?’, p. 169.

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strikes. Any attack by India might either destabilise the Pakistani Government, or escalate the conflict to
nuclear exchange. In the event of state disintegration, Pakistani nuclear weapons could fall into the hands
of militant elements who would attempt to use those weapons against India or the West.

Unfortunately, there is no easy path to stabilising reform within Pakistan. Pakistan essentially has a feudal
political establishment, run by a civilian aristocracy of wealthy agricultural landowners and industrialists,
and the Army.8 The civilian political parties primarily function as patronage networks, without deep-seated
ideological differences, and merely struggle to control state resources. As a key aim of the agricultural and
industrial élites is to avoiding paying income taxes, the Pakistani Government is also chronically in debt.
The Army is seen by most Pakistanis as the primary defender of the nation and the ultimate guarantor of
domestic stability. The ever-present threat of India is used to justify the Army’s disproportionate share of
national resources, and the Army itself also owns and manages a large agricultural and industrial empire.
Domestically, the Army is the ultimate power-broker between the political parties, and has acted on several
occasions to remove the party in power. As successive governments have received bailouts from international
financial institutions, neither the civilian political élites nor the Army have felt any real incentive to institute
fundamental change.

For the time being, the Army is objectively the most stable and responsible force to control the country. The
Pakistani military is the only state institution that works effectively, and without it Pakistan would probably
have disintegrated long ago. The dire alternatives are representatives of the rising wave of radical Islam
who arose from the madrassas under the patronage of General Zia ul-Haq, and gained their training in the
US-backed mujahedeen struggle against the Soviet occupation of Afghanistan. These elements, and more
recent jihadist recruits, are currently involved in Kashmiri terrorist organisations like Jaysh-e-Mohammad, and
Lashkar-e-Taiba, as well as in the Afghani and Pakistani Taliban which occupy Pakistan’s border provinces.
While the Pakistani Army and intelligence services are often unwilling to directly challenge these forces (and,
indeed, currently cultivate relations with the Kashmiri groups and the Afghani Taliban), and external (and,
particularly, American) attempts to move forces into Pakistani territory would almost certainly make things
worse, this unstable situation is likely to continue.

As India’s power increases, so will its ability to strategically encircle Pakistan, through relations with Iran
and Afghanistan, and via naval power. At the same time, India’s patience for Pakistan’s continuing terrorist
provocations will probably lessen. Nevertheless, Pakistan’s deterrent capabilities remain, as attacks on
the Pakistani state – either unsuccessful or successful – are likely to result in either nuclear exchange or
widespread chaos and bloodshed. If India continues restraint, however, and reaches out to more moderate
elements within the military and civilian political parties, it could leverage its growing economic strength to
gradually help a more moderate Pakistani state develop.
The Challenge of China
On a grander strategic level, relations between India and China will be highly significant as India emerges as
a great power. There is a growing interdependence between the two Asian giants, as China is now India’s
number-one trading partner, with more than $52 billion in bilateral trade, and estimates are that China-
India trade will surpass US-China trade by 2020. China’s powerful manufacturing sector complements
India’s combination of a raw materials and cutting-edge technology economy. Strategically, a strong and
influential India helps to create a more multipolar world, consistent with Chinese interests, although China
increasingly regards India as its main Asian rival. China is thus involved in a complex game of encirclement
with India. China has armed Pakistan with nuclear weapons and ballistic missile technology, and has built
‘strong military-to-military ties with Burma, Pakistan, Nepal, Bangladesh, and Sri Lanka as part of what
Indians see as a strategy to tie India down, Gulliver-like, in its region’.9 China is also developing deep-water
ports throughout the Indian Ocean to support its projected blue-water naval capacity.

8 Schmidt, J.R., ‘The Unravelling of Pakistan’, Survival, Vol. 51, 3, 2009, p. 29.
9 Twining, D., 10 May 2010, ‘Diplomatic Negligence: The Obama administration fumbles relations with India’, Weekly
Standard, Vol. 15, 32. <http://weeklystandard.com/articles/diplomatic-negligence>.

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 Meanwhile, on the border, China continues to press its claims to vast tracts of Indian territory. Over the
past years, increased friction in the border area between India and China has led to incursions by Chinese
troops, the wounding of several Indian border police, and a build-up of military forces on both sides, as
Beijing has been uncharacteristically assertive in its claims to sections of India’s Arunachal Pradesh state. The
Indians responded by moving 30,000 troops and their latest warplanes into the area, leading some analysts
to predict a China-India war within five years.

China rejects the McMahon Line that forms the border, and places the traditional Sino-Indian border at
the base of the Himalayan foothills. Stratfor’s George Friedman argues that, for China, control of Tibet
is of vital strategic importance, providing a barrier against its populous and economically and militarily-
advancing neighbour. The high mountain passes of Tibet provide virtually impenetrable terrain which is easy
to protect militarily. Along the frontier directly south of this border, in India, is one of the largest population
concentrations in the world. If China were to withdraw, Beijing fears that this population could migrate into
Tibet, and Tibet could gradually turn into a beachhead for Indian power that would directly abut Sichuan
and Yunnan provinces. The Chinese thus see control of Tibet as a matter of fundamental national security.
They also see the 1959 decision by Indian Prime Minister Jawaharlal Nehru to give asylum to the Dalai Lama,
and the continuing support for the Tibetan government-in-exile, as perpetuating this threat. Thus, ‘Beijing’s
price for a border settlement and for normalisation of ties with India, appears to be that India dismantle
the Tibetan settlement in Dharamshala and request the Dalai Lama take up residence in another country’.10

On a broader front, 80 per cent of China’s oil and gas supplies transit the Indian Ocean and South China
Sea, so the Chinese navy is increasingly making its presence felt in the area in order to secure its lines of
supply. For China, like India, the steady flow of imported resources is not just an issue of economic growth,
but also of the longevity of the Chinese Communist Party. Chinese leaders increasingly fear that adversaries
could blockade sea lanes and strategic bottlenecks such as the Strait of Malacca, and are thus moving to an
offshore defence policy that will include “distant ocean defence”. China’s actions, however, may impinge
upon India’s interests and destabilise relations.

Jason Blazevic argues that, following “defensive realist” strategies, each nation will attempt to gain power
for self-preservation and other nations will see this move as a strategic threat, thus decreasing collective
security. As part of this competition, China has been developing a so-called “string-of-pearls” strategy,
expanding influence into ports in Burma, Sri Lanka and Pakistan. According to a report by US defence
contractor Booz Allen Hamilton, ‘China is building strategic relationships along the sea lanes from the
Middle East to the South China Sea in a way that suggests defensive and offensive positioning to protect
China’s energy interests’.11 China emerged as the biggest military spender in the Asia-Pacific in 2006, and
now has the fourth-largest defence expenditure in the world. Its navy is also considered the third-largest in
the world behind only the US and Russia, and is superior to the Indian Navy. In this context, India perceives
Chinese actions as power maximisation, and fears that China’s forward-basing strategy will be used to
contain India and rapidly achieve hegemony in the Indian Ocean.

Meanwhile, China and India have adopted nuclear “assured retaliation” postures (what they sometimes refer
to as “credible minimum deterrence”), which rely on a small but secure and survivable nuclear force that
assures a retaliatory strike against a primary opponent. In many ways, this seems like the most stable aspect
of the competition between India and China, though it is yet to be seen what reaction a new generation of
Surya missiles might provoke in China. Meanwhile, analysts like Stephen Walt expect that China will follow
a consistent but non-provocative build-up of its military capabilities and diplomatic alliances over the long-
term, aiming to gradually edge the United States out of a hegemonic position. India is likely to mirror this
build-up and thus tension, and possible low-level confrontation, may result on the India-China border and
in the Indian Ocean region.
10 Nalapat, N., ‘The History of Sino-India Tensions’, The Diplomat, 1 December 2009. <http://the-diplomat.com/2009/12/01/
the-history-of-sino-india-tensions/>.
11 Blazevic, J.J., ‘Defensive Realism in the Indian Ocean: Oil, Sea Lanes and the Security Dilemma’, China Security, Vol. 5, 3,
2009, p. 63.

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Conclusion

India’s rise to great power status is inevitable and will occur quickly over the coming decades, especially
while the United States believes this will assist it in maintaining a global strategic balance. This will lead
to a greater projection of India’s power outside of its borders and especially into the Indian Ocean region,
which it sees as being essential for its economic and social stability. The two states that India’s ascent will
have the greatest strategic impact on will be its neighbours, Pakistan and China. For contrasting reasons,
however, this impact may not change the fundamental power balance that exists today. Pakistan is already
overwhelmed by the military strength of India, and thus its primary defences are the threat of nuclear
exchange or state disintegration – neither of which will definitely be undermined by rising Indian power. In
contrast, China and India will have increasingly complex and intertwined relations, but the economic and
strategic issues that bind them and the evenly-matched nature of their conventional and nuclear forces are
likely to maintain relative peace and strategic stability. India sees itself as an emerging great power in an
increasingly multi-power world, and is thus maintaining a strategy of poly-alignment. With the balance of
forces developing as they are, that ambition is likely to become a reality.

*****

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Indian Ocean: A Sea of Uncertainty
Future Directions International
 The Sri Lankan Election and
Tamil Politics after the LTTE
4 February 2010
Sergei DeSilva-Ranasinghe
Research Manager
FDI South and West Asia Programme

Summary
The defeat of the Liberation Tigers of Tamil Eelam (LTTE) in May 2009 has given vital democratic space for
previously suppressed and sidelined Tamil political parties to meaningfully engage in the democratic process.
As such, the political landscape for Tamils has changed dramatically over the last six months in particular,
which has seen a new energy and optimism emerge among Tamil leaders in Sri Lanka, eager to make
headway in restoring normality and rebuilding their society. The presidential election of 26 January 2010
represented an important step in that process, not least because the two leading candidates, incumbent
President Mahinda Rajapakse and former Chief of the Sri Lankan Army, General Sarath Fonseksa, were the
driving forces of the successful campaign against the LTTE.
Analysis

End of the LTTE Era

Arguably, the defeat of the LTTE has ended the darkest and bloodiest era in Sri Lanka’s post-independence
history, but in its wake a void has been left in Tamil politics. The intolerance of the LTTE to the democratic
process and of dissident Tamil opinion saw it spearhead a sustained campaign to eliminate rival Tamil
alternatives within the political spectrum. In fact, from 1975 to 2008, at least 56 Tamil leaders are believed
to have been killed. According to S.C. Chandrahasan, the son of revered Tamil leader, the late S.J.V.
Chelvanayakam (who founded the Federal Party and remained a dedicated practitioner of non-violent
politics):

‘Killing persons articulating voices opposed to the LTTE was one of the greatest wrongs the LTTE
did. It not only eliminated many experienced and talented leaders, it also prevented many up
and coming people from contributing to the cause of the Tamil-speaking people of the island.
This is one of the reasons which prevented the LTTE from becoming a popular movement. The
struggle for Tamil rights should be seen separately.’

Estimates vary markedly as to how many rival Tamils the LTTE eliminated throughout the conflict. According
to Thirunavakkarasu Sritharan, leader of the Eelam People’s Revolutionary Liberation Front-Naba (EPRLF-
Naba), the figure is estimated at between 13,000-18,000. However, Dharmalingam Siddharthan, the leader
of the Peoples Liberation Organization of Tamil Eelam (PLOTE) claims the figure is closer to 10,000, whereas
the University Teachers for Human Rights-Jaffna (UTHR-J) refers to over 8,000 Tamils killed by the LTTE up
to December 2008.
Tamil Politics since May 2009
Among Sri Lanka’s main Tamil parties, there were contrasting opinions with regard to the defeat of the
LTTE in May 2009. Certainly, the four Tamil constituents within the coalition government led by President
Mahinda Rajapakse, the United Peoples Freedom Alliance (UPFA), maintained their solidarity. The Tamil
parties allied to the UPFA included the Ceylon Workers’ Congress (CWC), Up-Country Peoples Front
(UPF), Tamil Makkal Viduthalai Pulikal (TMVP) and Eelam Peoples Democratic Party (EPDP). In addition, the
Democratic Tamil National Alliance (DTNA), which is an influential conglomeration of three anti-LTTE parties
(consisting of the Tamil United Liberation Front (TULF), Eelam People’s Revolutionary Liberation Front-Naba
(EPRLF-Naba) and People’s Liberation Organization of Tamil Eelam (PLOTE)), endorsed the outcome. In fact,

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 the EPRLF-Naba Secretary Thirunavakkarasu Sritharan asserted: ‘President Rajapaksa will go down in Sri
Lanka’s political history as the leader who ended the fascist violent culture in the country.’ The leader of
PLOTE, Dharmalingam Siddharthan, affirmed that:

‘We welcome a new era, the reintroduction of democracy and pluralism to the northeast. The
LTTE is finally defeated. Democracy and pluralism were long denied to the Tamil community.
They [the LTTE] failed to understand the political reality that a separatist state for Tamils was
unattainable.’

On the other hand, the Tamil National Alliance (TNA), a loose confederation of four influential pro-LTTE
parties formed in 2001 through LTTE endorsement and consisting of the All Ceylon Tamil Congress (ACTC),
Tamil Eelam Liberation Organisation (TELO), Federal Party and Eelam People’s Revolutionary Liberation Front-
Suresh (EPRLF-Suresh), largely denounced the government’s victory and rejected conciliatory overtures to
meet with President Rajapakse, although some TNA MPs met on an individual basis.

Ordinary Tamil civilians, many of whom were accustomed to the balance of power wielded by the LTTE,
received the defeat of the LTTE with a sense of contradiction. For most, there was a palpable sense of relief
that the insurgency was over, but uncertainty for the future dominated their concerns, especially in how
the Sri Lankan Government would potentially use its new found strength. This sentiment was perhaps best
encapsulated by N. Suntharesan, President of the Batticaloa District Chamber of Commerce and Industry,
who stated to The Nation newspaper:

‘In one way we are really happy that the LTTE is finished. All these days, the successive
governments accused the LTTE for being a stumbling block to any development or even power
sharing. But now, with the LTTE no more in existence, we are waiting to see what is going to
happen. The Tamil people feel that the victory has given the Government and especially the
Armed Forces the upper hand, and they fear that this could be used against the Tamils, like in
the 60s, 1977 and 1983 ethnic riots. They are worried that if the government military becomes
more and more powerful, they do not have anybody with military power to counteract. I think
with a proper development plan and a meaningful political package, this fear from the minds
of the Tamils could be allayed soon.’

These views were likely to have been spawned by the general uncertainty surrounding the fate of nearly
300,000 Tamil refugees who required urgent humanitarian attention. Legitimate concerns over the length
of time for screening and resettlement of Internally Displaced Persons (IDPs) roused suspicion about the
government’s actual motives, however, these fears appear to have been placated when the majority of
IDPs were allowed freedom of movement from October 2009 onwards. The general uncertainty and visible
lack of improvement for the future may have influenced the results of the Northern Province’s first local
government elections. In the Vavuniya Urban Council, a stronghold of the Democratic People’s Liberation
Front, an affiliate party of the PLOTE, lost to the TNA, which unexpectedly won by a narrow margin of 140
votes. In the Jaffna Municipal Council election, which was the first in 11 years, the EPDP allied to the UPFA
won 13 seats and secured control of the Jaffna Municipal Council.

Although the Sri Lankan Government remained overly cautious after the defeat of the LTTE, it steadily relaxed
its security posture, which was first demonstrated in May 2009, when it launched a major recruitment drive
to recruit 2,000 Tamil speaking police constables in the Eastern Province. On 17 June 2009, The Island
reported in the Batticaloa District that the police had 74 checkpoints, and in the Trincomalee District, along
the Trincomalee-Habarana Road, checkpoints were reduced from 11 to two. However, by September the
situation in the Eastern Province had markedly changed, as demonstrated by The Sunday Leader journalist
R. Wijewardene:

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 ‘To travel to Batticaloa through the emptiness beyond … the once fraught towns of Valaichchenai,
Kiran and Eravur in the darkness – without fear or checkpoints is to experience, in a journey,
the magnitude of the changes that have gripped this country over the past few months. A
night time journey to Batticaloa has been impossible for almost three decades. Daylight reveals
the full extent of the changes that have taken place in the town and the surrounding area …
there is a relaxed, unthreatening air on the streets of Batticaloa that speaks volumes about its
progress. The hair trigger tension of what has for decades been the least stable major town in
the country outside of the peninsula is gone. The armed presence has diminished. Checkpoints
are virtually non-existent – newly recruited Tamil officers now patrol the streets and people
move freely at all times. Once forlorn bars, restaurants and hotels are crowded extraordinarily
not with foreign visitors or NGO workers but with Sinhala businessmen and tourists. Scenes
that have been unimaginable for years; scores of Sinhala day trippers from Polonnaruwa and
Dambulla bathing in the placid waters at Passekuda – are now almost routine.’

Similarly, in the Northern Province, the Sri Lankan Government took several months to restructure its security
priorities. As such, in August 2009, the Sri Lanka Army appointed Major-General LBR Mark, an ethnic Tamil,
to oversee Security Forces, Jaffna. In October 2009, the Sri Lanka Police began a major recruitment drive
for the first time since 1979 to enlist 500 Tamil police constables from the Jaffna Peninsula to serve in the
Northern Province. In November and December 2009, the Government announced that travelling outside
Jaffna Peninsula and up-country regions no longer required security clearances. In November the Jaffna
High Security Zone perimeter was reduced to enable unhindered civilian access. On 6 January 2010, the
strategic A9 highway which links Jaffna to the south of Sri Lanka was finally opened to 24 hour unregulated
civilian access. On 31 December 2009, the night time curfew in Jaffna was finally lifted. The demilitarisation
of the Northern Province has enabled its reintegration into the island’s economy and society, as noted by the
Bishop of Jaffna, Rev. Dr. Thomas Sundranayagam:

‘Jaffna is returning to normal. The A-9 road has been re-opened and civilians can now use the
road. Lorries are daily bringing goods to Jaffna and also agricultural and fishing products are
being sent to Colombo and other parts of the country. Commercial activities are taking place
and the civilians are also very happy. They can now easily visit Colombo and other areas. People
from the South also come to Jaffna. During the Thaipongal and New Year they witnessed a lot
of people from South, visiting Jaffna; some of them were visiting the area for the first time.’

Although the military has expanded its strength since the defeat of the LTTE, the evidence suggests that by
and large there is in fact a process of ongoing demilitarisation taking place throughout Sri Lanka. Clearly,
the UPFA was hopeful that the speedy restoration of normality would translate into Tamil votes in the
upcoming presidential election.
2010 Presidential Election
As Sri Lanka concluded its sixth presidential election, Mahinda Rajapakse emerged victorious to lead Sri Lanka
for a second term. Although Rajapakse was tipped as the favoured candidate, there were expectations that
the election would be a close contest since the emergence of General Sarath Fonseka – who had led the
Sri Lanka Army to victory against the LTTE – as the joint opposition candidate. However, this was not to be
and Rajapakse’s comfortable win over Fonseka (both of whom claimed to be the architects of that victory)
has clearly demonstrated that his popularity, particularly among the Sinhalese electorate, has expanded
considerably since he was first elected in 2005.

Rajapakse obtained 57 per cent of the votes cast, while Fonseka received 40 per cent. Although Fonseka
refused to accept the final result, claiming the election was rigged, his stance is at odds with the Elections
Commissioner and all independent election observers, which despite some incidents and shortcomings, was

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 endorsed by the Campaign for Free and Fair Elections (CAFFE), the Peoples Action for Free and Fair Elections
(PAFFREL), and the Centre for Monitoring Election Violence (CMEV). Also, the preliminary post-election
report compiled by a five-member Commonwealth team led by the former Jamaican Foreign Minister
K.D. Knight confirmed: ‘ballots were properly counted’ and ‘overall voting and counting have proceeded
reasonably well in most areas.’

In a historical perspective, the significance of Rajapakse’s victory lies in the fact that no other Sri Lankan
president has achieved a majority of 1.8 million votes or gained 57 per cent of the vote in running for a
second term. As a result, Rajapakse has secured a strong mandate to follow through on his pledge to push
through reforms in governance and to broker a political settlement (including constitutional reform) with
the island’s Tamil minority. However, the fact that the majority of Tamils and Muslims voted for Fonseka is
a clear indication that, despite the restoration of normality and the success of Rajapakse’s infrastructure
development projects, especially in the Eastern Province, there are fissures along ethnic lines that require
priority attention. According to political commentator Dayan Jayatilleka, who was also Sri Lanka’s former
UN Ambassador: ‘[Rajapakse] has not yet resolved the state’s crisis of legitimacy at its periphery. There is
no political consensus which cross-cuts ethnicity and runs from North to South, East to West. Thus, the
crisis continues.’ Hence, if Rajapakse in the early part of his second term fails to address ethnic minority
grievances, then in the long-term Sri Lanka may indeed face the prospect of an escalation in ethnic tensions
and politically motivated violence. Such an outcome would further polarise the country and jeopardise its
hard-won stability.

Furthermore, with the separatist insurgency over, the issues of governance, accountability and transparency
have moved to the forefront of public interest, as amply demonstrated by Fonseka’s election platform,
which promised to herald a new era of transparency, accountability and good governance. There is an
implicit expectation among the ethnic Sinhalese who voted for Rajapakse, that his second term will augur
a new era for Sri Lanka; one that is both different to and which consolidates on the achievements of his
previous term. Realising the significance of the challenges that lie ahead, especially in achieving national
consensus in addressing ethnic minority grievances, Rajapakse will need to make headway in the lead up
to the Parliamentary Elections in April to exploit his popularity and to also inflict further damage to an
Opposition reeling in disarray. Sri Lanka’s main Opposition party, the United National Party (UNP) has lost
every Presidential contest since 1994 – although it has won one Parliamentary Election.

If the recent trends are anything to go by, it is not hard to fathom why the majority of Sinhalese voters
opted to vote for Rajapakse. Starting with Fonseka himself, there was a strong underlying sense that his
main motivation was based on his anathema for the Rajapakse family. Indeed, this was also the case with
his coalition supporters who were likewise driven by antipathy towards the Rajapakse family. In addition,
Fonseka’s coalition was in itself a paradox made up of parties and personalities with strongly divergent and
clashing interests. As such, it became increasingly apparent that the opposition lacked internal cohesion
and if Fonseka, a political newcomer, did in fact succeed to become President, his disparate coalition
government is likely to have encountered serious internal turmoil. For instance, the Janatha Vimukthi
Peramuna (JVP), an ultra-nationalist Sinhalese party, has consistently opposed concessions to the Tamils;
while the ultra-nationalist pro-LTTE Tamil National Alliance, Sri Lanka’s largest Tamil party, has not renounced
its endorsement of secessionism and even publically paid tribute to the LTTE in the lead up to the election.

In this context, the stability and leadership that Rajapakse offered bolstered his advantage, especially since
he has delivered on major infrastructure development and is also credited with the defeat of the LTTE.
Clearly, this transpired in the official results tally when Fonseka was trounced, winning only six electoral
districts. Hence, there is increasing doubt as to whether a unified coalition will indeed exist at the upcoming
Parliamentary Elections, as there are indications that the UNP is now gearing up to go it alone without
Fonseka – who is interested in contesting for a seat in Parliament. Rajapakse is at the height of his power

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and influence and is in an unprecedented position to herald much-needed change in good governance and
bring about political and constitutional reform, which will arguably be the most crucial test of his leadership
in a country which is now at a crossroads phase in its post-civil war history.
India’s Posture
In the aftermath of the defeat of the LTTE, India’s stance towards the TNA reveals that it is seeking a
settlement to the problem in Sri Lanka with the full implementation of the Thirteenth Amendment to ensure
stability on its strategically important southern periphery. Hence, the TNA position is increasingly at odds
with India’s foreign policy interests towards Sri Lanka. Since the pro-LTTE parties were routed in India’s Lok
Sabha parliamentary elections in April-May 2009, India has made subtle gestures to influence the Tamil vote
and has voiced its disapproval of the TNA election platform.

Initially, in July 2009 when Tamil Nadu Chief Minister M. Karunanidhi told the Tamil Nadu Assembly: ‘US
President Barack Obama changed the compulsion that only a white-skinned person can rule US. And
the day is not far off when a Tamil will rule Sri Lanka.’ He also cautioned Tamil Nadu politicians making
provocative remarks: ‘This is not a conflict between the governments of Tamil Nadu and Sri Lanka …. If we
end up saying something against the Sinhalese community, it will only affect the Tamils there.’ Similarly,
BBC Sinhala reported that Karunanidhi told the same Tamil Nadu State Assembly that Tamil Eelam or a
‘separate country [is] unrealistic’ and only by working with Rajapakse could a solution be fostered. He also
rebuked calls for a war crimes investigation on the grounds that it would be counter-productive. Hence, by
this statement Karunanidhi signalled that his party, the Dravida Munnetra Kazhigam, a key ally of Congress,
was comfortable with Rajapakse and the Thirteenth Amendment was its preferred solution. In fact, as the
Times of India reported, Karunanidhi categorically affirmed this position: ‘Only this is possible, not Tamil
Eelam.’ This posture was reinforced in January 2010 by Dr. Subramaniam Swamy, the Janata Party leader
in Tamil Nadu, who urged Tamils to vote for President Rajapakse if they wanted more Indian support.
Certainly, India is taking a tougher line with the TNA as seen in December 2009 when access was denied to
TNA MP and staunch pro-LTTE advocate M.K. Sivajilingam to visit Chennai (Madras), capital of Tamil Nadu
state. According to the Sunday Times, an anonymous Indian diplomatic source mentioned that India would
reconsider its view of the TNA ‘only if the alliance brings clarity to its political vision.’

Where Tamil opinion is concerned, the most important outcome of the election according to Dayan
Jayatilleka is that:

‘Tamil nationalism has to demonstrably break from the LTTE and “Prabhakanism” and from
the secessionist goal. The Sri Lankan state would naturally feel it is unsafe to consider as a
peace partner and an ally in nation-building, a party or formation which failed to arrive at a
consensus with it on these issues. Public opinion could be reluctant to fully devolve power to
such an entity.’

Previously, the LTTE flourished in a markedly different geopolitical environment, which at the time was
conducive to a separatist insurgency. Today, the situation is dramatically different and the competing
regional interests of India, China and the West will almost certainly make the TNA federalist/separatist
platform increasingly at odds with the region’s evolving political dynamics.

This paper is a revised and expanded version of the original which was first published as ‘The Road to
Normalcy’ in The Diplomat, (January, 2010).

*****

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Indian Ocean: A Sea of Uncertainty
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 Sri Lanka’s Stability Critical to New
Delhi’s Indian Ocean Ambitions
22 June 2011
Sergei DeSilva-Ranasinghe
Research Manager
FDI South and West Asia Programme

Summary
A controversial advisory panel report, published by the United Nations in late March 2011, called for a full
investigation into the perceived breaches in the Laws of Armed Conflict during the endgame of Sri Lanka’s
civil war. As a result, India continues to face the challenge of balancing its relations with Sri Lanka, while
appeasing the southern Indian state of Tamil Nadu, which is home to over 72 million Indian Tamils.
Analysis
The report’s fallout prompted a high-level Indian delegation, consisting of Foreign Secretary Nirupama Rao,
National Security Advisor Shivashankar Menon, and Defence Secretary Pradeep Kumar, to head to Sri Lanka
on 10-11 June for crisis talks with Sri Lanka’s President Mahinda Rajapakse. While the agenda will obviously
focus on Sri Lanka’s post-war stabilisation and reconciliation, and India’s interests generally, the ultimate
objective for India is to ensure that Sri Lanka does not drift further towards China. Presently, China is the
most dominant and influential foreign power in Sri Lanka, which is of serious concern to India.

Although Sri Lanka’s relations with the US and the European Union have remained strained since the end
of the civil war, the same cannot be said about India, a key Western strategic partner. In fact, the evidence
overwhelmingly suggests that relations between India and Sri Lanka are stronger today than they have been
since the 1970s.

A recent meeting in May 2011 between Sri Lanka’s Minister of External Affairs, Professor G.L. Peiris, and
India’s External Affairs Minister, S.M. Krishna, saw India reiterate its foreign policy stance towards Sri Lanka:
‘Our relationship with Sri Lanka is of critical importance not only to India but to Sri Lanka also. We have
always found that in Sri Lanka we have a reliable partner, a steadfast friend of India and we wish well for
Sri Lanka,’ he said.

Sri Lanka also appears to understand the importance of maintaining amicable relations with India, which
is critical to its own security and stability. Although China remains a key ally to Sri Lanka, so does India.
According to Dr Dayan Jayatilleka, Sri Lanka’s Permanent Representative/Ambassador to the United Nations
in Geneva from 2007 to 2009: ‘We need India’s support to balance off those who are hostile to us or are
influenced by the pro-Eelam [secessionist] trend in the Tamil Diaspora.’

Since the end of the civil war in May 2009, salient examples of India’s assistance to Sri Lanka, include: a
financial aid package worth US$100 million to give food, clothing and shelter, and also to expedite the
process of demining and resettlement. In June 2009, India’s UN Ambassador sharply criticised Navi Pillay, UN
High Commissioner for Human Rights, for her insistence on pursuing a war crimes investigation against Sri
Lanka, after the UN Human Rights Council voted against it.

Similarly, in July 2009, BBC Sinhala reported that M. Karunanidhi, the Chief Minister of Tamil Nadu, told the
Tamil Nadu State Assembly that a separate country for Sri Lanka’s Tamils was “unrealistic”. He rejected calls
for an investigation into the endgame of the civil war on the grounds that it would be counter-productive
to reconciliation. In a historic visit to Sri Lanka in October 2009, a senior Tamil Nadu ministerial delegation,
which included the Chief Minister’s daughter, Kanimozhi, visited the island to inspect Internally Displaced
Persons camps and endorsed Sri Lanka’s resettlement efforts. On two occasions since 2009, the pro-LTTE

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 politician M.K. Sivajilingam, who resides in Sri Lanka, has been denied entry into India. In May 2010 India
again extended its ban on the LTTE for another two years.

In June 2010, President Rajapakse visited India to negotiate the Comprehensive Economic Partnership
Agreement (CEPA), which India is keen on implementing to further expand relations with Sri Lanka in political,
economic, developmental, security and cultural spheres. Although, the CEPA is still being negotiated, due to
complications about its provisions and its overall benefit to Sri Lanka, India has independently acted on its
longstanding interest to obtain the Trincomalee port facility as an exclusive export processing zone, where
the Indian Oil Company has leased oil-storage tanks for many years.

India has also offered concessional loans for a number of major infrastructure development initiatives, such
as: the US$200 million joint-venture project, at Sampur south of Trincomalee harbour, which will see the
construction of a 500 megawatt coal power plant; funds for the restoration and expansion of northern
Kankesanthurai and Point Pedro ports, and the Palaly airfield; and the provision of a US$1 billion line of
credit for the restoration of key areas of Sri Lanka’s national railway system.

On Sri Lanka’s western coastline, an Indian company has secured a block for petroleum exploration in
the Mannar Basin. India is also seeking to share its excess power output by building a 285 kilometre long
undersea power transmission cable that will link Madurai in Tamil Nadu to Anuradhapura in north-central
Sri Lanka. Accordingly, in addition to its High Commission in Colombo and Consulate in Kandy, India has
opened two more consulates. One is in Jaffna in Sri Lanka’s north; the other is in Hambantota, in the south
of the island, where China has funded the construction of a new world-class port facility.

So far this year, India has also: awarded the contract to build the rail link between Talaimannar and Madhu in
the Northern Province in Sri Lanka; completed construction of the Galle-Matara express railway track, with
a concessional Indian loan worth US$36 million; recommenced cargo shipping and passenger ferry services
between Colombo and Tuticorin in Tamil Nadu in June 2011, after a gap of 30 years; and announced its
intention to commence an annual strategic dialogue with Sri Lanka.

The pattern of India’s behaviour is consistent and clear: it wants to decisively settle the ethnic issue in Sri
Lanka, which is vital to its own national security, and prevent a scenario that could possibly revive radical
Tamil nationalism as espoused by the LTTE. In addition, by securing its interests in Sri Lanka, India has
positioned itself to have a greater say in Sri Lanka’s internal affairs, thereby enabling it to contest, and
possibly limit, the growth of Chinese influence on the island.

Given that Sri Lanka is located just off India’s southern periphery and astride the strategically important
east-west shipping route, it will continue to be of concern for Indian strategic planners in what is a vitally
important geo-strategic location of the Indian Ocean. As such, India’s foreign policy towards Sri Lanka
will continue to be at odds with that of the West, and shall continue to focus towards promoting political
stability, rather than confrontation.

*****

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 The Politics of Sri Lanka-Tamil
Nadu Relations

23 September 2011
Dr Ameer Ali
FDI Associate

Summary
With the ongoing coverage that Sri Lanka receives in the Western media today, very little is given to the
divisions among Tamils themselves and the complex inter-relationship between Sri Lanka, and its immediate
neighbour, the southern Indian state of Tamil Nadu. Indeed, the turbulence that often characterises Sri
Lanka’s relations with India more often than not stems from ongoing tensions between Sri Lanka and Tamil
Nadu. It is this complex triangular dynamic that will remain the next major hurdle in stabilising Sri Lanka-
India relations, one that India appears to be paying greater attention towards.
Analysis

The Shadow of Tamil Nadu

Since the end of the civil war in May 2009, an important element that continues to shape the Sinhalese-
dominated Sri Lankan government’s relations with India is the existential fear of Tamil Nadu’s potential to
influence the Indian central government to adopt anti-Sri Lanka policies. The Cholan Tamil invasions of
antiquity; the sheer size of the Tamil Nadu population (numbering 72 million); the concentration of Tamils
in Sri Lanka’s Northern and Eastern Provinces and parts of the island’s central highlands, have contributed
to entrench this fear in the Sinhalese mindset.

It is these contributory factors the Sinhalese assume that provided the psychological strength, if not the
political rationale, to the rise of Tamil separatism in the country. This historically rooted fear and the paranoia
about Tamil Nadu, has tended to cloud the objectivity in Sri Lanka’s official analysis of inter-Tamils relations
between Chennai and Jaffna on the one hand and the Chennai-Delhi political complexity on the other, both
together translate the assumed threat from Tamil Nadu a myth.
Regional Differences
To start with, the Sri Lankan Tamils, although they originate from the South Indian Dravidian stock and
are inseparably linked with Tamil Nadu by language, religion and culture have a historical suspicion, if not
resentment, towards the domineering character of their Dravidian brethren in Sri Lanka. As a popular Tamil
adage still current in Jaffna intimates: ‘vadakkaththanaiyum vayittukkutththayum nampathe’ – ‘do not trust
the northerner and the stomach ache’. The northerner refers to the South Indian. Adages may sound too
trivial to be considered seriously, but they are not born out of a social vacuum and when contextually placed
they bear deeper meanings.

In the 1960s, the anti-Tamil Nadu sentiments were openly expressed by the Progressive Tamil Writers
Association of Sri Lanka which campaigned against the influx of cheap and commercially oriented Tamil
books, magazines, and films that were flooding the local market at that time. Their protest against that
kuppai ilakkiyankal (garbage literature) was not simply a battle for market protection for local output, but
was also a cry against the hegemony of South Indian writers and artists. It was therefore a demand for equal
recognition of Sri Lanka’s indigenous Tamil literary identity.

This campaign, championed at that time by the Tamil daily, Thinakaran, and by a group of Tamil academics
and writers, openly accused Tamil Nadu of cultural discrimination. This agitation won the sympathy and
support of the then socialist government led by President Sirimavo Bandaranaike, who served as Prime

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 Minister of Sri Lanka two times, from 1960-65 and 1970–77. Ironically, however, the demand for indigenous
identity and equal recognition of local Tamil literature and arts also unwittingly created a similar demand by
the Indian-Tamil writers of the Central Highlands, a sub-Tamil group of nineteenth-century origins.
Intra-Tamil Politics
This internal division within the Sri Lankan Tamil community is not confined to the world of literature and
arts only. It spilled over into politics and social relations, as well. Politically, the Indian segment of the Tamil
community created its own political party and trade unions, and never allied with either of the two major
Tamil parties, the Ceylon Tamil Congress (CTC) and the Federal Party (FP). It was the CTC in the early fifties
that supported the Ceylon Citizenship Act which effectively disenfranchised hundreds of thousands of
Indian Tamils residing on the island, an event not lost in the memory of the Indian Tamil community.

Even during the era of the LTTE, or Tamil Tigers, although a small number of Indian Tamil youth joined
the LTTE’s fighting cadre, the majority of that community kept aloof from the secessionist struggle. This
aloofness was also due partly to the fact that these Tamils are living in the heart of the Sinhalese-inhabited
territory and partly – and more importantly – to the almost complete social disconnectedness between
themselves and the local Tamils. This disconnectedness is basically the result of a dichotomy in social
stratification between the two groups.

The caste structure among the Tamils of Sri Lanka is significantly different from that of Tamil Nadu. For
example, the highest caste of the subcontinent, Brahmins, is not at par, but higher in status, at least from
the Indian perspective, than the élite caste, Vellalars, among the Sri Lankan Tamils. Similarly, the lower castes
of Tamil Nadu, from which the vast majority of the Central Highland Tamils hail, are, from a Sri Lankan
Tamil perspective, not at par with, but sometimes even considered lower than the lower castes among local
Tamils. The almost total absence of inter-caste marriages between the Brahmins of Tamil Nadu and the
Vellalars of Sri Lanka on the one hand, and between the Sri Lankan Tamils of the North and East and the
Tamils of the Central Highlands on the other, is a reflection of the deep social cleavage between the Indian
and Sri Lankan Tamils.

These inter-Tamil socio-cultural divisions reinforce the complexity of the political aspirations of the different
Tamil segments. It is true that the struggle for Tamil Eelam, or a separate Tamil state, by the LTTE had, and
still has, vocal support in Tamil Nadu. Even after the demise of the LTTE, the Sri Lankan Tamil cause continues
to carry favour among rival political parties in the southern Indian state. However, when the crunch time
came in 2008 and the LTTE faced annihilation at the hands of the Sri Lankan security forces, the Tamil Nadu
Chief Minister at the time, Muthuvel Karunanidhi, who publicly shed tears for the sufferings of Sri Lankan
Tamils, was paradoxically less enthusiastic and shockingly muted in his support of the LTTE. Even the current
Chief Minister, Jayaram Jayalalitha, a Brahmin by caste and a former Tamil cinema idol, who is now claiming
to do everything within her power to produce the Sri Lankan President Mahinda Rajapakse before the
International Criminal Court of Justice, is an ardent opponent of the LTTE. So, why this contradiction and
double talk?

The hegemonic aspirations of the Tamil Nadu élite are at odds with the aspirations of the LTTE. Historically,
Tamil Nadu has been the universally acknowledged champion of the Tamil language, culture and interests.
In the international arena, Tamil Nadu enjoys a virtual monopoly over Tamil interests and acts as the chief
spokesperson for India on these matters. Yet, Tamil Nadu is only a regional state and therefore has no
independent representation at the United Nations or its agencies. The Tamil voice at the world forum can
only be heard through New Delhi and its representatives. At that level, New Delhi’s national interest takes
priority over Chennai’s regional interest.

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Hypothetically, an internationally recognised sovereign Tamil Eelam in Sri Lanka, with its own representatives
and flag at the UN, would seriously jeopardise Tamil Nadu’s monopoly. This nagging concern amongst the
Brahminic élite in South India, which, for all intents and purposes, is the ruling class that carries more clout
at the federal level, speaks volumes about the strong and silent backing the Sri Lanka received from India
during the last stages of the civil war.

As long as Tamil Nadu remains within the Indian Federation without seceding to become independent, as
it tried and failed in the 1950s, its support for any Tamil separatist political struggle – Eelam or otherwise –
will not go beyond emotive rhetoric. It is New Delhi, and not Chennai, which will eventually determine the
future of Tamils in Sri Lanka. New Delhi’s geopolitical interests will always take precedence over the interests
of Sri Lankan Tamils. This argument may be too unpalatable to be digested by the Tamil community in Sri
Lanka and in the diaspora; but it is this complexity of relations between Chennai and New Delhi on the one
hand, and Chennai and Jaffna on the other, that ultimately left the LTTE high and dry in their last redoubt.

The LTTE and other Tamil militant groups relied heavily on the support of Tamil Nadu politicians to bring
pressure on Delhi; but New Delhi’s successful domestic diplomacy kept the Tamil Nadu government in
check and the Indian central government, in spite of its “double-track-strategy” of negotiation and
military pressure, never compromised on its stand for the territorial integrity of Sri Lanka. Even the so-
called Transnational Government of Tamil Eelam, the remnants of the LTTE in the diaspora after its crushing
military defeat and which are trying to rebuild the secessionist movement, have failed to understand this
basic geopolitical fact.

From New Delhi’s perspective, the strategic and economic advantages of an undivided Sri Lanka far outweigh
the benefits of any military subjugation of the island. The recent diplomatic developments between the
two countries point towards the same direction. However, Tamil Nadu’s influence in forming coalition
governments can complicate matters for India and will likely remain a source of ongoing tension between
Sri Lanka and India in the future.

*****

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 Pakistan’s Strategic and Foreign
Policy Objectives
5 May 2011
Sergei DeSilva-Ranasinghe
Research Manager
FDI South and West Asia Programme

Summary
In recent years, Pakistan’s foreign policy has steadily transformed from one that was limited in regional
scope, largely towards the Middle East and South Asia, to a policy that is moving towards developing
and strengthening relations with China, Iran, Central Asia and Russia. The changing priorities behind
Pakistan’s strategic interests have emphasised the need to secure: new sources of energy; new markets for
its products, services and labour; a favourable balance of power in the region; a way to contain and limit
India’s expanding regional influence; and the necessity to retain an amicable relationship with the US.
Analysis

Energy Security
In addition to concerns over Afghanistan, increasingly on the minds of senior Pakistani decision makers, is
a growing awareness about meeting the nation’s escalating energy demands. For example, with demand
reportedly three times greater than supply, the energy shortfall has had a major impact on industry and
has regularly forced businesses to cease operations. Pakistan imports 85 per cent of its oil and has relied
heavily upon Middle Eastern countries to acquire energy; such as Saudi Arabia, which is Pakistan’s largest
supplier of petroleum. Given these considerations, the need to secure new energy sources will also remain
a fundamental goal of Pakistan’s foreign policy.

Currently, Pakistan has been aggressively seeking to exploit new petroleum and gas reserves both domestically
and regionally. The Pakistani state-owned Oil and Gas Development, which extracts and produces 60 per cent
of Pakistan’s domestic oil, is actively prospecting for new reserves in the resource-rich but restive Balochistan
Province. ‘We are following a very aggressive exploration policy,’ said the company’s Chief Executive Shah
Mehboob Alam. The low intensity insurgency being waged by Balochi secessionists, however, has slowed
the pace of exploration operations.

Similarly, in its quest to secure energy Pakistan has also looked towards Iran, which is also strategically
important to Pakistan as a land corridor to the Middle East, Asia Minor, the Caucasus and the western
Central Asian region. It has accordingly sought to upgrade relations significantly. For some time, both Iran
and Pakistan have been engaged in improving communications and transport links to strengthen relations.
For example, in 2009 Iran provided US$72.3 million to lay a 170 kilometre transmission line to export
1000MW of electricity to Pakistan. More recently, in 2010, Pakistan signed a deal with Iran worth US$7.6
billion, to build the long-delayed pipeline project to pump 750 million cubic feet of natural gas daily from
the South Fars field to Pakistan by mid-2015. The initiative was hailed by Pakistan’s Petroleum and Natural
Resources Minister Naveed Qmar, who regarded it as ‘a milestone toward meeting energy needs of the
country.’ Bilateral trade between the two countries has also grown from around US$500 million in 2005 to
approximately US$2.3 billion in 2009.

A by-product of stronger relations has been enhanced bilateral security cooperation, especially in relation to
countering Baluchi secessionists, who present an intractable problem for both countries.

Given the instability in southern Afghanistan, Iran is also increasingly important to Pakistan as a land route to
the countries of western Central Asia, namely, Turkmenistan, Kazakhstan and Uzbekistan. Through this link,

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 Pakistan has been able to access Turkmenistan’s market more readily than it has in the cases of Kyrgyzstan,
Kazakhstan and Uzbekistan. ‘Presently these relations are being restrained by the absence of fast, smooth
and cheap transport system. At present trade is being handled by air which is not a cheap way,’ said a
senior Pakistani trade official. Yet Pakistan has demonstrated a strong interest in importing electricity from
Turkmenistan and in joint-venture partnerships to develop Turkmenistan’s South Yolotan-Osman gas field.

In addition to Iran, Pakistan has also looked to Central Asia to secure energy and access to new markets.
Since 2010, Pakistan has embarked on a diplomatic offensive to enhance its relations with such Central
Asian countries as Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan. It has signed a number
of bilateral and multilateral agreements. ‘The process is underway to boost relations with Russia and Central
Asian Republics,’ said Shah Mahmood Qureshi, Pakistan’s [then] Foreign Minister.

In the same year Pakistan’s Central Asian ambitions were given greater impetus when it joined the 10
member Central Asia Regional Economic Cooperation. Pakistan is increasingly interested in expanding
relations with the Central Asian states to exploit its geo-strategic position as a corridor to the Indian Ocean.
This has particularly become the case with the new Chinese-built port facility at Gwadar.

For Pakistan to access Tajikistan and Kyrgyzstan, it requires the cooperation of Afghanistan to use the
Wakhan Corridor, a narrow strip of land belonging to Afghanistan that borders Tajikistan, western China
and Pakistan. In recent times both Pakistan and Tajikistan have moved upon their longstanding interest to
build the 1306 km long Pakistan-Tajikistan Highway, to link the Tajik capital of Dushanbe to the Karakoram
Highway in Pakistan. There are also indications that Tajikistan remains eager to export energy. One example
is the CASA-1000 power project signed in March 2011, which aims to transmit 1000 MW of surplus
electricity from Tajikistan and Kyrgyzstan to Pakistan, by a 750km transmission line. As seen in April 2011,
Tajikistan has similarly offered to help Pakistan fund and build 600MW and 220MW hydro plants.

As part of its Central Asia focus, Pakistan is also looking towards expanding trade relations with Russia,
which is also reportedly seeking to expand trade and access routes to new markets throughout the region.
As reported in Dawn late last year, the Chairman of the Pakistan-Russia Business Council, Muhammad
Farooq Afzal, affirmed: ‘Russia is keen on funding infrastructure projects such as roads, rail and energy
in Tajikistan, Afghanistan and Pakistan. The positive results of the meeting will give access to Tajikistan
and Russia for Pakistani ports and in return Pakistan will get access to the Central Asian markets and rich
Siberian regions through road and rail. With a population of 145 million, and a consumer market of 1.27
trillion dollars, the Russian Federation is an enormous market. Together with the neighbouring countries,
Russia and is a potential market in the field of textile and garments, rice, leather, sport goods, surgical
equipment and pharmaceuticals. If an aggressive export strategy is adopted, Pakistan can raise its consumer
goods export to Russia up to one billion dollars within a year.’ Since then efforts to improve relations have
led both countries to establish an inter-governmental commission to examine the potential to enhance
trade and economic ties.
China-Pakistan Relations
Over the last decade Pakistan’s strategic partnership with China has become increasingly important to
its future security, stability and prosperity. ‘The Pakistan-China relationship is much more than a strategic
confluence of interests between two countries,’ affirmed Pakistani President Asif Ali Zardari in early 2009.
Similarly, in February 2010 Pakistan’s [then] Foreign Minister, Makhdoom Shah Mahmood Qureshi, told
an audience at the Shanghai Institute of International Studies: ‘Pakistan-China relationship has three
constituents: strategic partnership; economic cooperation, and people to people contacts. In this calculus,
the security dimension has been the strongest; but now the two sides are making conscious efforts to
underpin this relationship with strengthened economic co-operation, and deepened cultural interaction at
the level of the people.’

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Although modern bilateral relations with China and Pakistan have fluctuated since they officially began in
1951, there has been a notable strengthening of relations after the US intervention in Afghanistan in 2001.
Spanning the period from 1999 to 2009, there have been a number of key examples of Chinese investment
and support such as: assistance with the construction of a 300-MW nuclear power plant in Punjab Province;
a joint-venture partnership in developing and producing the Al-Khalid-2000 Main Battle Tank and the JF-
17 Thunder multirole fighter aircraft; provision of $198 million out of $248 million to build Gwadar port;
signing of a bilateral free trade agreement; co-operation in civil-nuclear technology as demonstrated by the
Khusab Nuclear Programme; acquisition of modern Chinese-built F-22P frigates; initiatives to build a fibre-
optic line, an oil and gas pipeline, and a rail track connecting Gwadar to China; and the provision of an EXIM
Bank loan of US$105 million for Pakistan Railways to purchase 75 Chinese-made locomotives.

By 2010 bilateral trade had increased to US$7 billion, up from US$2 billion in 2002, and both countries have
since announced plans to increase this further to US$15 billion by late 2011. Since 2010, over sixty Chinese
companies have been operating in Pakistan on 122 projects, involving some 11,000 Chinese businessmen,
engineers, technicians and workers.

In the same year China offered to invest US$10 billion in Pakistan for two hydro-power projects to generate
7,000 and 12,000 MW. Similarly, in December 2010, China again signed 22 new agreements with Pakistan as
part of its agenda to further expand trade and cooperation. They covered agriculture and livestock, banking
and finance, civil aviation, culture, diplomacy, electronics, energy, mining, politics and space technology.
India-Pakistan Rivalry
Although it is now more than six decades since both countries attained independence, India and Pakistan
have not achieved a satisfactory relationship, despite several attempts to do so. Instead, there have been
tensions from the Cold War era, three major wars, a nuclear arms race, the perennial dispute over Kashmir
and strains over water sharing rights. Conversely, although both countries have engaged in posturing over
Kashmir and issues of national security such as terrorism, it remains to be seen whether either Pakistan
or India would want a major conventional conflict. Indeed, there are proponents in both countries who
advocate reconciliation, and although the prospects of normalising relations appear remote at this stage,
such an outcome in future may not be completely unrealistic.

Currently, trade relations between India and Pakistan are small but have shown signs of growth over the last
decade; in 2000 trade was an estimated US$500 million, but by 2008 it was reportedly over US$2 billion. As
suggested by a report published by the Washington-based Peterson Institute for International Economics,
this figure does not include indirect trade to Pakistan via other countries, such as Dubai, Oman and Iran.
Clearly, the likely benefits for both countries of normalising relations are substantial, as the trade flows
under optimum conditions reportedly have the potential to reach over US$40 billion annually. Similarly, the
normalisation of relations also has the potential to benefit both countries from the standpoint of energy
initiatives, such as the proposed Iran-Pakistan-India and the Turkmenistan-Afghanistan-Pakistan-India
pipeline projects.

But for dialogue to succeed, both countries need to harmonise their conflicting strategic interests and also
find means to engage in dialogue without serious domestic political fallout. For example, Pakistan has grown
uneasy about India’s growing presence in Central Asia; for example: the use of an air base in Tajikistan since
2002; defence co-operation programmes with Tajikistan and Uzbekistan; and India’s initiatives to access and
exploit mineral and energy reserves in the region.

Some Pakistani officials are also concerned with other Indian initiatives in the region, namely: the provision
of concessional loans to Tajikistan and Uzbekistan, such as the US$17 million loan to Tajikistan for the
modernisation of hydroelectric infrastructure; the provision of financial aid to develop a trans-Afghan

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 highway and railroad; a highway linking Turkmenistan, Afghanistan and Iran to the Persian Gulf port of
Chah Bahar, which is also being upgraded and expanded with significant Indian aid. But, while India’s
presence in Central Asia is of increasing concern, Pakistan appears to be most alarmed by India’s expanding
inroads in Afghanistan.
Afghanistan-Pakistan Relations
Due to Afghanistan’s location, the outcome of the US-led intervention in shaping the current and future
political and security environment is of critical importance to Pakistan. In line with this, Pakistan has
traditionally sought to retain a zone of influence, or buffer, which it has done historically with elements of
the ethnic Pashtun population. It would appear that such a policy was pursued with a view to sustaining
Pakistan’s internal security and stability. Similarly, Pakistan would also be looking to influence an Afghan
government to ensure that it does not support any dissident elements that are detrimental to Pakistan’s
security.

In this sense, Pakistan could possibly adopt a number of strategies that are intended to shape Afghanistan’s
security environment in a manner that aligns with its core interests: co-opt or accommodate key Taliban
factions by supporting the movement generally; restrict the movement’s influence to the Afghan side of the
border; or to militarily confront the Taliban. At this stage, it would appear that the second option is the most
likely, with the last option the least likely.

In today’s context, Pakistan’s economic interests in Afghanistan remain modest. There are reportedly over
100,000 Pakistani professionals and skilled workers who reside and work there. Two-way trade between the
countries is estimated at US$1.5 billion and, in 2010, both Pakistan and Afghanistan showed serious interest
in improving transport infrastructure by jointly constructing the Chaman-Kandahar and the Peshawar-
Jalalabad rail links. Similarly, for some time now Pakistan has granted Afghanistan transit rights to India
for its exports. Recently, Pakistan has also demonstrated serious interest in seeking transit rights through
Afghanistan to Tajikistan, by building a highway and railway through the Wakhan Corridor.

These Pakistani initiatives, however, appear to be partly a reaction to counter India’s growing influence in
Afghanistan. Since the US-led intervention first began in 2001, India is known to have opened four consulates
throughout Afghanistan, in Herat, Jalalabad, Kandahar and Mazar-e-Sharif. Today, as emphasised by the
Centre for Strategic and International Studies in Washington, India’s presence can be summarised by the
following examples: growth of bilateral trade, which in early 2008 was worth US$358 million; the provision
of US$1.2 billion to fund infrastructure development projects, such as the Zaranj-Delaram highway, Salma
Dam power project in Heart Province, and Afghanistan’s new parliament; the presence of over 4,000 Indian
engineers, labourers and security personnel (reportedly including 500 Indian policemen), working on various
development projects; involvement in training Afghan police, civil servants and diplomatic staff; and further
assistance in the spheres of education, health, energy, telecommunications and transport.

Such a large Indian presence has also invited Taliban hostility, given India’s traditional support to the Northern
Alliance, which has resulted in numerous attacks against Indian nationals engaged in development and
reconstruction work. To complicate matters further, India has also accused Pakistan’s covert intelligence
agency, Inter-Services Intelligence, of encouraging Taliban hostility. Some US reports have gone as far as
to suggest that Pakistan and India are engaged in a “shadow war” in Afghanistan, but these allegations
appear to be unsubstantiated. Nonetheless, what remains evident and appears to be intensifying, is the
India-Pakistan rivalry, which, if left unaddressed, could have major and destabilising implications for the
region’s future.

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US-Pakistan Relations

Despite the huge investment of financial, material and human resources the US has provided to Pakistan, the
strain in relations has steadily grown with each passing year of the war in Afghanistan. This was exemplified
in early 2010 by Foreign Minister Qureshi, who reportedly stated on two separate occasions: ‘We have
already done too much … Pakistan has done its bit, we have delivered.’ Similarly, after a meeting with US
officials, Qureshi affirmed: ‘A very strong perception in Pakistan that, despite our very good relations, the
United States has not paid sufficient attention to Pakistan’s concerns, security concerns vis-à-vis India.’

Such sentiment has persisted even though the US provides Pakistan with more foreign aid than it does most
other countries. According to a US congressional report published in June 2010, titled: Pakistan: Key Current
Issues and Developments, by mid-2010 Pakistan had received nearly US$10.5 billion in aid since 2001, and
an additional US8.5 billion in “reimbursements” for counterterrorism operations.

Efforts by the US to enhance bilateral relations by engaging in a number of strategic initiatives and
dialogues, such as: the United States-Pakistan Trade and Investment Council, under the US-Pakistan Trade
and Investment Agreement signed in 2003; and, more recently, the US-Pakistan Joint Trade Study Group;
the US-Pakistan Strategic Dialogue; and the yet to be formed US-Pakistan Bilateral Investment Treaty, have
had mixed results. This can particularly be seen by the trade figures for 2010, which stand at US$5.4 billion
and remain well short of Pakistan’s rapidly growing trade with China.

Nonetheless, Pakistan is likely to be concerned over the long-term status of US financial support, especially
after the US seeks to withdraw from Afghanistan. It will, therefore, continue to impress on the US the
need to ensure Pakistani stability; recognising Pakistan’s nuclear capability and its potential as a haven for
radical groups. Indeed, the US withdrawal from Afghanistan could be detrimental to Pakistan, given that it
is dependent on significant US economic aid, and also on revenue generated as a major supply route for US
expeditionary forces in Afghanistan.

In the event of a US withdrawal from Afghanistan, it is possible that Pakistan will still seek to maintain
amicable relations with the US, however strained they may be. Hence, this would be partly to ensure
continued US aid, but also to diminish the probability of the US strongly aligning itself with India.

Pakistan is part of a rapidly changing region that is characterised by political instability, insurgency and
serious acts of terrorism. It also has significant energy, population, and food and water challenges. Whether
it is able to achieve its strategic and foreign policy objectives remains to be seen. What is clear, however, is
that Pakistan is increasingly embracing new allies other than the West.

*****

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 Afghanistan: Shooting and
Chewing Gum at the Same Time

17 March 2011
Jason Thomas
FDI Associate

Summary
In Seven Pillars of Wisdom, T.E. Lawrence wrote ‘… the dreamers of the day are dangerous men, for they act
their dreams with open eyes to make it possible.’ While Lawrence’s extraordinary World War One mission
was in Arabia fighting the Turks, his comment epitomises the mindset one is confronted with in Afghanistan
when negotiating with the Taliban. The key question is how to look them in the eye and negotiate while
fighting at the same time. It has, however, been done before in conflicts such as the Korean War, Northern
Ireland and Vietnam.
Analysis
Even when engaged in war against another tribe, lines of communication in Afghan tribal society are
maintained. Dialogue between elders from rival tribes is often what resolves disputes, not military defeat. The
key to these negotiations is not just that they are a balance of hard and soft power, it is that they occur at
the local level or with leaders who are directly connected with the local population. They are not conducted
using the top-down approach upon which the ISAF-NATO Command appears to be focussed, or with
individuals who, after years of hiding in Pakistan, have little in common with local Taliban.

Negotiations with the Taliban must first of all be at the local District level and not left to the Quetta Shura
and President Hamid Karzai. Second, General Petraeus should increase the use of hard power to drive a
lethal spear into the foreign insurgents; and third, as long as the local Taliban leaders do not allow foreign
insurgents into their area or permit non-state actors such as al-Qa’ida to re-establish themselves, then the
ISAF-NATO forces should not interfere in their community.

If this bottom-up approach were to be seriously implemented, the biggest test will be the enforcement
of such an arrangement – for one thing is omnipresent in Afghanistan and that is an Afghan’s propensity
to see if foreign forces (whether they be foreign insurgents or ISAF-NATO) have the courage to fulfil their
promises.
All Politics is Local
Not only is conflict 80 per cent political and 20 per cent military, the 80 per cent in Afghanistan is 100 per
cent local. Major Jim Gant was correct in stating that ‘a strategy in which the central government is the
centrepiece of our counterinsurgency plan is destined to fail. It disenfranchises the very fabric of Afghan
society’.1 Kabul and President Karzai are so far removed from local society that their negotiations with
distant Taliban leaders from Pakistan are unlikely to succeed. The tyranny of distance is not just physical, it
is also psychological.

Part of the mistake in the current top down level of strategic thinking in relation to negotiations is that
we continue to come at it from a Western democratic mindset. In an anthropological perspective, and at
the risk of being elitist, it is anachronistic. We forget that Western democracy has been developed over a
long period of history, including numerous revolutions and civil wars that eventually resulted in founding
principles cemented in documents such as the Magna Carta of 1215, the Bill of Rights of 1689, which
followed the deposing of James II, and, of course, the oldest written constitution in the world, the 1787
Constitution of the United States of America. Citizens in every local town in the United States have had over
220 years to recognise and respect their constitution within a free and open society.
1 Gant, J., 2009, ‘One Tribe at a Time: A Strategy for Success in Afghanistan’.

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 Afghan tribes and villagers experienced democracy for the first time in 2004. Yet this has not diminished the
primacy of local power and authority in resolving disputes and negotiating local issues. It could well be that
because the introduction of democracy, constitution and rules of law to Afghanistan was through foreign
intervention rather than an organic revolution, it will take even longer to cement a top-down approach to
the rule of law.

Stepping back for a moment, the obvious difference between the insurgency in Afghanistan and that of
other civil conflicts in Algeria, Vietnam, Malaya and East Timor is that these insurgencies were a momentous
struggle to displace a deeply corrupt government or to break the shackles of colonialism. The motive for
the insurgency in Afghanistan is neither of these. The foreign Taliban demand adherence to no ethnicity,
no nationality nor necessarily have the same reasons to fight. Some are religiously motivated, such as
the Madrassah students from across the Pakistani border in the North-West Frontier Province. Others are
“Western home-grown” Islamic students or converts to Islam from Europe who were fighting like many of
the foreign elements which entered Iraq to join the al-Qa’ida insurgency and kill Coalition soldiers.

All this reinforces why, combined with a deep and sometimes radical interpretation of Islam, a Western
model of governance may never override Afghan local politics, especially when it is infested with foreign
extremism.

Why, then, do President Karzai – a Pashtun – and the ISAF-NATO command, continue to pursue a top-down
approach by seeking to engage with Pakistan-based Taliban leaders with little or no connection to local
tribes or even the local Taliban? Having presidentially-appointed Governors and District Sub-Governors has
only made local politics more treacherous because the tribal elders, Taliban leaders and village citizens have
had no say, either democratically or in the traditional sense, in the appointment of these individuals, many
of whom are corrupt.

It could be argued that top-level negotiations put pressure on the Pakistani Inter-Services Intelligence
Directorate (ISI), and spread rumours among the Taliban ranks that the leadership is losing heart for the
fight. This paper does not suggest an either/or approach. The point is to place as much emphasis on
pursuing local solutions as is being placed on the current top-level negotiations.
Local Taliban, Warlord or Governor – Take Your Pick
We know that the violence in Afghanistan is inflicted by several groups. There are the Pakistan-based
foreign insurgents who are funded, fuelled and armed by the ISI and who are a mixture of radicalised
foreign extremists being provided with sanctuary in the border areas of Pakistan. Many acts of violence,
revenge and intimidation are blamed on the Taliban but are not always the work of the local Taliban. More
often, the various warlords, drug barons and criminals wage horrendous violence on anyone who stands
in their way. They also have zero interest in peace and stability. In fact, their reason for being is contingent
upon mayhem.

As mentioned earlier, there are also the un-elected Governors and Sub-Governors who have almost no
affinity with their local populations. Worse still, the local populations have no ability to retain or eject these
officials in a plebiscite. The local Taliban know all about counterinsurgency. The dilemma facing the Taliban
Commanders in places like Ghazni, when considering whether or not to permit large cash-for-work projects
in their area, was that on the one hand they recognised the political credit for allowing locals to work for
cash yet, as the Taliban in Quetta relayed back to me through intermediaries, ‘we do not want these men to
work, because they will not have time to fight.’ Some Taliban leaders are even encouraging reconstruction
projects in areas where the corrupt Provincial Governor is only interested in lining his own pockets with
international aid money instead of rebuilding the lives of local people. The former Governor of Ghazni was
furious when he discovered that the first large-scale cash-for-work project in the province that he agreed to
meant paying the labourers directly, and not through his office.

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Vanda Felbab-Brown, from the Brookings Institute, makes a number of obvious points in her 2009 paper
Negotiations and Reconciliation with the Taliban: The Key Policy Issues and Dilemmas.2 She uses the
example of the Chora district in Uruzgan Province, a violent region with a strong Taliban presence, where an
effort to sponsor reconciliation and address discrimination has been successfully employed. It is local issues,
such as the paucity of good governance, tribally-motivated discrimination, the lack of dispute resolution
mechanisms and rule of law, and the corruption of the Afghan police and government officials that have
alienated so many from the government, not the division of national power, that is central to fewer local
men joining the fight.

If the local Taliban agree not to host al-Qa’ida or other trans-national terrorist organisations in their local
district, then what is the difference between them, a warlord or a Governor, in the context of Afghanistan?

The simplicity of life in Afghanistan is a camouflage for an ability to prevail against asymmetrical and
conventional threats. It also hides the significance of external cues in an otherwise complex environment
that would appear to be irreconcilable. This is because the local people, not the foreign Pakistan-based
insurgents, continue to maintain the code of honour that has prevailed against all foes, domestic and
foreign, from the beginning of tribal history in Afghanistan.
Lessons from Other Conflicts
The United States and United Kingdom are both experienced at fighting while negotiating at the same time.
The United States continued to negotiate while fighting in Korea and Vietnam. The Korean and Vietnam
wars involved two years of negotiations in the former conflict and five years in the latter. The UK engaged
in hard and soft power during the 30 year-long conflict in Northern Ireland.

One of the unsung heroes of the Korean War was Vice Admiral C. Turner Joy, the first head of the United
Nations delegation to the Korean Armistice Conference. In his diary, Admiral Joy sets out how difficult it is
to negotiate while fighting. He was prevented from implementing his belief.

Like dealing with leaders within the Afghanistan tribal system, only firmness would induce the Communists
to agree to a ceasefire that would last. Consequently, the North Koreans saw that the UN Command’s
position was constantly open to change and, therefore, appeared to be weak. Just like the Taliban, the
North Koreans hoped that time and intransigence would erode American resolve.3

In 2009, particularly from the United Kingdom, comparisons began to emerge between the Taliban and
the Irish Republican Army (IRA) in Northern Ireland. Yet the reality of what happened in Northern Ireland
was much more complex. Timing was everything and talking to the IRA was often counterproductive:
undermining moderates and encouraging the terrorists to think that they had the initiative. Western
negotiators can also dream with their eyes wide open. It was only in the 1990s, after nearly thirty years of
violence that the right conditions for dialogue were meticulously established. Crucially, this was only after a
long-haul security campaign had fought the IRA into a state of acquiescence.

Not surprisingly, the implementation of any peace deal is more difficult than the effort required for signing
the peace deal in the first place. In the case of Afghanistan, deals and double-deals are part of survival.
Negotiations have always been at the local level, rather than resolving a national crisis.

2 Felbab-Brown, V., ‘Negotiations and Reconciliations with the Taliban: The Key Policy Issues and Dilemmas’, Brookings
Institute, 2009.
3 Goodman, A. E., (ed.), Negotiating While Fighting: The Diary of Admiral Joy at the Korean Armistice Conference, Hoover
Institution Press, 1978.

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 How many civil wars do we know of that resulted in lasting peace? In most cases, combatants chose to walk
away from the negotiating table and return to war. In Committing to Peace, Barbara F. Walter points out that
civil war combatants almost always chose to return to war unless a third party stepped in to enforce or verify
a post-treaty transition. In those instances where a third party assisted with implementation, negotiations
almost always succeeded, regardless of the initial goals, ideology or ethnicity of the participants. If a third
party did not assist, the talks almost always failed.4 Bosnia is a good example, where it took the intervention
of the United States and United Kingdom, along with the UN, to not only deliver hard power, but also to
bring about a negotiated settlement and then to keep that settlement in place. The challenge in the case
of Afghanistan is who would be that third party. That is, you need a third party to enforce coercion and, at
times, demonstrate incentives in co-operation.
Conclusion
Not only do we need a better strategy to fight and negotiate at the same time, we need to identify if a
reliable third party with enough regional clout can be brought into the negotiations to enable them to be
successful. What makes Afghanistan more difficult is that these negotiations need to take place at the local
level. Most importantly, given our long and costly experience with warlords and corrupt Governors, a local
peace deal with the Taliban may prove just as effective. If the local Taliban could guarantee that they will
not permit transnational terrorists to remain in their districts, the international community could, in return,
offer to respect their right to live their own lives. That could be a better indication of success than the pursuit
of an incorruptible Afghan Government. The key question is how to enforce this agreement over the long
term.

A continuation of hard power is required, and that is only now reaching its full capacity with the
implementation of the troop surge. Unfortunately, all the political signals are that troops will begin to
be drawn down in the middle of 2011. That is not long enough to deliver the required hard power deep
enough into local areas to make negotiations truly effective.

*****

4 Walter, B.F., Committing to Peace: The Successful Settlement of Civil Wars, Princeton University Press, 2001.

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 Afghanistan: Implications of the
Karzai and Khan Assassinations

27 July 2011
Paula Hanasz
FDI Associate

Summary
Two key powerbrokers assassinated within a week – that’s an impressive feat even by Afghanistan’s
infamous history of assassinations. The separate killings of Ahmad Wali Karzai and Jan Mohammed Khan
raise questions about the stability of the country as it seeks to assume responsibility for its own security.
Analysis
The first question is, does Afghanistan’s inability to protect these two Karzai allies serve as an indication
that the country is unable to look after its own security? Probably not. Afghanistan is unstable for a myriad
of reasons, the insurgency being only one strand of the complex knot of insecurity. Assassinations are
considered by some to be a legitimate way of shifting power balances. Moreover, in Afghanistan, murder is
a culturally appropriate response to certain social transgressions, and therefore the deaths of even politically
significant figures often have a personal dimension. Ahmed Wali Karzai and Jan Mohammed Khan both had
plenty of personal enemies not connected to the insurgency.

So, why would the Taliban claim responsibility for the killings of AWK and JMK? (as Ahmed Wali Karzai
and Jan Mohammed Khan are known to the acronym-loving coalition forces). It’s true that both men were
considered key Western allies, the former in Kandahar and the latter in Uruzgan. But they were also less
than salubrious figures, known for ruling virtual fiefdoms in their respective provinces. In many ways, their
removal should come as a relief to the international coalition in Afghanistan. The Western alliance with
them illustrated to many ordinary Afghans the West’s hypocrisy in publicly denouncing corrupt officials,
while siding with them in practice. If the Taliban was indeed responsible, it may have done the Afghan
Government and ISAF a favour.

Both AWK and JMK were known for corruption, shifting allegiances to suit their own agendas, and
having links to drug trade networks. But who doesn’t in Afghanistan? It is impossible to avoid unsavoury
relationships there because, oftentimes, individuals objectionable to Western sensibilities are those who
wield the most influence locally and are therefore best able to effect change.

The trick may lie in knowing how to manage the relationship with a recalcitrant ally. Incentives for co-
operation and allegiance must be tangible, specific to the individual, and continuous. Disincentives must be
equally real, and threats followed through. Arguably, Ahmed Wali Karzai was getting out of hand – even his
half-brother, the president of Afghanistan, reportedly had trouble keeping him in check. Jan Mohammed
Khan wasn’t much better. Surely, the removal of two such problematic figures cannot destabilise the country
any further.

*****

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Indian Ocean: A Sea of Uncertainty
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 Chapter Four

China in the Indian Ocean Region and Beyond

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 Differing Perceptions of China’s
Role in the Indian Ocean

21 June 2010
4
CHAPTER
John Hartley (Retd)
FDI Institute Director & CEO

Summary
Consideration of China’s strategic objectives in the Indian Ocean has led to much debate amongst analysts.
Two schools of thought seem to emerge.

The first suggests that China is seeking to expand its influence aggressively by consolidating its presence
through the acquisition and construction of military and naval facilities and by improving relations with
Indian Ocean island and littoral states, thus isolating India and reducing the role of the United States in the
region.

The second approach is that China is simply seeking to sustain its economic development and to achieve its
goal of being seen as an emerging and responsible world power.

Analysis
Attempting to clarify these two approaches is difficult. Chinese policies, despite the publication of White
Papers and occasional policy statements, lack transparency. Certainly, Chinese foreign policy is ultimately
decided at the highest levels of the ruling Communist Party’s Central Committee, but various Chinese
commentators and analysts, some of whom may well have government support, often put out conflicting
statements that further exacerbate the opaqueness of Chinese policy. Indeed, it is possible that the Chinese
government is uncertain of what policies to adopt.

This uncertainty is increased by foreign academic, government and media speculation. For instance, the
term “string of pearls” has gained a rapid and colourful image, suggesting that China is more expansionist
and mercantilist and less interested in peaceful co-existence than many analysts contend. The term, of
course, was devised by a team of US consultants, reporting to the Pentagon and has become one of the
most debated subjects in contemporary strategic analysis, despite the issue that it is factually opaque.

Nor does China’s past strategic thinking, or its national concerns, offer much light on its future intentions.

During the Cold War era, China’s focus was on securing control over its state and on ensuring that it
controlled events in its border areas. This would lead to conflict on the Korean peninsula and brief but
significant engagements with Russia, India and Vietnam. Beijing would also aggressively support Maoist
inspired and potentially destabilising insurgencies in Burma, Thailand and Malaysia.

From 1983, with the demise of the Soviet Union, Beijing recognised the nature of the
bi-polar rivalry between Washington and Moscow. It sought to exploit that super-power rivalry to gain
strategic and economic benefits. In time, particularly after the US enrolled China to counter the Soviet
Union, Beijing increasingly began to see itself as the leader of the Third World.

With the collapse of the Soviet Union, Chinese strategists sought better relations and greater influence
in neighbouring Asia-Pacific countries. Beijing struggled, however, to establish an image of itself as an
independent and responsible member of the international community.

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 Increasingly, China is subject to an economic dynamism, resulting in annual GDP growth rates of more than
ten per cent over the last 30 years. This has led to the need to extend the benefits gained by an emerging
middle class to the majority of China’s rural poor. As a result, Beijing’s foreign policy increasingly reflects its
need to secure guaranteed access on favourable terms to energy, metals and strategic minerals, as well as
markets for its manufactured goods.

China’s position in world energy and resource markets, for instance, has changed dramatically in a short
time. China first became a net oil importer in 1993. Oil imports surpassed 100 million tons in 2004 and have
doubled since then. Over the last decade, China has become the world’s largest iron ore importer.

The result of these policies is that China is emerging as a significant force in global affairs. Beijing has
sought to extend its influence on neighbouring Asia-Pacific countries while establishing better relations with
many of its resource suppliers, particularly in Eurasia, Africa and South America. China has also supported its
national oil companies, approved pipeline projects to overland neighbours and started to develop a strategic
oil reserve.

Inevitably, this has led to a consideration that China is an assertive force, increasingly showing external
ambitions and intent on challenging America’s dominant international role. Advocates of such claims point
to China’s new naval strategy of “far sea defence”, claiming that Beijing is seeking to expand its ability to
project military force in key oceanic areas that include the Indian Ocean. This view is not helped by often
repeated statements made by Chinese officials, with claims such as: ‘We can no longer accept the Indian
Ocean as only an ocean of the Indians....’

Nor is the Chinese side impervious to such statements. A recent article in an official Chinese newspaper
quoted an influential Chinese strategist of accusing the US of “conducting a crescent-shaped strategic
encirclement” of China. In that article, South-East Asia was seen as politically dependent on the US, while
American strategies towards Pakistan, Burma and North Korea were aimed at countering China’s influence.
Not surprisingly, South Korea and Japan were seen to be even closer to Washington.

Of course, it is difficult to determine just how much these statements reflect official Chinese attitudes.
Certainly, Chinese comments on the subject of Beijing-Washington relations generally appear to be cautious.
Nor are there any apparent leadership divisions that could reflect varying policies within the Chinese
hierarchy. But Beijing is to undergo a leadership change in 2012 and such statements may be aimed at
influencing the new leadership generation.

Some analysts also suggest that the newly introduced “Core Interests” policy, whereby China will not
compromise on what it perceives to be issues of territorial integrity and national sovereignty, is a step
towards displaying greater assertiveness. But Beijing so far has not formally applied such a policy. Certainly,
this has not occurred in relation to India and, while the policy launch mentioned Tibet and Taiwan, both
Washington and Beijing know this will not result in any changes to policy on either side.

Despite the above, many Western and Indian analysts contend that China is seeking to establish effective
control over the Indian Ocean through its projection of naval power. Public statements attributable to senior
PLA naval officers certainly suggest China is embarked on a multi-phased strategy that would see the naval
theatre of operations expand from the first island chain (a line running roughly parallel to the Chinese coast
from Japan through to Taiwan, the Philippines and Borneo) to include portions of the northern Yellow Sea,
the East China Sea, the South China Sea and, eventually, the northern Pacific. In addition to the above, the
protection of sea lanes would be of paramount importance. This would include the securing of sea lanes
from the Middle East.

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But are these naval intentions guaranteed to happen? China has certainly sought to modernise its navy to
extend its “blue water” capabilities. The development of a naval base at Sanya, on the southern coast of
Hainan Island, for instance, is part of this process. Some analysts suggest this is aimed at projecting China’s
naval presence into the Indian Ocean, but there have also been potential flashpoints that could lead to naval
deployments in the East China Sea and the South China Sea.

There are also indications that China is concentrating on capabilities that will ultimately prevent the United
States Navy from operating effectively in the East China Sea and in other Chinese waters. Although
China has reportedly modernised its destroyer force, plans to acquire two aircraft carrier battle groups by
2015, or even 2020, are undoubtedly exaggerated. Beijing has, however, continued to develop a fleet of
conventional, nuclear and ballistic missile submarines.

Another significant factor that is yet to be fully understood is that China’s defence spending in 2010 will
rise by 7.9 per cent. This is considerably less than the 12.9 per cent growth annually for the period 1996-
2008. Of course, China’s defence spending of US$76.3 billion has tripled since 2000 and trails only that of
the United States, which plans to spend US$710 billion in 2010. China overtook Japan a few years ago and
Britain, France and Russia more recently.

One reason put forward for the reduced increase in defence expenditure is that the PLA has reached many
of its medium-term goals. This may see a slowdown in the deployment of new capabilities.

The Chinese government, not surprisingly, has used the reduced rate of defence expenditure to reinforce its
peaceful intent, emphasising that it has always tried to limit military spending, that it has no expansionist
intentions and that it will be different from any other great power.

Nowhere are the two schools of thought more extreme than where they impact on India and the Indian
Ocean. Put bluntly, China either seeks to be the dominant power in the Indian Ocean, and thus relegate
India to some form of subordinate role, or is simply attempting to secure access to energy and other mineral
sources.

Either way, the steps taken by China to protect and enhance its interests are generating apprehension in
Indian strategic circles, leading some analysts to conclude that a form of great power rivalry is beginning
between the two countries. As usually happens in such situations, minor and even peripheral issues are
taken out of context and attributed to outcomes that do not necessarily reflect the true situation. Recent
official Indian defence statements, for instance, claim that infrastructure developments in Tibet and Xinjiang
show that China is developing the ability to project force against India. Such developments may have more
to do with China’s concerns over internal security than any attempt to project force against India.

India has also long been concerned with China’s close association with Pakistan. Indeed, Indian strategists
perceived the transfer of nuclear and conventional weapons and technologies as being aimed at containing
India.

Other analysts claim that while war is not inevitable, peace cannot be taken for granted. Competition for
economic opportunities and regional support are quoted as reasons for future uncertainty. Others point out
that the 1962 war has left scars that reflect suspicion and concern. Furthermore, as India modernises and
develops an industrial base, competition for resources will intensify, leading to further suspicion of each
other’s intentions. There are concerns that China never anticipated that India would achieve major power
status and thus possibly challenge Beijing’s primacy in Asia. On the other hand, India is frustrated by China’s
rise and its ability to capture world attention, despite the fact that New Delhi believes it has an “advanced
political system.” Similarly, India is concerned over its failure to compete with China in global political terms
and economic development.

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 Given these mindsets, it is not surprising that an article would appear in the Indian Military Review titled
“Chinese Bases in India’s Backyard”. Another version, however, may be a reflection of a Chinese admiral’s
statement that China should set up a permanent base in the Seychelles from where the Chinese navy could
conduct anti-piracy operations off the Somali coast.

China, of course, has sought to establish “nodes of influence” through what is often perceived as assertive
diplomacy. This has led in some cases to joint port construction and enlargement in such places as Gwadar
in Pakistan and Hambantota in Sri Lanka.

There is considerable speculation regarding Gwadar. This is probably the largest so-called “pearl”. Certainly,
the port was built with substantial Chinese investment. Since it was opened in 2007 it has been managed
by the Port of Singapore Authority. One of its original commercial underpinnings was that it would be a hub
for transporting oil overland through Pakistan to western China. Such assessments were made in the early
1990s and must now be subject to considerable doubt, particularly in light of the instability in Pakistan and
neighbouring Afghanistan, to say nothing of security concerns in Xinjiang province.

Another concern for India is the Sino-Burmese relationship. Burma clearly is of value to China as its ports and
pipelines can service China’s southwest. Furthermore, the operation of Chinese oil companies off Burma’s
coast provides an excuse for a Chinese naval presence in the area.

An almost inescapable conclusion, therefore, is that the Chinese presence is overstated. But the “string
of pearls” theory has certainly served as a wakeup call to India’s strategic thinkers. Opinion is divided.
Some strategists support the contention that China’s ambitions are exaggerated. Others, particularly in
the military, are convinced that China wishes to limit India’s influence to South Asia only. Of course, as so
often happens in military strategic considerations, declaring China to be the real threat may also lead to an
expansion in Indian military budgets and resources.

There is also the factor of Indo-US relations to be considered. To a certain extent, the “Next Steps in
Strategic Partnership” between India and the US has led some observers to conclude that a number of
threat theories have originated from the US establishment. While there is little evidence to support this
contention, it nevertheless receives considerable coverage from certain elements in India, particularly those
that oppose closer ties with the US.

But the past decade has witnessed an improvement in Sino-Indian relations. Both countries have stated
that they are not threats to the other. There have been a number of military exchanges and frequent visits
by defence ministers. Both countries have conducted joint exercises in the East China Sea and anti-terrorist
exercises. There is a massive and rapidly rising trade relationship with considerable like-mindedness on such
issues as climate change and world trade. One issue that will bear consideration is the extent to which
China might be prepared to support India for a seat on the UN Security Council. While China has not
declared such support unconditionally, it has issued a number of statements suggesting it might do so.

Even the Himalayan border dispute appears to be less of an issue, although no final solution has been
found. At the western end of the border lies Aksai-Chin which China occupied in 1962. This high, flat
plateau has the only road connecting Tibet and the western part of Xinjiang and is viewed by China as a
strategic concern. To the east, Indian-controlled Arunachal Pradesh is the disputed area. Observers have
long expected that an exchange of these two territories would end the dispute.

While that has not happened, progress has been made in other areas. In 2003, a joint committee was
established to start the demarcation process. Two years later, the two governments signed a guideline
on demarcation and a recent meeting between Prime Minister Manmohan Singh and President Hu Jintao

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agreed to maintain stability and peace until the border dispute is settled. Meetings between officials now
occur six times per year.

During the same meeting, both leaders declared 2010 to be a ‘momentous year’, marking as it did the
sixtieth anniversary since both countries established diplomatic relations.

An overall assessment is that tensions between India and China will, from time to time, remain high. China
will continue to develop policies, naval capabilities and seek alliances that will ensure the security of its sea
lines of communication. But Beijing is conscious of the impact these moves might have on India and will
seek to portray its actions as non-threatening.

India, on the other hand, will view Chinese actions and intentions with suspicion, but will be prepared to
engage China at a state and diplomatic level.

Of course, all this could change and the situation will need to be closely monitored.

*****

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 China in the Indian Ocean:
A Case of Uncharted Waters

5 July 2010
CAPT David L. O. Hayward (Rtd)
FDI Associate

Summary
Some Western and Indian observers and officials remain concerned over what Beijing perceives as potentially
vulnerable sea lines of communication through the Indian Ocean. This has led to the suggestion that China
will ultimately develop a strategy that will lead to strategic relationships with a number of island and littoral
states. In time, China may go on to develop bases from which it can project power and further expand its
influence in the region. This thinking has resulted in the so-called “String of Pearls” concept.

This paper seeks to examine the strategic importance of the Indian Ocean from a Chinese perspective and
to make some judgement over various bases, which China is helping to construct. It also examines the
attitudes of the United States and a number of other countries in the region.
Analysis
One paradigm for a Chinese geopolitical, economic and military stratagem in the Indian Ocean has been
called the “String of Pearls” (SOP) concept.

It was first advanced to the US Department of Defence by consulting firm Booz Allen Hamilton in a classified
report in 2005. According to the report:

‘China is building strategic relationships along the sea lanes from the Middle East to the Nan
Hai (South China Sea) in a way that suggests defensive and offensive positioning to protect
China’s energy interests.’

In the SOP concept, a “pearl” entails infrastructure such as the construction of new ports, airports, logistical
facilities, and improvement of those that might already exist. These developments are to serve dual trade
and military interests, including supply, refuelling and electronic listening stations. As port facilities are
attained, the People’s Liberation Army Navy (PLAN) could press its maritime presence forward from the Nan
Hai and Strait of Malacca to Africa and the Strait of Hormuz.

It is pertinent to further qualify this cursory assessment of Chinese intentions.

Oil Supply Route to China
Stretching from the Arabian Gulf and the coast of East Africa on one side to the Malay Archipelago and
the shores of Australia on the other, the vastness of the Indian Ocean consists of an area of over 45 million
square kilometres. The thirty-odd nations that constitute the ocean’s littoral region contain one third of the
world’s population. Rich in natural resources, this geographical space contains more than half the world’s
proven oil reserves. In addition, a plethora of vital minerals such as iron ore, titanium, chromate, bauxite,
manganese and uranium, as well as such raw materials as rubber and tin, are found in abundance in various
parts of the littoral region.

If the world map is inverted, taking the example from Professor Geoffrey Kemp’s Pentagon Limited
Contingency Study of 1977, and now viewing the Southern Seas through the eyes of Chinese military
strategists, then the vital sea-lanes for the transport of crude oil to China are seen as follows:

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 Upon exit from the Strait of Hormuz, the oil supply route traverses through the Arabian Sea, rounds Dondra
Head (Sri Lanka), crosses the Indian Ocean, enters the Strait of Malacca, bypasses Singapore, enters the Nan
Hai (South China Sea) and the disputed waters claimed by China as part of its “Sacred Territory”; threads its
way past the Spratly Islands, Johnson Reef, Macclesfield Bank, and Paracel Islands, to Zhanjiang (opposite
Hainan Island), to Zhuhai and Guangzhou (Canton); to Xiamen and continues on through the Taiwan Haixia
(Taiwan Straits) to the Dong Hai (East China Sea), calling at Hangzhou and Shanghai; then northwards to
the Huang Hai (Yellow Sea), to ultimately deliver the crude oil to Qingdao, Dalian and Tianjin.1

The greatest geographical impediment to expedient oil supply to China is the Strait of Malacca. An estimated
50,000 cargo vessels transit the region each year. In fact, the US Energy Information Administration (EIA)
describes it as a “World Oil Chokepoint” moving approximately 15 million barrels of oil through the strait
each day.

Some Chinese military specialists have the view that the US has the military capability to cut off Chinese oil
imports and could severely cripple China by blocking its energy supplies. Chinese President Hu Jintao stated
in November 2003 that China faces a “Malacca dilemma” – the vulnerability to disruption of its oil supply
lines from the Middle East and Africa.
China’s Oil Thirst
It is anticipated the China may lead a world increase in demand for oil tankers of the Very Large Crude
Carrier (VLCC) variety as its energy needs rise in the next five years. Assuming the increased oil tonnages are
sourced from the Arabian Gulf it could, according to estimates such as those published by consulting firm
Poten & Partners, create demand for an additional eighty VLCCs to meet Chinese oil consumption by 2015.

VLCC tankers will soon provide 80 per cent of China’s oil and 65 per cent of India’s – fuel desperately
needed for the two countries’ rapidly growing world-fastest economies. Japan and South Korea, too, are
almost totally dependent on energy supplies shipped through the Indian Ocean.

China now imports approximately 60 per cent of its oil from the Middle East, up from 40 per cent in 2005.
According to the BP Statistical Review of World Energy 2009, China imported 1.84 million barrels per day
(MMBD) from the Middle East out of total imports of 4.4 MMBD. While China’s economy is dependent on
many imported resources, oil is a particularly strong motivator for the expansion of its defensive perimeter.
China’s oil imports grew at an average rate of 9.1 per cent annually from 1993 to 1998 and consumption
reached 7.9 MMBD in 2008. The US EIA projects a near doubling of imports to 15 MMBD by 2020. This
spike in consumption is compounded by an 18 per cent drop in the estimates of domestic reserves and
further calculations of production decline from a high of 3.9 MMBD by 2010, before gradually decreasing.
By 2035, China is likely to import between 70 to 80 per cent of its oil from the Middle East if the current
US EIA projections prove to be true.
China’s “SOP” Concept
It now remains to give closer attention to the “pearls” and “fortress” in the Indian Ocean.
Gwadar (Pakistan)
The re-vitalised port of Gwadar is a mere 200 nautical miles from the mouth of the Arabian Gulf. Gwadar,
in particular, was listed as an essential constituent of the SOP in the Indian Ocean.

Beijing is helping Pakistan to construct a deepwater port and naval base. Port improvements and dredging
have been undertaken. (During the time the Red Army occupied Afghanistan, the Soviet Union had similar
1 Entry ports and oil infrastructure facilities can be further defined by access to www.portguide.com. Lloyd’s Register Airplay
Ltd has published a Tanker Berth Guide available to subscribers.

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intentions). China has provided 80 per cent of Gwadar port’s US$248 million initial development cost. More
specifically, China is providing US$198 million of the development cost in the form of official development
assistance, while the balance of US$50 million is paid by Islamabad.

‘Gwadar will provide economical access to the sea for cargo generated in the northern and
southern parts of Pakistan and neighbouring States. Pakistan offers the shortest route to
Central Asia ....’

Inherent in the above statement from the Pakistani Government is the fact that Gwadar will eventually
provide direct access to Xinjiang in western China, assuming the Pakistani initiative of the Sino-Pakistani
railway system comes to fruition (though that may turn out to be a utopian dream). China may have an
ulterior motive to eventually establish a new oil and gas pipeline to Central Asia, providing the cost is
not prohibitive and the Hindu Kush/Karakoram mountain ranges surmountable. Longstanding boundary
disputes with India will be a problem.

Gwadar lies at the confluence of not just local offshore drilling pipelines, but also of the sea and land routes
that will move oil to India, China and Japan in the twenty-first century. It will become a new “Venice” for
the oil trade: a modern replacement for the “silk trade”.

In addition to the port and naval facilities, China has financed an airport (envisaged as Pakistan’s largest)
and an oil refinery destined to produce 60,000 barrels per day from offshore drilling. A new Chinese-funded
superhighway, built for mercantile and defence purposes, connects Gwadar to Karachi.

The infrastructure development at Gwadar marks China’s new strategic presence on the Indian Ocean. The
Gwadar port, referred to by US analysts as the “Chinese Gibraltar,” represents a total of US$1.2 billion in
Chinese investment.
Hambantota (Sri Lanka)
Again, in Sri Lanka, Chinese aid and commercial investments have increased markedly while the government
of President Mahinda Rajapakse has been in power. The US$1 billion Chinese-funded Hambantota Port
Development Project near Dondra Head in the southern part of Sri Lanka will set up a naval military base to
rival that of the UK’s Diego Garcia military base in the Chagos Islands, which is currently leased to the United
States Navy. Hambantota is a strategically vital gateway for securing access to sea lines of communication
(SLOCs) in the Indian Ocean. The new port is only six nautical miles from major SLOCs between the Bay of
Bengal and Arabian Sea.

When completed in thirteen years from now, Hambantota will be more than three times the size of Colombo
harbour. The port will be able to accommodate a new generation of mega-ships and is to include four
terminals (12 berths), bunkering and refuelling facilities, an LNG refinery, aviation fuel storage facilities
and dry docks. The port will be able to handle VLCCs, smaller oil tankers and mercantile shipping as a
halfway respite stop on their way to China. Other Chinese-funded projects in Sri Lanka include new port
infrastructure at Galle; the new international airport, the Norochcholai Coal Power Plant Project (US$855
million); the Colombo-Katunayake Expressway (US$248 million); and the National Performing Arts Theatre
(US$21 million). In recent years, Chinese aid to Sri Lanka has grown fivefold.

According to Dr Priyath Wickrama, Chairman of the Sri Lanka Ports Authority, the new port will boost the
country’s annual cargo handling capacity from six million containers to some 23 million.

Hambantota has the potential to become an island fortress analogous to that of Hainan Dao, guarding
Chinese oil supply movements through the South China Sea.

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 Chinese-Funded Developments Located Elsewhere in the Indian Ocean

China has further modernised or constructed ports belonging to Maldives (a naval base at the port of
Marao, close to the Laccadive Sea at the tip of India), Seychelles, and Madagascar.

China has also capitalised on a 1992 agreement with Burma for the construction of ports at the Small and
Great Coco Islands (at the eastern side of the Bay of Bengal/Andaman Sea) in return for the modernisation
of Burma’s navy. Chittagong (Bangladesh) has also benefited from Chinese-funded projects.

In addition, Chinese firms have constructed or modernised ports at Sittwe, Kyuakpu, Mergui and Hainggyi
Island. Some Western analysts claim that the Chinese military also operates reconnaissance and electronic
intelligence stations on several islands belonging to Burma, though both Indian and American intelligence
officials have said evidence is lacking.

The eastern seaboards of Bangladesh and Burma (as far south as the Coco Islands), appear to be covered
militarily and subject to Chinese geopolitical intentions. It is not known to what extent military resources are
involved or will be involved in these projects.

China is examining the feasibility of constructing a US$20 billion canal across the Kra Isthmus in Thailand.
This new canal would allow tankers and other commercial vessels to bypass the “chokepoint” Strait of
Malacca. The canal project, if implemented, will give China port facilities, warehouses, military installations,
and other infrastructure in Thailand capable of further enhancing Chinese influence in the Andaman Sea
and the Gulf of Thailand.

A number of military analysts in the US are wondering about an eventual Chinese naval base in the Arabian
Gulf. The most likely site is Bandar Abbas (Iran), directly opposite the Musandam Peninsula, at the very
throat of the Strait of Hormuz (roughly 50 kilometres wide at its narrowest point). Chinese electronic
eavesdropping, monitoring ship traffic (around 300 shipping movements per day), through the Strait of
Hormuz and the Arabian Sea is already fully operational.

The Chinese encirclement of the Indian Ocean using the SOP concept (as a blueprint) is yet to be fully
realised and could be portentous for many decades to come. Military analysts in the West have expressed
concerns. The phrase “Power, One Pearl at a Time” has been coined and is understood by many as a
tightening of the noose.

Chinese naval strategy and military philosophy (not examined in detail in this paper) in the Indian Ocean
may be seen by some analysts as a virtuous regional hegemony: that is, a calculated bid to one day reach
ultimate maritime supremacy. This extreme viewpoint is, however, to be refuted. For the reasons stated
below, it will be impossible for China to apply regional hegemony in the Indian Ocean in the near future, for
there is far too much competition. The situation could, however, easily change by 2030 or later.

At the present time, at least, Chinese naval strategy largely comprises a defensive mode to deter Western/
Allied attempts to interdict the supply of oil and vital strategic minerals via SLOCs to Mainland China.
Responses to Chinese Developments in the Indian Ocean

The United States (and Diego Garcia)

The 2008 American Political Science Association conference in Boston noted a key point for the US in
relation to operations in the Indian Ocean:

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 ‘Unlike in other critical sub-regions of Asia, in the Indian Ocean littoral the US lacks reliable host-
nation bases and is unlikely to acquire them. For that reason, the UK territory of Diego Garcia,
whose location and political reliability give it significant utility for both routine operations and
crisis response, is central to US power projection in the Indian Ocean’.

Today, apart from US military assets located further north in Japan and South Korea, only Diego Garcia and
Guam remain as purely dedicated Western military bases nearest to China’s oil supply route from the Middle
East, through the Indian Ocean, the Malacca Strait, the Nan Hai and from other oil import sources in Africa.

Guam (excluding Kadena Air Base in Japan) is perhaps nearest to VLCCs transiting the Nan Hai en route to
Mainland China. Singapore (not officially a US naval base) conveniently sits at the Malacca “chokepoint”.
Bahrain (hosting the US Fifth Fleet) controls the oil supply fountainhead in the Arabian Gulf at the Western
end of the Chinese SOP.

The British-owned atoll of Diego Garcia in the Chagos Islands is a pre-positioning airfreight and maritime
support base lying approximately 1,130 kilometres southwest of Dondra Head (Sri Lanka). It is roughly 4,000
kilometres south-east of the Strait of Hormuz. The 3,650 metre long airfield runway has been extended to
cope with air-tankers and air-freighters. The harbour is currently leased to the US Navy. An estimated 1,700
US military personnel, 1,500 civilian contractors, and about 50 British personnel populate the island. The
strategically located base played a key role in the 1991 military operation against Iraq.

By 2013, the four phased construction projects, which commenced in 2008, totalling in excess of US$200
million, will transform the island into a superior fully-fledged naval base and logistical hub so as to achieve
“fullest capability soonest”.

Most importantly, the island is able to host a US Navy nuclear-powered guided-missile submarine (SSGN) for
limited repairs and extended crew rest. This new SSGN is an Ohio-class Trident ballistic missile submarine
refitted to carry conventional Tomahawk cruise missiles. With a “maximum strike” strike complement of
154 Tomahawk missiles, a single SSGN has the cruise missile striking power of a typical carrier battle group.
The SSGN is well suited to the security environment of the Indian Ocean littoral.

The USS Emory S. Land, a submarine tender, is also deployed to Diego Garcia, serving as a floating shipyard
to repair and supply submarines and surface combatants.

Diego Garcia facilitates US power projection throughout the Indian Ocean littoral through pre-positioning
of Army and Marine Corps brigade sets, long-range bomber operations, replenishment of naval surface
combatants, and the strike and special operations capabilities of the SSGN.

The remote Diego Garcia links three nearby US Combatant Commands, namely USCENTCOM, USPACOM,
and the recently constituted Africa and Kenya Command. As such, the island is a primary hub for US power
projection in the region and is one of the most strategic US bases in the world.

Any future US deployments from Diego Garcia will not take place in a vacuum but, rather, in an Indian
Ocean influenced by India and, potentially, China as well.
Singapore
Pro-Western Singapore is without question the most important strategic port nearest to the eastern Indian
Ocean and the Nan Hai, as it sits so close to the busy Malacca Strait and close to the southern end of the
Nan Hai. There are four large container terminals at the port and commercial shipping throughput traffic is
enormous. It is one of the busiest ports in the world. Singapore has become a close security partner of the

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 US since the end of the Cold War. The US Navy (together with other pro-Western navies) often visits and
uses ship repair facilities at the Changi Naval Base. The base would be most important strategically if any
military confrontation occurred in either the Indian Ocean or the Nan Hai.

Chinese military strategists were infuriated when the US Government successfully lobbied in the 1990s for
the US Navy to build a military pier at the Changi Naval Base. When the pier was completed in 2001, it was
large enough to accommodate a Nimitz-class super carrier. Singapore has thus become the US Navy’s hub
in the eastern reaches of the Indian Ocean and the Western Pacific.

Chinese-Singaporeans are hotly canvassed by either China’s Ministry of State Security (MSS), or by its
Western counterparts. There is a distinct dichotomy at trade functions and symposia in Singapore between
pro- and anti-Chinese-Singaporeans. China continues to lobby for naval facilities at Singapore.
Manama (Bahrain)
The US base at Bahrain is now called Naval Support Activity Bahrain (NSA Bahrain) and is home to US Naval
Forces Central Command and the US Fifth Fleet.

The operational area of the Fifth Fleet encompasses about 6.5 million square kilometres of water spanning
the coastlines of 27 countries including the Arabian Gulf, the Red Sea, the Gulf of Oman and parts of the
Indian Ocean.

On 27 May 2010, it was announced that NSA Bahrain is receiving US$580 million to double the size of
the naval station and to upgrade infrastructure facilities available to the US Navy. The monies are to be
expended in four phases over five years to 2015.

The above expenditure would enable the US to better withstand the growing number of threats in the
region’s strategic waterways.

If a worst-case scenario eventuates, such as a prolonged Sino-US conflict, NSA Bahrain would have the
capability to block oil supply to China from the Middle East. This will somewhat negate the viability of the
SOP concept in terms of the logistical support and/or military protection afforded to Mainland China’s oil
supply SLOCs through the Indian Ocean. In fact, the Indian Ocean would be “an ocean too far” on which
oil supply could dwindle to a sporadic drip. The tap in the Middle East could be turned off.
India
‘Each pearl in the string is a link in a chain of the Chinese maritime presence’, India’s navy chief, Admiral
Sureesh Mehta, said in a speech in January 2010, expressing concern that naval forces operating out of
ports established by the Chinese could ‘take control over the world energy jugular.’

India’s perceptions of the Chinese SOP concept are a complicated subject requiring careful treatment. This
is in no small part due the fact that Indian attitudes towards US naval power have recently ameliorated in
tandem with the perceived threat to New Delhi from Chinese expansion in the Indian Ocean. As such, China
has now replaced the US as the extra-regional actor of primary concern for Indian strategists.

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Conclusions

Could the “String of Pearls” strategy become a military reality anytime soon?

The compensating factor for the West is that it already has perceived techno-advanced weapons able to
blunt Chinese military initiatives to attain maritime supremacy in the Indian Ocean. Currently, the US and
Allied navies are comfortable in the knowledge of being able to exert supremacy and interdict the SLOCs, if
required, in the event of any confrontation with China.

It remains to be seen if the Chinese Navy could – assuming it is Beijing’s intention – develop a “blue water”
naval capability that could even come close to matching that of the US. In any event, that will not happen
for several decades, assuming once again that China is prepared to embark on such a course.

A fully realised SOP strategy could, over time, ensure the PLAN obtains maritime supremacy in the Indian
Ocean. That would certainly result in a quantum shift in the balance of mercantile and naval power in the
Indian Ocean and would provide the PLAN with some assurance of success in any future conflict with the
West.

To date, however, the SOP strategy – assuming one exists – has been essentially defensive in nature. But this
could change over time and needs to be closely monitored.

Another issue that needs close analysis is whether Iran will play a major role, particularly as China will
ultimately source up to 80 per cent of its oil supply from the Middle East.

Finally, in the event of a future confrontation between China and the US, the Arabian Gulf and the northern
Indian Ocean could be the primers. In another thirty years or so, PLAN naval dispositions could lead to
Chinese maritime supremacy in the Indian Ocean and an attendant heightened risk of resource-driven
conflict.

*****

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Indian Ocean: A Sea of Uncertainty
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 China-India Rivalry in the Maldives
Set to Intensify
8 June 2011
Sergei DeSilva-Ranasinghe
Research Manager
FDI South and West Asia Programme

Summary
The 28-31 May 2011 visit to the Maldives by the most senior Chinese official ever to visit the Islamic
archipelago-nation, went largely unreported in the Western media. The significance of the visit by Wu
Bangguo, Chairman of the Standing Committee of the National People’s Congress, underscored the
increasing importance of the Maldives to China’s regional strategic calculations.
Analysis
China and the Maldives first established diplomatic relations in 1972. Since then, relations have gradually
developed. More recently, Indian policy analysts referred to China’s soft power rise throughout South Asia
as a “creeping expansionism”. They went so far as to accuse China of harbouring ambitions to set up a
submarine base facility in the Maldives.

For instance, in 2005, Indian commentator, A.B. Mahapatra, asserted that:

‘China has engineered a manner of a coup by coaxing Maldives’ Abdul Gayoom government
to let it establish a base in Marao. Marao is one of the largest of the 1192 coral islands grouped
into atolls that comprise Maldives and lies 40 km south of Male, the capital. Scientists warn
that global warming is pushing up ocean and sea levels. They fear that most of Maldives will be
submerged by year 2040. Marao may be one of the few large islands that may survive. “And
even if it goes under water”, said a naval official, “it will be ideal for submarines.” In February
2001, a small delegation from Pakistan visited Maldives to boost cultural ties. “The Pakistanis
put pressure on Male to facilitate Chinese plans for a naval base,” said an official. “China used
Pakistan to play the Islamic card with Maldives.” But the Marao base is not expected to be
operational until 2010.’

President Abdul Gayoom ruled the Maldives for around 30 years. Following his election defeat in November
2008, his successor, President Mohamed Nasheed, has shown greater willingness to accommodate Indian
interests. As reported widely in the Indian media in late 2009, the Maldives acceded to India’s request to
deploy 26 coastal radars to monitor its territorial waters: ‘Some of the radars have already been set up. India
is also training men to operate and run the radars,’ stated President Nasheed. ‘India is not trying to influence
us. We wanted the radars. A lot of biomass poaching (poaching of fish and corals) happens in the area. So
does a lot of illegal commercial fishing,’ he said.

Latterly, it transpired that India’s coast guard and naval vessels would patrol the Maldives’ territorial waters
and exclusive economic zone, and a private Indian company was contracted to refurbish the former British
Gan Island air base for use by Indian reconnaissance and surveillance aircraft.

Trade in minerals and energy, worth many billions of dollars annually, passes near the Maldives, which is
strategically located astride the major sea lanes in the Indian Ocean. It is hardly surprising therefore that
former Indian diplomat Kuldeep Sahdev mentioned: ‘It is a country of immense strategic importance to us.’

Historically, India has long seen the islands as within its sphere of influence and has sought to underwrite
the security of the Maldives. This was demonstrated in November 1988, when heavily armed ethnic-

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 Tamil militants staged a coup to oust President Gayoom, but were rapidly intercepted and neutralised by
expeditionary forces dispatched by India.

More recently, in February 2011, President Nasheed made a tour of India to enhance co-operation in trade,
investment and security, and chose to use the opportunity to reiterate his pro-India stance. ‘Maintaining
balance in the Indian Ocean is very important. There is not enough room in the Indian Ocean for other non-
traditional friends,’ he said. ‘We are not receptive to any installation, military or otherwise, in the Indian
Ocean, especially from un-traditional friends. The Indian Ocean is the Indian Ocean.’ He added: ‘India is a
better investment destination. It’s far easier to deal with India than with China. We had discussions on the
Indian Ocean, piracy, climate change and trade and investment. Piracy is a very important issue for us. We
are sitting right in the middle of the Indian Ocean.’

Yet, although India is clearly strategically pre-eminent in the Maldives, China has continued to expand its
soft power influence in the archipelago nation. Since the Maldives attained independence in 1965, China
has built the country’s Ministry of Foreign Affairs building and also the national museum. More recently,
China formed a Maldives-China Parliamentary Friendship Group and China’s parliament has also set up a
focus group, intent on further developing relations. In 2010, bilateral trade between both countries reached
US$64 million, a reported increase of nearly 56 per cent from 2009.

Concessional loans provided by China, such as to build the 1000 Housing Units Project, have served to
further expand goodwill and co-operation. Indeed, in 2010 some 117 Maldivian expatriates were reportedly
studying in China, and over 120,000 Chinese tourists visited the Maldives, making China the largest source
of tourists for the Maldives. Similarly, during the same year China and the Maldives signed a number of co-
operation agreements, including in culture, education and sport.

Given the economic benefits of its association with China, regardless of current strategic imperatives vis-
à-vis the rivalry between China, India and the US, the Maldives will continue to be reliant on China’s
investment, trade and goodwill, even though India has also sought to enhance its investment, trade and
economic assistance to the island-nation.

Hence, the visit of Wu Bangguo is likely to make India increasingly anxious about China’s growing soft
power influence. From a Maldivian perspective, the importance of the visit was unmistakable. ‘This is the
highest-ranking visit from China to Maldives. This visit is therefore very symbolic,’ said Abdulla Shahid, the
speaker of the Maldivian People’s Majlis. Indeed, the implications of China’s growing soft power influence
are likely to be critical considerations for India, especially when President Nasheed goes to the polls in the
upcoming 2013 presidential election.

*****

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 China Investment Spurs
Bangladesh Development
15 June 2011
Sergei DeSilva-Ranasinghe
Research Manager
FDI South and West Asia Programme

Summary
On 9 June 2011, Bangladesh signed a loan agreement worth US$211 million with the Export-Import Bank
of China to upgrade the country’s telecommunications network. Such initiatives by China to develop critical
infrastructure are illustrative of the central role it has played in strengthening Bangladesh’s economy and
connectivity to the region.
Analysis
Bangladesh established formal relations with China in 1975 and thereafter bilateral relations were steadily
enhanced by frequent diplomatic visits to both countries. Subsequently, in 1986, the Bangladesh-China
People’s Friendship Association was formed, which helped set the pattern in two-way trade and investment,
especially throughout the 1990s, fostering China’s emergence as a vitally important partner and ally.

Indeed, from the time relations were first established until October 2000, China provided cumulative
assistance worth US$217 million to Bangladesh. In the same year, bilateral trade reached an unprecedented
high at US$715 million.

Later, in 2002, on a visit to Bangladesh, Chinese Premier Wen Jiabao signed nine bilateral agreements to
enhance co-operation in a variety of fields. Among the crucial agreements signed was a defence co-operation
accord, which strengthened China’s position as a key supplier of weapons, equipment and ammunition to
the Bangladeshi military. ‘Bangladesh wanted time-befitting armed forces for the country. China will co-
operate with Bangladesh for this purpose,’ stated Morshed Khan, the former Bangladeshi Foreign Minister.
He added: ‘[The] intention is there to co-operate in defence sector; now the two sides will co-operate with
each other. This umbrella agreement is not directed against any country and would not affect Bangladesh’s
relations with India.’

Such measures by China provided the foundation to further enhance bilateral relations and encourage
greater Chinese investment in Bangladesh. According to the China Daily, by 2006, Bangladesh ranked as
China’s third-largest trade partner in South Asia, and China had emerged as Bangladesh’s most significant
trading partner.

In fact, from the time that the “Bangladesh-China Friendship Year” was declared in 2005 through to
2008, salient examples of Chinese investment included: the commencement of direct air links between
Dhaka and Beijing; an agreement on nuclear co-operation; the construction of a di-aluminium phosphate
fertiliser factory; the signing of a joint venture agreement for mining coal, between Bangladesh’s state
owned Petrochemical company, Petrobangla, and two Chinese companies, China National Machinery Export
Import Corporation and Xushou Coal Mining Group; the creation of the US$25 million, Chinese-funded,
Dhaka-based Bangladesh-China Friendship Exhibition Centre; and capacity-building and training assistance
programmes for Bangladeshi public servants and security forces personnel.

Evidence of sustained growth in relations was also demonstrated from 2007 onwards, when China’s Ministry
of Commerce claimed that two-way trade had reached a record US$3.4 billion. In 2008, the Chinese
newspaper, People’s Daily, reported that bilateral trade had increased to US$4.7 billion.

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 In March 2010, both countries celebrated 35 years of diplomatic ties, which culminated in the signing of
four bilateral agreements. Following the June 2010 visit of the Chinese Vice-President to Bangladesh, more
agreements were signed, pledging financial assistance and expertise to: launch Bangladesh’s first space
satellite; upgrade the Pagla water treatment plant and the Shahjalal fertiliser factory; reduce tariffs on
4,721 Bangladeshi products being exported to China; co-operate in building a conference centre and seven
bridges; build the 600-1000 MW Pabna nuclear power plant, with a US$1.5 billion Chinese concessional
loan; build a 900 kilometre highway linking Chittagong to Kunming via Burma; and engage in joint-venture
oil and gas exploration. Similarly, by late 2010, and according to Bangladesh’s Board of Investment, up to
55 Chinese businesses had submitted 186 investment proposals in the infrastructure, trade and business
sectors that were worth US$320 million. Furthermore, in May this year, the Financial Express reported that
the Chinese energy consortium, Sinopec Shengli Oilfield Services, had won its bid to partner with state-
owned Bangladeshi firm Bapex, to explore four gas fields in the Chittagong Hill Tracts.

However, the centrepiece of China’s growing influence in Bangladesh is symbolised by its interest in
modernising the Chittagong port, which handles around 92 per cent of the country’s import-export
trade, and in building a new deep-water port facility from scratch at Sonadia, located near Cox’s Bazaar.
Chittagong’s strategic location serves as an important access point for Chinese commerce, as recently
confirmed by Shanghai Institute for International Studies’ South Asia director, Zhao Gancheng, who stated:
‘Developing the port is a very important part of China’s co-operation with Bangladesh, and China is aware
of its strategic significance.’ He added: ‘While there is currently no oil pipeline running to Bangladesh,
access to Chittagong will be of greater importance in the future when this infrastructure is put in place.
With the development of China’s transportation of goods and energy in the Indian Ocean, China will
certainly continue to attach more importance to this port.’

Similarly, in 2010 Bangladesh announced its plans to begin construction on the new Sonadia port facility,
which is also Chinese-funded. ‘We sought support from China to build Sonadia deep-sea port and construct
Chittagong-Kunming Highway via Myanmar [sic]. Beijing has assured us of support in this regard,’ stated Dr.
Hasan Mahmud, the State Minister for Environment and Forests.

Upon completion, Bangladesh has stated its intention to offer its ports as regional access points to service
north-eastern India, Nepal, Bhutan, Burma and southern China. For trade with these countries the road
and rail link to China via Burma, which is currently being developed, is of the most critical economic and
strategic importance. In 2010, Bangladesh started construction on the 128km railway linking the border
town of Gundum to the Burmese and Chinese railway systems.

Unsurprisingly, neighbouring India – which also has aspirations in the region – has grown increasingly
anxious at China’s inroads into Bangladesh, which is strategically located astride its restive and vulnerable
north-eastern borders.

For instance, as exemplified by one Indian defence analyst, Anand Kumar, who is affiliated with the New
Delhi-based Institute of Defence Studies and Analyses: ‘A Chinese role in the development of Chittagong
is particularly worrisome to India, since it would be similar to China’s involvement in the development of
Hambantota in southern Sri Lanka and Gwadar in Baluchistan,’ he said. ‘China reportedly has access to
the Burmese naval base in Hanggyi Island and has established a monitoring station at Coco Island, north
of India’s Andaman and Nicobar Islands,’ he added. ‘Through these ports, China is trying to fulfil two
objectives – encircle India as part of its “string of pearls”, and gain other openings to sea.’

Nevertheless, in the meantime, India has little choice but to contend with the rise of China’s influence in
Bangladesh, which is further complicated by history and tensions that have long characterised bilateral
relations between the two countries.

*****

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 China’s Rise: South Pacific Perspectives
– New Zealand and Australian Security
Perceptions of China
12 September 2011
Dr Robert Ayson
FDI Associate

Summary
New Zealand and Australia both see China’s rise as the leading factor in Asia’s emerging security landscape.
Both also share an interest in peaceful major power relations between a stronger China and a still powerful
United States, but their respective relationships with these two leading regional powers are not identical.
It is possible to overplay these differences: Australia’s strategic view of China is not as uncompromising as
some New Zealanders may be tempted to think, and New Zealand’s view is not as soft as some Australians
might imagine it to be. Canberra and Wellington will find opportunities to work together on managing the
effects of Asia’s power transition. But differences in their abilities to engage in some areas, including their
readiness for advanced military operations in Asia’s maritime domains, will also continue to be evident.
Analysis
While Australia and New Zealand may not always see eye to eye on every international issue, there are some
strong points of similarity in their attitudes towards what is happening in the Asia-Pacific region as China
rises. These common Australasian perceptions include the judgments that:

s The balance of power in the Asia-Pacific region is shifting.

s China’s rise is the leading feature in that changing balance.

s The interactions between China and the other major regional powers, especially the United States,
are the main shapers of Asia’s future security order.

s The region’s smaller and medium powers, including the ASEAN countries, Australia and New
Zealand, need to adjust to whatever new security order the China-US interaction – and the
influences of other major players such as India – will help produce.

s The regional security order in which we operate is affected by other unrelated factors, among
them the weakness and vulnerability of certain political systems, including in the South Pacific.

s But, even in that immediate region, the influence of the larger powers, including China, will be
felt.

s We need to see how the region’s emerging institutions can be made ready to help sustain positive
major power relations, including those involving a rising China.

Yet, it might also be argued that because of some differences in our relative positions, interests, resources
and relationships, Australia and New Zealand view the security implications of China’s rise rather differently.
Among these trans-Tasman differences, we might consider:

s Australia’s closer proximity to East Asia, and its more intense historical experience of Japan’s rise
in power in the Second World War period versus New Zealand’s sense of relative isolation and the
protection New Zealand automatically gets from the Australian continent.

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 s Australia’s size and its sense of itself as a medium power with a greater stake in the balance of
power versus New Zealand’s sense of itself as a smaller player and a consumer of the Asia-Pacific
balance that others produce.

s Australia’s longstanding and very close alliance relationship with the United States versus New
Zealand’s less intimate, but nonetheless warming, security relationship with Washington.

s The scale and scope of the Australian Defence Force, including its continuing efforts to maintain
a qualitative edge in maritime combat capabilities, versus New Zealand’s smaller defence force
whose capabilities are being shaped rather more around South Pacific security needs.

s The fact that while both Australia and New Zealand depend heavily on China’s economic rise
for their future economic performance, security concerns have greater relative prominence in
Australia than they do in New Zealand, where trading priorities and concerns about economic
survival sit very firmly at the top of the pile.

These factors would seem to add up to the conclusion that Australia has more to lose than New Zealand
from a changing regional balance in which China’s strategic position is strengthened, including in the
distribution of power between China and the United States. We might find evidence of these stronger
concerns in Australia’s 2009 Defence White Paper, which tells us fairly bluntly that:

‘A major power of China’s stature can be expected to develop a globally significant military
capability befitting its size. But the pace, scope and structure of China’s military modernisation
has the potential to give its neighbours cause for concern if not carefully explained, and if
China does not reach out to others to build confidence regarding its military plans. China
has begun to do this in recent years, but needs to do more. If it does not, there is likely to be
a question in the minds of regional states about the long-term strategic purpose of its force
development plans, particularly as the modernisation appears potentially to be beyond the
scope of what would be required for a conflict over Taiwan’.1
Strong Words
These are fairly strong words, although one wonders if some of the interpretations of the Australian White
Paper’s views of China were egged on by the tone which had been set a few days before its release by
a speech given in Queensland by then Prime Minister Rudd. In any case, it is still instructive to make a
comparison with the corresponding – and rather more circumspect – section in New Zealand’s Defence
White Paper, which came out late last year:

‘The strategic balance in North Asia is shifting. China both benefits from and contributes to
regional stability and prosperity, but there will be a natural tendency for it to define and pursue its
interests in a more forthright way on the back of growing wealth and power. The pace of China’s
military modernisation and force projection programme, and the response this could prompt from
neighbouring states, may test the relationships of the major regional powers’.2

These are somewhat gentler words. And so we might just stop there, confirming our preconceived notions
that there is a gap between Australian and New Zealand security perceptions of China. We New Zealanders
could remain comforted in the knowledge that our Australian friends can sometimes get ahead of themselves
in their concerns about changes to the strategic balance in Asia. Perhaps some in Australia could be led to
think that New Zealand was being a little soft on the great dragon which is growing and flexing its muscles
further north.
1 Department of Defence, 2009, Defending Asia in the Asia Pacific Century: Force 2030, Commonwealth of Australia:
Canberra, p. 34.
2 Ministry of Defence, 2010, Defence White Paper 2010, Government of New Zealand: Wellington, p. 30.

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But we should not stop here, as tempting as this is. While New Zealand’s defence policy-makers do not seem
nearly as fixated as their Australian counterparts on the China question, some other parts of New Zealand’s
declaratory policy are also worthy of our attention. For example, considerable importance is attached in the
2010 white paper to New Zealand’s traditional military relationships – especially with Australia, and the United
States, but also the United Kingdom and Canada, and, in Asia, our two Commonwealth partners in the
Five Power Defence Arrangements, Malaysia and Singapore. The emphasis on these traditional partnerships
and, especially, relationships with “like-minded states” that can help ‘reinforce shared international norms’3,
leaves China (amongst some others) off to one side. There may be some quiet but potentially important
signalling going on here.
Evident Concern
Moreover, in some of the background documents to the white paper, we see a fuller version of New
Zealand’s evaluation of China coming through, in which notes of concern are a bit more evident.4 For
example, the Defence Assessment, completed a few months earlier, had argued that:

‘There is an outside possibility of conflict in North Asia in the timeframe of this Assessment.
This could be precipitated by a dispute in China’s maritime periphery’.5

A summary of that Defence Assessment presented to the External Relations and Defence Committee of
Cabinet in mid-2010 argued that:

‘The rise of China is changing the strategic balance, particularly in the Asia-Pacific region. New
and evolving international and regional institutions will come under pressure as they try to
accommodate a more prominent China’.6

Of course, the idea of accommodation portrays China as a legitimate and important participant in regional
affairs whose rising power needs to be factored into regional processes. As Prime Minister John Key
noted last year during a major address on foreign policy, which was later published in the New Zealand
International Review, New Zealand sees no reason to be frightened about the emergence of a region of two
super-powers: China, as well as the United States.7 But this does not mean that New Zealand would be
comfortable with a region of one super-power if that solitary tall tree happened to be China.

One notes in this context the comments from Foreign Minister Murray McCully following his address to the
New Zealand Institute of International Affairs in early April 2011 welcoming the expansion of the East Asian
Summit to include both the United States and Russia. The minister reiterated this theme in opening the
China symposium at Victoria University two days later. The comparison with Australia’s encouragement for
this development is informative. In an interview during her recent visit to the United States, Prime Minister
Gillard noted that:

‘We are frank when we need to be, but we want to see China take its proper place in the rules-
based order in our world and we were very passionate about making sure the US sat down ...
[at the table of] ... the East Asia Summit’.8

3 Ibid., p. 18.
4 For a fuller treatment of these documents, see Robert Ayson, ‘Force and Statecraft: Strategic Objectives and Relationships in
New Zealand’s 2010 Defence White Paper’, Security Challenges, Vol. 7, 1, (2011), pp. 11-29.
5 Ministry of Defence, July 2010, Defence Assessment, Government of New Zealand: Wellington, p. 18. <http://www.defence.
govt.nz/pdfs/defence-review-2009-released-defence-assessment-july-2010.pdf>.
6 Office of the Minister of Defence, Defence Assessment: Summary Report, p. 3, attached to Cabinet External Relations and
Defence Committee, Defence Assessment: Summary Report, ERD Min 10 (30), 28 June 2010. <www.defence.govt.nz/pdfs/
defence-review-2009-released-defence-review-white-paper-cabinet-combined-papers.pdf>.
7 Key, Rt. Hon. J., ‘New Zealand in the World’, New Zealand International Review, Vol. 35, 6, (2010), p. 5.
8 Gillard, Hon. J., Transcript of interview with Erin Burnett, CNBC. <www.pm.gov.au/press-office/transcript-interview-erin-
burnett>.

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 US-China Balance

New Zealand’s interest in a strong US presence in the region which is being increasingly influenced by a
rising China, is evident in a chart prepared for Cabinet’s consideration in August 2009 as an early part of
the Defence Review process. One discovers an especially interesting group of objectives guiding the New
Zealand Defence Force’s role to ‘support strategic stability and promote New Zealand’s interests in the Asia-
Pacific region with military assets.’ The fourth of these is the objective that reads: ‘China’s increasing power
managed constructively.’ At the top of the list stands what appears to be the necessary condition for this
outcome: ‘US strategic position in the region maintained’.9 An active and committed United States seems
in New Zealand eyes to be an essential part of the balance of power which can help “accommodate” or
perhaps even help “manage” a rising China. This is at least one of the reasons why the subsequent White
Paper argues for ‘a continuing US security presence as a contribution to regional security’ in the Asia-Pacific
region.10

Of course, one might do the same digging in the Australian case and find rather firmer depictions of China
in background documentation than those that appeared in the 2009 White Paper. We do not have the
advantage of these: the 16 December 2010 release of background papers for the New Zealand equivalent is
a rather significant and very welcome exception to the normal rule that these sorts of things do not see the
light of day. But we occasionally get the sense that some of the thinking in Canberra on China, or at least
in some of the conversations that Kevin Rudd is reported to have had with Hillary Clinton, is more robust
than what is officially published.

But if we were able to do this behind the scenes spade-work in the Australian case, I doubt that what
we would find would allow us to conclude that New Zealand is from Mars and Australia is from Venus in
terms of our security perceptions of China’s rise. Our impressions may not be identical, but, as I hope I have
demonstrated, they may be a little more similar than some assume.
Major Difference
Yet, there is a fundamental difference in our approach that no amount of documentary evidence can
overcome: this is in the way we do respond, and in the way we are able to respond, to a rising China in
military terms. The 2010 White Paper makes clear that the New Zealand Government seeks a defence force
that is able to deploy beyond our immediate region – that is, it wants to send a message that Asia matters.
But there remains a big gap between New Zealand and Australian defence capabilities in terms of their
respective relevance for advanced combat operations in maritime East Asia.

This is perhaps why Australia might have a reason to be a bit more concerned than New Zealand about
the changing strategic balance in Asia in which China’s rise is the number one factor. For it is rather more
likely that Australia’s forces will be called on to contribute to any stoush in East Asia involving the interests
of the major powers than would New Zealand’s. This difference in capability is amplified by a political fact:
that even in the heady days after the signing of the Wellington Declaration, Australia’s strategic relationship
with the United States remains more intense than New Zealand’s. In turn, of course, the way in which New
Zealand may want to develop its security relationship further with the United States, and trilateral security
relations involving both the United States and Australia, will say at least a little about Wellington’s security
perceptions of China.

*****
9 ‘Defence Policies, Global Considerations’, 14 August 2009, attached to Cabinet External Relations and Defence Committee,
Defence Assessment: Summary Report, ERD Min 10 (30), 28 June 2010. <www.defence.govt.nz/pdfs/defence-review-2009-
released-defence-review-white-paper-cabinet-combined-papers.pdf>.
10 NZ Government, Defence White Paper 2010, p. 39.

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 The Future of China-Pakistan
Relations after Osama bin Laden

8 August 2011
Dr Jabin T. Jacob
FDI Associate

Summary
Osama bin Laden’s death and the circumstances of his killing continue to provoke plenty of comment and
analyses as to what it means for the future of US-Pakistan relations. By contrast, there has been considerably
less attention paid to the implications for Sino-Pakistani relations. This paper argues that the killing of bin
Laden, while increasing frictions in the US-Pak relationship, does not necessarily also mean a warming
of Sino-Pak ties. The latter relationship is, in fact, bound up in a number of issues over and beyond the
US-Pak equation. These include Chinese concerns over ethnic separatism in its Xinjiang province and the
post-US drawdown stability of Afghanistan, the Sino-Indian equation, the Sino-US relationship and Chinese
economic interests in Pakistan.
Analysis
The argument has been made that China will continue to perform its traditional role of backing Pakistan
in times of trouble. Attention has also been drawn to how, following initial praise for the killing of bin
Laden, Beijing has switched its focus to highlighting Pakistan’s vital role in countering terrorism and to the
supposed American propensity to violate national sovereignty and international law. The impression that
Pakistan and China will draw closer together because of the successful American operation ignores both
China’s security concerns vis-à-vis Pakistan, that have been increasing over time, as well as China’s other
regional and global security considerations.
Trusting Pakistan: A Chinese Dilemma
While it seems natural to observe that the Americans (and the Indians) are concerned about whether or not
the Pakistan military and intelligence services have been playing a double game all along, that the Chinese
might be similarly concerned has not been openly considered. Even if the strike against bin Laden had been
a joint US-Pak operation, the question would still have remained of a pro-jihadist camp within the Pakistani
military establishment supporting and shielding radical Islamist and terrorist elements within Pakistan. Here,
Beijing too has cause to be worried about whether these elements will target Xinjiang or Chinese citizens
in Pakistan. Indeed, this is not a new concern and Beijing has, in the past, come down heavily on Islamabad
– as in the Lal Masjid siege in 2007 – even if it has tried to brush aside such concerns in the immediate
aftermath of bin Laden’s killing.1

If tales of Pakistan’s duplicity can be dismissed, then the Pakistani incompetence in detecting the presence
of bin Laden in the country, or the news that Islamabad did not detect and could not stop the American
intrusion, should certainly worry China. How can Beijing really expect its “all-weather friend” to serve as a
reliable counter to either India or the US under such circumstances?

Thus, behind all the furious rhetoric that has emerged from Beijing about the international criticism of
Pakistan being ‘not only unfair, but also dangerous,’2 Beijing faces the same dilemma that it does with
respect to North Korea: can’t live with it; can’t abandon it, either. This dilemma also takes the form of
a strange Chinese hope expressed by one Chinese analyst, who noted that US-Pak relations were ‘too
complicated and close’3 to be substantially altered by the contretemps over bin Laden hiding in Pakistan.

1 ‘Criticism of Pakistan intelligence is unfair’, Global Times, 7 May 2011.

2 Ibid.
3 Krishnan, A., ‘China focuses on stability in Pakistan,’ Hindu, 3 May 2011.

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 Meanwhile, the biggest Chinese concern is actually of the US using bin Laden’s death to hurry its withdrawal
from Afghanistan and thus rediscover the energy and resources to target China once again. Even if not
directly connected to the bin Laden killing, the third round of the US-China Strategic and Economic Dialogue
that started in Beijing soon afterwards was another instance of the many sharp differences and seemingly
intractable problems between the two sides.
Afghanistan Post-2014: Which Condominium?
The stability of Afghanistan is another Chinese concern. US-led military intervention in Afghanistan has, in
recent years, stabilised the country enough for Chinese companies to make investments in that country,
such as, for example, in the Ayanak mines and in the country’s telecom sector. With an American drawdown
in Afghanistan looming, such investments are at stake and more so, if Pakistan too, destabilises. There have
thus been views expressed in the US that Washington and Beijing could co-operate – despite the strains in
the bilateral relationship – in stabilising Pakistan in the post-bin Laden phase.4 In other words, co-operating
on Pakistan and Afghanistan could serve as a Sino-US confidence-building measure.

Further, it could well be that it is not only the Americans that will refocus attention on China, but also al
Qaida. Beijing is well aware of this. While the US can cut and run from Afghanistan, declaring that the “war
on terror” need no longer be fought in foreign lands, the Chinese cannot just as easily walk away from
their own “war on terror” in Xinjiang. One Chinese commentator was, in fact, willing to forgive the US its
violation of Pakistani sovereignty, saying ‘[t]he US should assist Pakistan in stabilising its society and reviving
its economy’ and that, ‘[u]tterly uprooting terrorists and extremists in the region is the duty of a global
power.’5 In other words, China is in no hurry to claim the mantle of a global power if it means dealing with
Pakistan on its own.

That said, there is also speculation of a Sino-Pak condominium to manage Afghanistan once US-led forces
have withdrawn, with the Chinese providing economic aid and investments and Pakistan taking on the
security duties. More importantly, from the Chinese perspective, Pakistani co-operation would be essential
to keeping lines of communication open with the Taliban – which could possibly return in force to power
in Afghanistan – as well as to controlling the spread of Islamic radicalism from Pakistan into Xinjiang. This
is probably the worst-case scenario for New Delhi. For now, however, it is also an unlikely scenario. For
one, the Americans have probably learned their lessons from the post-Soviet era in Afghanistan when they
washed their hands of it completely, only to have to return in strength, post-9/11. For another, Washington
will be unwilling to give away the hard-won fruits of its sacrifices in the region so easily to Beijing.

A reasonably robust American diplomatic and military presence is, therefore, likely to continue in Afghanistan
in some form. In addition, both Islamabad and Rawalpindi will remain dependant on American aid for
the foreseeable future. Despite their economic clout, the Chinese seem unwilling, as of now, to provide
the same sort of economic aid and support to Pakistan. Thus, it could well be that it is Washington and
Islamabad that will jointly create an arrangement for a post-NATO Afghanistan.

From India’s point of view, any arrangement in Afghanistan that it is left out of is unacceptable, but a US-
Pak arrangement will probably be something it can live with given the alternatives. New Delhi will expect
Washington to keep a close watch on Pakistani actions and to have greater ability to keep the pressure
on Islamabad and Rawalpindi than in a comparable arrangement with China. The Pakistanis, meanwhile,
will hope that no matter which of the above arrangements takes shape following the US drawdown in
Afghanistan, there will be a reduction in what they perceive as an inordinate amount of Indian influence in
Afghanistan.

4 See, for example, Patrick C. Doherty, ‘Dear China: Help Us Fix Pakistan,’ Foreign Policy, 9 May 2011.
5 Fu Xiaoqiang, ‘Pakistan’s sacrifices in war on terror deserve respect,’ Global Times, 10 May 2011.

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Economic Stakes: Keeping China Interested in Pakistan

On his visit to China in May, to commemorate 60 years of Sino-Pak relations, Pakistani Prime Minister
Yousuf Raza Gilani also intended to convey to both the US and India that Pakistan was not short of options,
despite the dire straits it finds itself in. Gilani, however, came away with little to show from his trip except an
embarrassing Chinese refusal to consider Gwadar in Pakistan’s Baluchistan province as a possible naval base.

Nevertheless, China has several economic interests in Pakistan, with bilateral trade growing post-9/11.6
Further, Pakistani co-operation is essential if China is to remain engaged economically in Afghanistan.
Involvement in Pakistan forms part of the “going out” strategy of Chinese commercial entities while,
politically, this involvement also hews closely to Beijing’s line that economic development can address
problems of political instability. Given the American pressure and presence in Pakistan at the moment,
it might be argued that China is making a virtue out of necessity, in that it has few options other than
economic ones, by which to exercise its influence in Pakistan. Still, such economic involvement is important
for Pakistan. Chinese companies are involved in the construction of roads, dams and telecommunications
infrastructure across the country from Gwadar in Baluchistan to Khyber-Pakhtunkhwa (formerly the North-
West Frontier Province).

Similarly, Sino-Pak co-operation in the nuclear field, apart from its military-strategic overtones, in the Asian
context also has an economic angle to it. Thus, though the latest agreement on the supply of Chinese
nuclear reactors to Pakistan clearly falls short of Beijing’s commitments under the Nuclear Non- Proliferation
Treaty, it needs to be viewed primarily in the light of a US-China dynamic, as a Sino-Pak counter to the
Indo-US civilian nuclear deal of 2008. However, as even the Americans were willing to admit – even if less
out of conviction than out of a desire not to complicate relations with China still further – the reactors are
also necessary for an energy-starved Pakistan. Similarly, trade in missiles and other conventional weaponry
with Pakistan follows a pattern of Chinese arms sales that satisfies both geopolitical and economic motives.
Meanwhile, such Sino-Pak co-operation – including the development of Gwadar port and the construction
of road and communications infrastructure in Pakistani-occupied Kashmir – also has the convenient effect
of keeping India on tenterhooks in the region.

Nevertheless, even a policy predicated on economic interests has its limits for China. For one, China will
weigh annual Sino-Indian trade of about US$60 billion presently against the approximately US$7 billion
trade with Pakistan in 2010. Further, Chinese investments in Pakistan have not always been well-thought
out or received adequate returns. Part of the so-called “string of pearls”, Gwadar is a case in point. While
the Chinese have invested in the port over several years now, Pakistan’s failure to maintain peace and
stability in Baluchistan has been a major problem. This has meant lack of supporting infrastructure and
ancillary industries around the port. The lack is such that the Port of Singapore Authority, which had taken
over the running of the port, is said to be keen to cut its losses and hand it back to Pakistan before the
end of the term of its contract. Further, Gwadar also faces competition from the much older and better
developed port of Karachi in neighbouring Sind province that has also received Chinese investments and
could possibly serve Beijing’s purposes just as well.

For another, as already mentioned, with China’s growing economic involvement in Pakistan, has come
increased targeting of Chinese civilians by religious radicals and secessionist elements in the country. Beijing
might consider these attacks as the cost of doing business and trying to maintain influence in Pakistan.
But, given rising Chinese economic stakes in Pakistan and Afghanistan, and the fact that many Chinese
companies are often state-owned and possess close links to the Chinese leadership, Beijing might also start
losing patience with its ally. China could well start behaving like the United States has in weaker countries
around the world where its economic interests have been threatened: to demand stability or to ensure
stability by facilitating a change of regime or of key political actors.
6 Embassy of the Islamic Republic of Pakistan, Beijing, China, ‘Pakistan-China Relations: A Strategic Perspective,’ Statement by
HE Masood Khan, Ambassador of Pakistan to China, at the Centre for American Studies, Fudan University, 2009.

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 Conclusion

Beijing has already been engaged for some time now in a process of fine-tuning its relationship with
Pakistan, given China’s rise in global stature, and the pressure on it to be a “responsible stakeholder”, not
to mention the dynamics of its relations with the United States and India. The death of Osama bin Laden
does not change this reality. If anything, domestic instability in Pakistan, the continuing spread of religious
radicalism from Pakistan into China, and threats to Chinese economic interests are conditions that would
amplify the need for Beijing to take a sterner line with its “all-weather friend”. Such a situation could see
China seeking co-operation, however limited, with the Americans, or even acting on its own.7 This could
well be a serious dilemma confronting the Chinese leadership at some point in the near future. What is also
clear in the meantime is that a solution to problems in Pakistan and Afghanistan will not be possible without
Chinese co-operation and involvement.

*****

7 ‘China should act as regional stabilizer,’ Global Times, 20 October 2009.

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 Chapter Five

South-East Asia

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 The Hate/Love Triangle in the
Timor Sea: Australia, Indonesia
and East Timor - Part One
12 May 2010
5
CHAPTER
Dr Vivian Louis Forbes
FDI Associate

Summary
This two-part Strategic Analysis Paper focuses on the Timor and Arafura Seas and, in particular, the three
littoral States: Australia, Indonesia and East Timor (Timor-Leste), in terms of the manner in which they
manage the maritime space and marine resources in the region. It alludes to the fables, examines and
analyses the facts, exposes the fabrications and highlights the fictional issues that have come to the fore
since 2002. It queries the provisions in, and failure of the entry into force of, the 1997 Treaty between
Australia and Indonesia; overviews the 2002 Timor Sea Treaty between Australia and East Timor; and,
focuses on the 2006 Certain Maritime Arrangements in the Timor Sea (the CMATS Treaty) which became
effective on 23 February 2007.
Analysis
Part One acknowledges the neighbourly
gestures, financial support and generosity of
Australia towards Indonesia and East Timor
and the need for Australia, within reason, to
continue assistance to enhance the lifestyle of
the coastal communities of Timor Island and
other island communities. It then overviews
the plethora of treaties that establish the lines
of resource allocations. In Part Two, it discusses
the issues and problems and highlights some
of the rhetoric and rumbles that have clouded
the geographical reality and, furthermore,
the goodwill that Australia has demonstrated
when negotiating maritime jurisdiction with
neighbours of its northern seas.

Geographical Reality

Australia
Australia is an island continent and, in terms
of physical dimensions, the sixth-largest
country in the world. Australia’s maritime
jurisdiction encompasses territories that are
spread over a wide area of the Indian and
south Pacific Oceans, including a number of
islands and two sectors of Antarctica, the
ice-continent. The mainland and Tasmania
are also surrounded by many thousands of
small fringing islands and numerous larger
ones. Nearly 48 per cent of the total coastline
length comprises island coastlines. The coastline of Australia is approximately 69,650 kilometres in length
and includes the coastlines of some 12,000 adjacent islands. (The length of the coastline of the mainland

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 is about 37,000 km). As an island nation, coastlines play an important role in defining national, State and
Territory boundaries. Australia is approximately 3,700 kilometres long, from its most northerly point to its
most southerly point in Tasmania, and it is almost 4,000 km wide, from east to west.

The Australian continent covers a surface area of about 7.7 million square kilometres. Although the land
surface area of the majority of these islands is small, under the provisions of international law these territories
enable Australia to proclaim marine jurisdiction over large tracts of the ocean and seabed that surround
these islands. Australia has the sovereign right to explore and exploit the seabed and water column in its
Exclusive Economic Zone (EEZ). Australia has one of the largest EEZs in the world with the total area being
greater than the nation’s land surface area. The EEZ generally extends to a 200-nautical mile (NM) limit from
the coastline of Australia, including the external territories.

The natural prolongation (continental margin) of the Australian landmass is extensive: off the north coast
there are the Sahul Shelf and Exmouth Plateau; off the south coast is the Tasman Plateau; off the northeast
coast is the Queensland Plateau which covers an extensive area under the Coral Sea whilst off the central
east coast of Australia the width of the continental shelf is relatively narrow; and, off the west coast of the
mainland the width of the continental margin varies from 100 to nearly 300NM. For example, the limiting
edges of the Carnarvon Terrace and Naturaliste Plateau are each in excess of 500 km in an east-west extent
from the coastline.
Indonesia
Indonesia is the largest “archipelagic state” in the world. It consists of five major islands and no less than
35 smaller groups of islands and islets. In total, there are about 17,000 islands and islets of which about
6,000 are inhabited. An estimated population for the archipelagic State is 234,694,000 (July 2007) of which
nearly 40 million live below the poverty line, however defined, which equates to nearly 18 per cent of the
population. The chain of islands straddles the Indian/Pacific Ocean interface in the equatorial region.

In tectonic terms, the islands form stepping stones which link the continents of Asia and Australia. The
archipelago together with Asia is atop the Eurasian Plate; the continent island is on the Australasian Plate.
The two plates are separated by Convergent Boundary which is aligned along the bathymetric axis of the
Sunda Trench and Timor Trough; the latter is about 3,500 metres; the former attains depths in excess of
6,000 metres.

The territory of the Republic of Indonesia stretches from Pulau Rondo off the northern tip of Sumatra
(Latitude 6° 05’ North) to the southwest point of Pulau Roti (Lat. 11° 15’ South), and from Longitude 94°
58’ to 141° 00’ East. This geographical extent excludes that portion of Timor Island which forms the nation
state of Timor-Leste, and that part of Borneo Island which belongs to Malaysia (the states of Sabah and
Sarawak) and Brunei. With an overall distance of more than 4,800 kilometres from east to west, Indonesia
covers an area which is almost as great as that of Europe. However, nearly 80 per cent of the area between
the above-mentioned geographical extremities consists of seas. The total land area of Indonesia covers
about 1,900,000 square kilometres making it the world’s 14th largest territorial entity. (See Table 1, below).
East Timor (Timor-Leste)
Portuguese Timor and some enclaves in West Timor were a colony of Portugal since 1702. Between 1942
and 1945 the land was occupied by the Japanese Imperial Army and thereafter reverted to Portuguese
administration. In November 1975, it was occupied by Indonesia and declared that country’s 27th Province –
as East Timor – until 1999. In a United Nations-sponsored act of self-determination, on 30 August 1999, the
East Timorese voted for full independence from Indonesia. Portugal agreed to abide with the wishes of the
East Timorese. East Timor (Portuguese: República Democrática de Timor-Leste), as a politically independent
State, came into existence on 20 May 2002.

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In a nut shell: East Timor includes the eastern half of the island of Timor, the Oecussi (Ambeno) region, an
enclave, on the northwest portion of the island of Timor, and the islands of Atauro and Jaco. East Timor’s
terrestrial boundary with Indonesia measures about 228 km. East Timor declared the width of its territorial
sea as 12 nautical miles (NM), a contiguous zone of 24 NM and an exclusive fishing zone of 200 NM.
(Maritime Zone Act) The continental shelf south of Timor Island is relatively narrow.
Table 1: The Littoral States: Comparative Sizes

Country Land Area (km2) Coastline (km) Cont. Shelf (km2) EEZ (NM)2
Australia 7,686,300 69,650 2,636,000 7,006,500
East Timor 18,900 760 narrow -
Indonesia 1,905,000 95,000 2,768,800 5,408,000

NEIGHBOURLY GESTURES
A short discussion about Australian initiatives in promoting development in the two neighbouring countries
and support for the long-term welfare of the peoples of Indonesia and Timor-Leste and in particular, for
those in the Nusa Tenggara Timur Province is appropriate in this section.
Australia and Indonesia
Australia’s aid programme in Indonesia reflects the Government’s national interest in Indonesia’s stability
and prosperity by helping that country improve governance, reduce poverty and achieve sustainable
development. The enormous complexity of Indonesia’s economic, political and social change agenda has
been compounded by acts of terrorism on Indonesian soil, and allegedly incitement on Australian territory,
since 2001. Australia is continually assisting Indonesia build its counter-terrorism capacity, including building
the capacity of the Indonesian police force on counter-terrorism and trans-national crime, restricting the
flow of financing to terrorists, and enhancing travel security by strengthening airport, immigration and
customs control capabilities. A major problem is that of illegal migrants heading to Australia, sailing from
ports of Indonesia in generally small and mostly un-seaworthy boats.

Poverty in Indonesia is heavily concentrated among those with little or no formal education. A major
programme in basic education is being put in place to assist the creation of a well-resourced mainstream
education system. Australia supports democracy in Indonesia through an expanded programme of assistance
for legal reform and human rights focusing on judicial reform, the promotion and protection of human rights
and public accountability, electoral and parliamentary processes and institutions, support for community
legal organisations and anti-corruption measures and fostering moderate religious teachings in madrassas.

A new programme to continue support measures for economic reform is being implemented which includes
financial sector restructuring and supervision, debt management, revenue enhancement and audit capacity
building. The program will build on existing support for the government bonds management centre, further
assist the Indonesian tax office to streamline and improve processes and help with a major restructure of
the Indonesian Ministry of Finance. An integrated approach to poverty reduction in eastern Indonesia is also
being developed, with a focus on the Nusa Tenggara Timur Province. Initially this will include helping the
Government of Indonesia develop new approaches to poverty reduction and better district level governance.

Two-way trade in goods and services between Australia and Indonesia was valued at $10.3 billion in
2007-2008; Indonesia is Australia’s thirteenth-largest trading partner. The relationship between the two
countries is characterised by strong people-to-people links and the promotion of bilateral understandings
and exchanges at Government, business and cultural and social levels.

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 Australia and East Timor

Australia has been one of East Timor’s strongest supporters and partners. East Timor, the world’s latest
democratic State confronts all the challenges relating to the establishment of a new government, economy
and society simultaneously. Achieving long-term development in East Timor is a goal that will take decades
rather than a few years to achieve. This is a massive task and long-term endeavour. Between August 1999
and June 2007, Australia provided over $570 million in Official Development Assistance (ODA) to Timor-
Leste and, after raising its aid significantly in 2006-07 to meet the needs of the security and humanitarian
crisis, AusAID notes that Australia (Table 2) invested a further $72.8 million in 2007-08.

An Australia-East Timor Development Assistance Strategy for 2007-2011 will cement Australia’s successful
partnership with East Timor and provide long term support in important areas of existing cooperation (such
as policing; economic management and budget execution; water supply and sanitation) and important
newer areas of engagement for Australia (for example, vocational education; system-wide health service
delivery; strengthening the courts and justice system; and the development of key infrastructure necessary for
growth like roads and electricity transmission). The new strategy and performance framework was intended
to be finalised in consultation with the Government of East Timor following the country’s parliamentary
elections of 30 June 2007. Similarly, the Australia–Timor-Leste Country Strategy 2009-2014 maps out a
framework for how Australian ODA can assist East Timor to meet the Millennium Development Goals.

In 2007-08, East Timor ranked as Australia’s 91st largest trading partner, with total merchandise trade valued
at $37 million (up from around $19 million in 2005-06). Australian exports to East Timor were valued at $33
million and major items included refined petroleum and motor vehicles. Imports were valued at $4 million,
with coffee the major commodity.

Despite these co-operative efforts and a relatively generous financial support, there is a perception among
some that Australia has been unfair to the citizens of Timor-Leste in the allocation of revenue that may be
generated from the exploitation of the potential hydrocarbon reserves that are perceived to exist in the
substratum of the Timor Sea in an area between the two countries.
Table 2: Australia’s Overseas Aid Programme

Indonesia Estimated Official Development Aid: $458.8 million

Priorities include increasing and sustaining economic management and growth including addressing
environment challenges, supporting the transition to democracy, enhancing human security and stability,
and increasing the accessibility and quality of basic social services.

East Timor Estimated ODA: $72.8 million

Building a functional and effective state, strengthening economic development and management, and
improving delivery of services.

Lines of Resource Allocations in the Seas

The geographical and legal basis by which Australia claims sovereign rights to the resources on and under its
natural continental shelf are clear and unambiguous. No other country has a right to claim sovereignty over
this area. It was the 1945 [President] Truman Proclamation that asserted sovereign rights over the resources
on and under the natural prolongation of the landmass which in essence signaled the extension of coastal
states’ jurisdiction. That Australia is willing to forfeit a certain percentage of royalties to Indonesia and East
Timor, is commendable and should be seen as a continued friendly gesture and goodwill.

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Agreements and Treaties: Australia and Indonesia

Portions of the seabed boundary between Australia and Indonesia in the Arafura and Timor Seas were
resolved by agreements in 1971 and 1972. Further agreements and treaties, established in 1981, a
Provisional Fisheries Surveillance and Enforcement Line (PFS&EL), a Memorandum of Understanding “Box”
in 1974 and 1989, a Zone of Cooperation in 1989 to “close the Timor Gap” and a suite of lines of marine
resource allocations in March 1997 Treaty that included a single-purpose maritime boundary to the north
of Christmas Island.

An analysis of the 1997 Maritime Boundary Delimitation Treaty between Australia and Indonesia suggests
that the provisions in the agreement do not support the confident conclusion suggested by the Parties
to the Agreement. In essence, the Treaty established a regime under which Indonesia practically enjoys
unfettered sovereign rights to explore, exploit, conserve and manage the marine biotic resources in the
water column of the zone of overlapping jurisdiction. The Treaty has not been ratified, as at 12 May 2010
(13 years have lapsed), by the Parties to the agreement thereby creating one expansive “grey area” of
uncertainty for fishermen operating in the Arafura and Timor Seas.

The provisions of the 1997 Treaty would appear to place Australia in a disadvantageous position in that
the seabed and substratum rights held by Australia in an area of overlapping jurisdiction might only be
enjoyed largely at Indonesia’s discretion. On the other hand, the EEZ sovereign rights held by Indonesia
would generally be unaffected by any jurisdictional position that Australia may implement consistent with
international law with reference to resources on and in the substratum of the natural continental shelf. The
Treaty’s provisions which recognise the regimes for ocean management depend on the continued goodwill
between the governments of the two countries. The Treaty, however, is silent on matters that could be
contentious, for example, people smuggling, apprehension of illegal fishermen and other activities that
might actively serve to aggravate relationship difficulties through differing interpretations of the Treaty and
cultural misunderstandings.

The provisions of the 1997 Treaty, however, offer a degree of assurance to those operating in the exploration
and exploitation of the hydrocarbon resources within the “grey zones”. Reservations about certain provisions
contained in the treaty relate to the fact that any exploration in the seabed under Australian jurisdiction can
only commence when permission is granted by Indonesian authorities. The rationale is that it is a matter of
courtesy.
Timor Sea Treaty: Australia and Timor-Leste
On 3 July 2001, the Australian Government announced that Australia and East Timorese/United Nations
Transitional Administration for East Timor (UNTAET) representatives had reached an Agreement on a
new Timor Sea Arrangement to replace the 1989 Timor Gap Treaty (TGT) relating to the development
of hydrocarbon reserves in the Timor Sea. Since that moment, East Timor’s Prime Minister of the day,
despite signing the agreement and the subsequent Timor Sea Treaty (TST) constantly offered unconstructive
comments. The TST, signed on 20 May 2002, and subsequently ratified, was intended to build on the
extensive assistance Australia has already provided to East Timor.

It was an interim arrangement allowing for joint petroleum development by Australia and Timor-Leste in
the Timor Sea pending a maritime boundary agreement between the two countries. At the same time
East Timor’s parliament passed the Maritime Zone Act, which proclaimed the country’s potential maritime
entitlement under international law. Soon after signing the Timor Sea Treaty and the enactment of the
Maritime Zone Act, East Timor’s then Prime Minister sent diplomatic correspondence to Australia requesting
talks on the delimitation on maritime boundary between the two nations. Australia’s Prime Minister agreed
to hold maritime boundary negotiations between the two countries, which resulted in preparatory talks on
12 November 2003 in Darwin followed by twice yearly talks which began in April 2004. Any discussion of

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 talks with Indonesia relating to their common maritime boundary awaits the demarcation of the terrestrial
boundary on the two parcels of land and two offshore islands that comprise Timor-Leste on the island of
Timor. It is just as important for Timor-Leste to demarcate its terrestrial boundaries and delimit its maritime
boundaries with Indonesia.

The Timor Sea Treaty 2002 between Australia and East Timor (Timor-Leste) established a Joint Petroleum
Development area (JPDA) in the Timor Sea. The designated JPDA re-placed ‘Area A’ of the now defunct
Zone of Co-operation. The JPDA is administered jointly by Australia and Timor-Leste. Two major oil and gas
fields: the Bayu-Undan which is being developed by Conoco Phillips and the Sunrise gas project by Shell
and several minor reserves are encompassed by the limits of the JPDA. The Government of Timor-Leste will
earn in excess of 90 per cent of all tax revenue from the projects within the JPDA and an additional vast
financial incentive.

Companies involved in the major projects within the JPDA have been working to ensure effective
implementation of the TST. The key elements of the TST, which is to last for 30 years, are:

s A revenue split of 90 per cent for East Timor and remainder to Australia from petroleum
development activities in the JPDA;

s Deferral of delimitation of a permanent seabed boundary without prejudice to Australia’s and East
Timor’s rights or entitlements;

s Maintenance of the contractual terms of the existing oil and gas projects;

s Australian jurisdiction over the planned pipeline from the JPDA to Australia;

s Unitisation of the Greater Sunrise (which straddles the JPDA and an area under Australian
jurisdiction) on the basis that 20 per cent of the field lies within the JPDA and 80 per cent of the
field lies within Australian jurisdiction; and

s Twenty per cent of the royalties from the Greater Sunrise Field to go to East Timor. (This figure
was subsequently revised to 50 per cent).

The 2002 Timor Sea Treaty was intended as an interim agreement that is without prejudice to the position of
either country on their maritime boundary claims. The Timor Sea Treaty provisionally gives East Timor 90 per
cent of petroleum production from within the JPDA. Development of the oil and gas resources, including
the major Bayu-Undan field, is proceeding. Revenues have already started flowing, and it is estimated that
East Timor could earn as much as US$15 billion in revenues from the Bayu-Undan project alone. The East
Timorese revenue from production in the JPDA and Greater Sunrise is paid to East Timor’s Petroleum Fund
which, as of December 2009, had a balance of US$5.3 billion.
International Unitisation Agreement for Greater Sunrise (IUA)
The IUA, signed by Australia and East Timor on 6 March 2003, now provides the secure legal and regulatory
environment required for the development of the Greater Sunrise gas reservoirs. Under the Timor Sea Treaty,
which is in force for both Australia and East Timor, Greater Sunrise is apportioned on the basis that 20.1 per
cent falls within the JPDA and the remaining 79.9 per cent falls in an area to the east of the JPDA over which
Australia exercises exclusive seabed jurisdiction. This apportionment reflects the geographical location of
the resources. The IUA unitises the reservoirs on the same basis. Legislation implementing the IUA is now
in place. Due to the agreed resource split in the JPDA, under the IUA East Timor would receive tax revenues
from 18.1 per cent of the Greater Sunrise resource and Australia would receive tax revenues from 81.9 per
cent. These values were re-defined to the greater benefit of East Timor in the 2006 negotiations.

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CMATS Treaty

Australia and East Timor entered into the landmark Treaty on Certain Maritime Arrangements in the Timor
Sea (CMATS Treaty). The CMATS Treaty signed on 12 January 2006 is a further interim agreement that is
without prejudice to the position of either country on their maritime boundary claims. The Treaty, together
with the 2003 International Unitisation Agreement for Greater Sunrise (IUA), established a framework for
the exploitation of the Greater Sunrise gas and oil resources and will realise the equal sharing of upstream
government revenues flowing from the project. The Treaty represents an opportunity to further underpin
the income and development of one of Australia’s nearest neighbours, while at the same time putting on
hold the Parties’ claims to jurisdiction and maritime boundaries in the Timor Sea for fifty years, to 2056. An
exchange of notes was held in Dili on 23 February 2007 where the government representatives of the two
countries formally notified each other that their domestic processes for the entry into force of the Treaty
were completed.

The CMATS Treaty and IUA are therefore now legally binding. The Treaty reflects the agreed creative solution
between Australia and Timor-Leste. The principal aim of the creative solution is to allow the exploitation of
the Greater Sunrise gas reservoirs to proceed while suspending maritime boundary claims for a significant
period and maintaining the current treaty arrangements in place. The IUA was brought into force concurrently
with the CMATS Treaty.

As part of the solution found through the CMATS Treaty, although the formal apportionment of Greater
Sunrise under the IUA remains the same, Australia will share equally (50:50) the upstream tax revenues from
the resource. The Greater Sunrise project could result in transfers of revenue to East Timor of as much as
US$10 billion over the life of the project. The exact benefit to East Timor and Australia will depend on the
economics of the project. Exploitation of the Greater Sunrise reservoirs, and the additional revenue provided
under this Treaty, will assist in securing Timor-Leste’s development and economic stability.

Australia and Timor-Leste are bound by the Treaty to refrain from asserting or pursuing their claims to
rights, jurisdiction or maritime boundaries, in relation to the other, for 50 years. The two countries have
undertaken to not commence any dispute settlement proceedings against the other that would raise the
delimitation of maritime boundaries in the Timor Sea. Consistent with the CMATS Treaty and associated
side-letters, Australia will be able to continue regulating and authorising petroleum activities outside of the
Joint Petroleum Development Area (JPDA) and south of the 1972 Australia-Indonesia seabed boundary.

Other initiatives established by the CMATS Treaty include: an independent assessment process at the
request of either Party to review the reconciliation of the revenue sharing; East Timor being able to exercise
water-column (fisheries) jurisdiction within the JPDA; and the establishment of a Maritime Commission to
constitute a focal point for bilateral consultations on maritime matters of interest to the Parties, including on
maritime security, the protection of the marine environment and management of natural resources. Perhaps
at this point the question can be posed: Is this not an equitable solution?

*****

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Indian Ocean: A Sea of Uncertainty
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 The Hate/Love Triangle in the
Timor Sea: Australia, Indonesia
and East Timor – Part Two
14 May 2010
Dr Vivian Louis Forbes
FDI Associate

Summary
This two-part Strategic Analysis Paper focuses on the Timor and Arafura Seas and, in particular, the three
littoral States: Australia, Indonesia and East Timor (Timor-Leste), in terms of the manner in which they
manage the maritime space and marine resources in the region. It alludes to the fables, examines and
analyses the facts, exposes the fabrications and highlights the fictional issues that have come to the fore
since 2002. It queries the provisions in, and failure of the entry into force, of the 1997 Treaty between
Australia and Indonesia; overviews the 2002 Timor Sea Treaty between Australia and East Timor; and,
focuses on the 2006 Certain Maritime Arrangements in the Timor Sea (the CMATS Treaty) which became
effective on 23 February 2007.

Part One acknowledged the neighbourly gestures, financial support and generosity of Australia towards
Indonesia and East Timor and the need for Australia, within reason, to continue assistance to enhance the
lifestyle of the coastal communities of Timor Island and other island communities. It then gave an overview
of the plethora of treaties that establish the lines of resource allocations.

Now, in Part Two, it discusses the issues and problems and highlights some of the rhetoric and rumbles that
have clouded the geographical reality and, furthermore, the goodwill that Australia has demonstrated when
negotiating maritime jurisdiction with neighbours of its northern seas.
Analysis

Facts, Not Fables

It is well documented that the provisions of the maritime boundary agreements in 1989, 2002 and 2006 (as
discussed in Part One of this paper), were perceived by many as being too generous to both East Timor and
Indonesia, indeed, to a degree of fault on the part of the Government of Australia.

The new maritime arrangements agreed with East Timor under these treaties are on top of the already
generous sharing arrangements within the JPDA under the existing 2002 Timor Sea Treaty, where East Timor
receives 90 per cent of revenue from production of hydrocarbon resources, which may be worth as much as
US$15 billion. East Timor’s Petroleum Fund, set up to receive and administer the revenues it receives from
oil and gas sales, now has a balance of over US$1 billion from exploitation of resources in the JPDA alone.

Australia has recognised the rights of foreign fishermen; in particular, those from the neighbouring
Indonesian islands to operate in the Arafura and Timor Seas provided they carry out those activities in
traditional mode and not on grand-scale commercial operations. There are numerous recorded incidences
when alien fishers have drifted into Australian territorial waters and abused the regulations and rules that
are in place for the sustainable development of the fisheries.
Rhetoric and Rumbles
Some government and NGO officials from East Timor and Australia continue to voice rhetoric for political
gains. Unconstructive comments also emanate from groups in Australia, East Timor and the United States,
such as the East Timor and Indonesia Action Network (ETAN), Oxfam, La’o Hamutuk and Green Left, which
have accused Australia of blackmail and robbery in its attempts to take control of the hydrocarbon reserves

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 in the Timor Sea. Unfortunately such comments do not accord with the facts alluded to above. For example,
in March 2004, fifty-three US Congressmen sent a letter to the Australian Government urging it to move
fairly and expeditiously in the boundary negotiations with East Timor. This was surprising, especially in the
light of the tardiness of the US Government to ratify the 1982 UN Law of the Sea Convention (a step that it
was beginning to consider as late as 27 September 2007; by mid-May 2010, however, it has not submitted
to the UN its instrument of ratification.) One must, perhaps, wonder at the motives of those involved.

In late-2004 and early-2005, a Melbourne businessman behind a television advertisement accused the
Australian Government of stealing oil and gas supplies from East Timor and was determined to “up the
ante”, by ambushing the Australian Prime Minister at upcoming public events.

‘I’m concentrating on marginal seats because that’s where the Government will be the most
sensitive. The Government can stop this campaign tomorrow just by doing a deal with East
Timor that’s fair and reasonable and that the East Timorese accept. I think I’m doing the right
thing. If it’s successful I will have done the right thing.’ (Ian Melrose)

The Australian Democrat Party and the leader of the Green Party have voiced similar opinions. Some
examples of the rhetoric:

‘John Howard and Alexander Downer — don’t unfairly take East Timor’s oil and gas revenue
which it needs to build hospitals, school and to feed their children. You are not being fair to
the East Timorese.’

‘Sadly, the Howard Government has proven that it is willing to bully and blackmail our
neighbouring countries for its own financial gain. This disregard for International Law is
damaging Australia’s reputation in the region.’

‘The 50/50 split divided the spoils of illegal occupation – neither Indonesia nor Australia owned
this territory. Indonesia “gave” Australia a large share as payment for Australia’s complicity in
Indonesia’s brutal occupation.’

‘Since 1999…the Australian Government has been stealing approximately US$1 million every
day from East Timor.’ (Green Left, 26 Sept. 2007)

‘We could have gifted the oil and gas royalties to the Timorese …’ (Stott Despoja, 9 April 2007)

It is alleged that Mr Melrose paid around $30,000 for a 30-second television commercial, which received
maximum exposure during Australian Open men’s quarter finals match on 26 January 2005. The advertisement
alleged the Federal Government had stolen $2 billion in revenue from the East Timorese. Ian Melrose is a
very wealthy and determined man. The Melbourne businessman, who owns a chain of optometrists, noted
he would spend $2 million in 2005 on advertising campaigns and media stunts aimed at embarrassing the
Prime Minister. Such statements issued by credible commentators can be unhelpful to East Timor’s case for
compensation, if such were the case.

Geographical reality has been clouded by economic and social fabrications and fiction of a legal nature
in matters relating to a potential maritime boundary in the Timor Sea. The distortions in the legal sense,
manipulation of geophysical reality, sprinklings of political ideology and input of many of self-interest groups
have complicated the arguments and brought to the fore the real concerns for the long-term benefits of the
citizens of East Timor.

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Furthermore, maps and graphics put forward by official and un-official sources within and outside East
Timor to present their case are misleading and mischievous. In the first instance, any set of lateral maritime
boundaries projecting southward from East Timor needs to be negotiated with Indonesia. Like many other
researchers, the present author has delineated potential lateral boundaries for East Timor through objective
interpretations and these do not match the East Timorese versions which, in any case, have been adapted
or adopted from external sources.
What If?
It is a fact that geography was never intended to be equal and that Australia’s sovereign rights, naturally and
legally, extend to the edge of the continental shelf and beyond within scientifically determined and defined
limits (Article 76 of the 1982 Convention). The reader is asked to consider these hypothetical questions.
What would be the outcome if:

(a) The United States and Cuba disputed a similar area of continental shelf rights between the
two countries; or
(b) The Governments of China and Taiwan had an identical problem?

What would be the response, conversely, if the roles were reversed, with the East Timorese administrators
owning the Australian landmass and adjacent seas and seabed and the government on the other side of
the Timor Sea was claiming rights to resources that were in and on their continental shelf? It is very likely
that “the equidistant principle” would be rejected. There may even be an inference that the claimants jump
into the Timor Trough.

The Australian Government would be doing a disservice to its citizens if it conceded to the Government
of Timor-Leste’s unrealistic demands with repercussions. The 1982 Convention only suggests that states
produce an “equitable” solution in the event of a dispute over the perceived alignment of maritime
jurisdictional limits between states. Australia is providing a more than equitable solution by generously
giving 90 per cent and more in numerous aid packages.

Despite this generosity, there is a small group of individuals in East Timor, and in Australia, who suggest
that East Timor should gain an even larger slice of the profits. Geopolitical reality would say no; political
expediency takes a softer approach with a massive push by some lawyers and those with a vested interest,
operating outside of Australia, in developing the hydrocarbon fields.
Co-operation on Illegal Fishing
The Australian and Indonesian Governments are working closely to tackle the problem of illegal fishing in
Australia’s northern waters and, more broadly, in the region. Illegal fishing is highly damaging to Australia’s
marine environment, and also poses significant quarantine, immigration and security risks to Australia.

The Governments of Australia and Indonesia are implementing a range of measures to tackle this problem at
its source. Australia posted counsellors from the Department of Agriculture, Fisheries and Forestry, Customs
and the Australian Federal Police in Jakarta to enhance collaboration with Indonesian Government officials
and police. A public information campaign to discourage fishers and their communities from participating
in illegal fishing activity in Australian waters commenced formally on 22 September 2006, with outreach
visits by Australian and Indonesian officials to Rote Island, West Timor, Papua Province, South and South
East Sulawesi and East Java. The Indonesian Government is closely involved in planning and implementing
the campaign.

In 2007, for instance, Australia hosted on 20-21 March, the fifth annual meeting of the Working Group
on Marine Affairs and Fisheries ahead of the 2007 Australia-Indonesia Ministerial Forum. Australia and

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 Indonesia also co-hosted a regional ministerial meeting on 3-4 May 2007 to develop actions to combat illegal
and unregulated fishing practices in the South-East Asian region. In addition to Australia and Indonesia,
ministers from eight other countries in the region participated in the meeting.

In preparation for that meeting, senior officials from the region met in Jakarta on 29-30 November 2006
and in Canberra on 22-23 March 2007. The two countries are also undertaking a joint study of illegal
fishing in the waters between our countries to better understand the nature and extent of the problem,
including the causal drivers, its environmental, social and economic impacts, and the nature of the illegal
fish trade in South-East Asia. Australian and Indonesian officials held the first meetings of a joint fisheries
surveillance forum and a working group to manage shared red snapper stocks. AusAID has supported the
development of alternative livelihoods for illegal fishermen in eastern Indonesia and is considering options
for additional work. Through the 2006-07 Budget, the Australian Government committed an additional
$389 million over four years to combat illegal fishing in our northern waters. The bulk of this funding was
used to increase apprehensions and enforcement activity.

Six illegal foreign fishing vessels and 61 fishermen were brought into Darwin for investigation during
northern Australian maritime patrols in September 2007. The patrols were co-ordinated by Border Protection
Command and involved officers from Defence, Customs and the Australian Fisheries Management Authority
(AFMA).

Five vessels were found fishing Australian waters north of Darwin near Evans Shoal. AFMA officers requested
that the fresh trepang onboard be returned to the ocean. The 57 crew were handed over to Customs in
Darwin for processing and transferred to the Department of Immigration and Citizenship.

Another foreign fishing boat was spotted by a Customs Coastwatch aircraft east of Cape York. Australian
Customs intercepted and boarded the shark boat approximately 60 nautical miles south of Thursday Island.

In another twist, at 11.30am on 15 February 2009, it was alleged that the Territory Spirit was located at
Lat. 9° 40.6399’ S, Long. 130° 26.3200’ E (a very precise location, determined by satellite navigation, and
allegedly in a grey legal zone). The position of the Australian-registered fishing boat was north of the water
column boundary delimited in the yet to be ratified 1997 Treaty and south of the 1972 Treaty line – the
seabed boundary. Initial hearing of the case presented an indecisive comment and it is likely that the next
step is a hearing in the Supreme Court.
Asylum Seekers and the Stepping Stones
People-smuggling is not currently a criminal offence in Indonesia, the main transit point for asylum-seekers
heading to Australia. The Indonesian Archipelago has become a stepping stone for asylum seekers who
originate from as far afield as Afghanistan, Iraq and Sri Lanka. The seekers tend to head towards the
northern Australian coastline and in particular to Ashmore Island (Reef Complex) and Christmas Island.
During the weekend of 13 March 2010, a boat arrived 25 nautical miles northwest of Adele Island, which
is about 100km off Western Australia’s Kimberley coast, carrying 28 passengers and two crew members. It
was the 37th boat to arrive in the northern seas of Australia in the first ten weeks of 2010.

On 16 March 2010, two questions were presented to the Prime Minister of Australia at the House of
Representatives, Canberra when referring to the government’s budget estimate that only 200 unauthorised
arrivals were expected to come to Australia by boat in the 2009/10 financial year. Given that there have been
more than 3,100 unauthorised arrivals on 68 boats in the period to March 2010, how many unauthorised
arrivals does the government now anticipate will come to Australia by boat this financial year; and, what
will be the additional cost to accommodate those arrivals? The Prime Minister replied that global security
circumstances constantly change, as they did for previous governments, as they will do for this government

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and as they will do into the future as well. Therefore, it is important to respond appropriately to the practical
circumstances which present themselves and the government will continue to do so.

On 17 March 2010, the Anti-People Smuggling and Other Measures Bill, 2010 was read for a second
time in Canberra. In excess of $410 million is allocated annually to combat people smuggling. This piece
of legislation, when enacted and implemented, will ensure that law enforcement agencies will make
emergency authorisations for the use of surveillance devices for the new aggravated people-smuggling
offence. The government infers that it maintains a tough stance on people smugglers and a responsible
approach to genuine asylum seekers, consistent with its international obligations, even with its porous
maritime boundaries in the Arafura and Timor Seas.
In Conclusion
The Australian Government has maintained, with firm conviction, its position that the critical boundary
between Australia and Indonesia should reflect the extent of Australia’s natural continental shelf. Australia
has worked closely with the East Timorese people and the UN in support of that country’s transition to
independence in 2002 and in the following years, especially in the response to the breakdown in law and
order there in April 2006 and early-2007. Australia remains at the forefront of international efforts to
provide humanitarian assistance to East Timor and even advocated an expanded UN mission in the country
to address East Timor immediate and long-term assistance and development needs.

Thus, any suggestions that Australia has robbed East Timor of its oil revenue and been unfair in the
negotiations of at least three agreements are nothing short of “mischievous and opportunistic.” Such
suggestions are not acting in the best interest of the East Timorese people.

There is legal principle involved, which includes sovereign rights to place, space and resources and the
nation’s birthright should not be sold or given away. The most important factor is to ensure that any
wealth accrued from the development of the marine biotic and mineral resources of the Timor Sea and
adjacent waters will be directed towards enhancing the quality of life of the East Timorese and people of
the neighbouring islands. Under the new agreements, Australia will continue to exercise continental shelf
jurisdiction outside the JPDA and south of the 1972 Australia-Indonesia seabed boundary. East Timor will
be able to exercise fisheries jurisdiction within the JPDA. A Maritime Commission will also be established to
enable high-level dialogue on a range of important issues facing Australia and East Timor in the Timor Sea,
including the management of security threats to offshore platforms and co-operation in managing fisheries
resources.

*****

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Indian Ocean: A Sea of Uncertainty
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 Burmese Days: The Beginnings of
Change in a Land Apart?

16 December 2010
Leighton G. Luke, Manager
Jasmine Hughes, FDI Research Assistant, Indian Ocean Research Programme

Summary
The release of pro-democracy leader and Nobel Peace Prize laureate Aung San Suu Kyi from house arrest on
13 November 2010 has the potential to herald a new phase in the Burmese democracy movement’s long-
running campaign against the governing military junta, known officially as the State Peace and Development
Council. Just how that campaign will pan out, however, remains to be seen. Any developments in Burma
will also be watched closely by China and India, both of which have strategic interests in the country.
Whatever view they might take of the military government, neither Beijing nor New Delhi would wish to
see their strategically important neighbour collapse into chaos.
Analysis
Released on 13 November 2010 after spending the last seven years under house arrest – she has spent
more than 15 of the last 21 years incarcerated – democracy icon Aung San Suu Kyi declared she bears no
ill will towards those responsible for her detention, saying that they should not fear for their safety and has
called for unity and reconciliation. At the same time, however, she has also vowed to continue to fight for
democracy in Burma, stating her belief in human rights, the rule of law and her commitment to what she
has called a ‘non-violent revolution’. Such pronouncements will effectively put her on a collision course with
the ruling State Peace and Development Council.

On 7 November 2010, Burma held its first elections since the 1990 vote that saw Ms Suu Kyi’s National
League for Democracy (NLD) win a landslide victory. Although widely denounced as flawed by many
foreign governments and observers, the action of holding a “democratic” election is nonetheless a positive
move, even if the conditions surrounding the election were less than encouraging for those hoping for the
democratisation of Burma.

A case has been made by those opposition politicians who did contest the 7 November poll
– some of whom broke away from Ms Suu Kyi’s NLD to do so – that any slight democratic opening is better
than none at all and could provide an opportunity for incremental democratisation. The NLD did not field
candidates due to electoral laws and restrictions which it labelled ‘unfair and unjust’. On the day, the junta-
backed Union Solidarity and Development Party (USDP) won more than 80 per cent of seats in the bicameral
parliament.

Any nascent democratisation, however incremental, will continue to be constrained by the May 2008
Constitution, which reserves a quarter of all parliamentary seats for the armed forces and allocates three of
the most important portfolios to military officers: Interior; Defence; and Border Areas, National Races and
Development Affairs.

Despite the election results, which were entirely expected, the expectations of the
pro-democracy movement will be high in the wake of Ms Suu Kyi’s release. Ms Suu Kyi’s
main task will be to rebuild the NLD, which was disbanded and fractured by her order to
boycott the November elections. The groundswell of support for Ms Suu Kyi will be her
– and the NLD’s – greatest asset. Such support, together with Ms Suu Kyi’s intention to investigate electoral
irregularities and challenge the deregistration of the NLD will, from the junta’s point of view, pose the
greatest threat to its continued authority, despite having solidified its position via its political proxies in the
recent poll.

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 Just how Ms Suu Kyi balances the expectations of her supporters, and her innate sense of duty, against
the ever-watchful eye of the state remains to be seen but, given the junta’s past willingness to jail her for
even the most minor of supposed infractions, Ms Suu Kyi will necessarily need to tread carefully. Certainly,
though, no effort was made to prevent Ms Suu Kyi meeting with United States Deputy Assistant Secretary
of State for East Asia and the Pacific, Joseph Yun, at her home in Rangoon on 10 December.

The decision of the junta to finally grant a Burmese entry visa to Ms Suu Kyi’s youngest son, Kim Aris,
now aged 33, could be interpreted as a sign that the generals at least wish to be seen as being fair and
reasonable towards her. Granting Mr Aris his visa serves to convey the impression that, having “done her
time”, and barring any further infractions, her slate is once again clean.

Ultimately, however, the generals are highly unlikely to tolerate a repeat of the 1988 mass protests (the
“8888 uprising”), the landslide opposition victory of the 1990 elections or the so-called Saffron Revolution
of 2007. If the past is any guide, they will look to curtail Ms Suu Kyi’s activities with another bout of
imprisonment or house arrest.
India-China-Burma Relations: A Golden Triangle?
The concurrent rise of China and India has the potential to result in a significant new geopolitical realignment,
one in which the relationship between the two burgeoning powers will have rippling effects within the
region and around the globe. Burma, in particular, could be greatly affected by future relations between
India and China as it holds particular interest for both countries, due to its oil and gas reserves and possible
access avenues to and from the Indian Ocean. This interest has led to growing economic investment in
Burma by both India and China. These investments could be seen as having the potential to give New Delhi
and Beijing a certain level of influence over Burmese affairs.

The 2010 Index of Economic Freedom, gauging the fundamental right of every human being to control his
or her own labour and property, ranked Burma as the fifth most repressed economy in the world (175 out of
179), ranking behind only North Korea, Zimbabwe, Cuba and Eritrea. Different states have responded to the
survey results in different ways. Some, such as Australia, New Zealand, Canada, the United States and the
European Union, have imposed trade and/or financial sanctions of varying degrees of severity; others, such
as India and China, have continued their economic involvement with Burma. For the past thirty years at least,
the junta has been barely susceptible to outside influence. Even China, which plays such an important role in
Burma, can have trouble being heard. As the International Crisis Group notes: ‘[T]he insular and nationalistic
leaders in the military government do not take orders from anyone, including Beijing.’1 A crippled economy,
due to decades of mismanagement, now leaves Burma’s rulers attempting to gain legitimacy and lure
investment. The states most likely to be successful in encouraging some form of change in Burma would
be those that are the most economically involved: chiefly China and India. Conversely, if Beijing and New
Delhi happened to be vying for Burma’s interest, they would also be less likely to attempt to exert any real
influence over the country’s political future, lest it threaten their access to prized Burmese assets.

Being both the first- and second-most populated states in the world, China and India are in increasing
need of resources, particularly oil, natural gas and water. Being neighbours means that China and India can
find themselves battling for the same resources and, in some cases, harbouring suspicion about the other’s
intentions. Regional neighbours with similar mounting needs means that pipelines, waterways and ports are
all issues of possible future conflict. Despite a relationship that is increasingly filled with economic, political
and defence interaction, China and India still remain suspicious of each others’ wider regional motives and
can be highly competitive in regard to resource allocation.

1 International Crisis Group, 14 Sep 2009, Asia Report 177, ‘China’s Myanmar Dilemma’, p. i.

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Burma has sizeable oil and natural gas reserves, as well as a possible accessway to the Indian Ocean, and
would help both countries to open up poorer, landlocked provinces in south-western China and north-
eastern India. China is currently building major oil and gas pipelines across Burma that will enable it to both
tap Burma’s reserves and shorten the transport time of its crude oil imports from the Middle East and Africa.
Chinese companies are rapidly expanding into Burma’s hydropower sector to meet Chinese demand. China
is Burma’s top provider of foreign direct investment and, through recent economic agreements, is seeking
to extend its lead. In September 2010, Chinese warships visited Burma for the first time.

While this would seem to point towards China enjoying an advantage in Sino-Burmese relations, it isn’t all
plain sailing for Beijing. As has happened elsewhere in the developing world, Chinese companies’ resource
extraction activities are fostering local resentment due to their lack of transparency and unequal benefit
distribution, environmental damage and forced displacement of communities. Burma, in turn, is looking to
diversify its foreign relations in order to reduce its reliance on China.

India, which has lagged behind in comparison, is likely to use this to establish a stronger presence in Burma.
Last year, India’s trade with Burma reached US$1.19 billion, a 26 per cent increase over the previous year
and India’s state-owned National Hydro Power Company Limited has said that it plans to invest $5.6 billion
this year [2010] in Burma as the country expands its energy sector. India is becoming one of Burma’s major
investors and the growing economic relationship makes China both suspicious and eager to hold its role as
the main economic investor in Burma.

While the 7 November elections were criticised as a farce by many governments and the United Nations,
China praised the elections, labelling them ‘steady and smooth’ and a critical step on the path to an
elected government. India has been rather quiet regarding the elections, in comparison to its advocacy
of democracy after the 1988 protests. The world’s largest democracy is vying for influence in Burma and
criticising the junta would work in opposition to that goal. In any case, it is questionable whether the junta
would really be swayed by criticism from either Beijing or New Delhi.

China is the country’s most important ally, but even Beijing has had trouble exerting real influence on
Burma. In dialogue and interaction with China, the Burmese junta has proven itself to be not easily swayed
by outside forces or opinions. China has never been particularly vocal in regard to Burma and any misgivings
it might have about the junta’s actions, but the notion that China is ambivalent to Burma’s internal strife and
human rights abuses is misleading.

As the International Crisis Group noted in 2009, Beijing is fully aware that the continued failure of the
Burmese military government to deliver basic economic development and social progress to its people could
undermine both Burma’s stability and China’s ability to advance its own economic blueprint. Although China
differs in its methods of attempting to influence change within Burma, it is just as invested in the concept
as the West. It is arguable that China has more invested in Burma’s progress due to being so economically
involved in the country – having invested US$8.17 billion in Burma in the 2009-10 fiscal year, not to mention
sharing a very porous border. If the country were to boil over at some point in the future, China would have
the most at stake. Beijing would therefore be very interested in encouraging any forward movement that
might create a more stable – though, of course, not necessarily democratic – Burma.

In previous years, China’s military, economic and political support was the junta’s lifeline. With the failed
nationalisation policies of the socialist era leaving it one of the world’s most impoverished countries, the
junta relied on China’s aid, investment, trade and military assistance.2 More recently though, Burma has
grown suspicious of China and has sought to counterbalance relations by strengthening co-operation with
India, Russia, Thailand, Singapore, Malaysia and North Korea. Although China’s backing is still an important
2 Ibid., p. 1.

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 part of any international plan to promote positive change in Burma, it does not have the influence over the
junta that it once might have. The perception of waning influence in a neighbouring state in which it has
invested heavily could make China feel somewhat nervous about the possibilities and implications of further
change, but no change creates serious issues for China also. A less stable Burma would have an array of
negative implications for China. In particular, it has the worry of border issues such as tensions between the
junta and ethnic minority groups living in the border regions (possibly leading to another possible flight of
refugees, as occurred in 2009), the narcotics trade and the spread of HIV/AIDS to consider.

But would either China or India ever be willing to exert real influence over Burma when both are vying for
access to its resources? Burma might currently seem to be more susceptible to outside influences, but if
the junta’s main investors are willing to be involved with it economically, to supply it with weaponry and
barely question its actions, then any susceptibility – such as it may be – will fade. India and China, despite
their supposed regional rivalry, have become increasingly involved economically, culturally and politically.
They have a burgeoning relationship that is, in most aspects, at least cordial. If the relationship continues to
evolve along an upward trajectory, it may leave Beijing and New Delhi more likely to encourage some form
of positive change in Burma instead of currying favour through silence or appeasing statements. If, however,
India and China were to become increasingly wary of each other, such a situation would conceivably provide
the Burmese junta with an environment in which to continue business as usual, with little or no international
repercussions beyond those sanctions already in place.

As ever, much about Burma remains opaque and the country’s future is no exception. Rather than the title
of George Orwell’s critique of Burmese society in the days of Empire, a paraphrasing of Rudyard Kipling’s
famous lines might provide a more apt summary of what, for the time being at least, remains a land apart:
‘This is Burma ... It is still quite unlike any other land.’

*****

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 Chapter Six

Middle East

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Indian Ocean: A Sea of Uncertainty
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 A New US Persian Gulf Strategy?

11 February 2010
6
CHAPTER
John Hartley
FDI Institute Director

Summary
The United States recently announced moves to improve its defensive capabilities in the Persian Gulf. This
involves stationing additional Patriot batteries and Aegis-equipped warships in the Gulf and upgrading the
defensive capabilities of Saudi Arabia and other Persian Gulf allies.

The timing and reasons for these moves are interesting.

Analysis
At the heart of these developments is the failure of the US and the other three members of the Group of Six
(France, Germany and the United Kingdom), to convince Russia and China to force Iran to cease uranium
enrichment – which could lead to the development of nuclear weapons – and to allow the process to be
fully verified.

Western countries, in particular, continue to believe that Iran is developing nuclear weapons while Tehran
rejects such claims and states that it is simply attempting to develop nuclear power for commercial reasons.

Diplomacy and the imposition of sanctions have not deterred Iran. The US, for instance, has considered the use
of “crippling sanctions” that would see Iran deprived of up to 35 per cent of its refined oil requirements. But
such moves were considered by some analysts as likely to result in “catastrophic humanitarian consequences”
that could even increase the authority of the regime and gain no support from any opposition leader in Iran.

As it is, the UN Security Council has adopted five resolutions, three of which involved sanctions. Recently
the US Senate passed a bill advocating tough sanctions on any individual, company or even country which
provides refined petroleum to Iran. But these sanctions are just as unlikely to be effective, particularly as
China has made it quite clear that it is not prepared to participate. Beijing has lucrative business deals with
Iran, especially in the oil and gas sectors.

Nor is major conventional conflict with Iran likely. A limited strike would not destroy Iran’s nuclear facilities.
These are scattered, numerous, deeply buried, surrounded by air defence units and, in some cases, close to
large cities.

Limited strikes, based largely on air and missile strikes, may also result in Iran using its proxies. Hezbollah
and Hamas stand out. But Iran, through its Islamic Revolutionary Guard Corps, has sought to arm and train
Shiite factions in other parts of the Middle East, including – most recently – Yemen. Even where it may not
have a significant military foothold, the threat to develop one has concerned countries such as Egypt, Saudi
Arabia and Jordan for some time.

There is also the threat to close the Strait of Hormuz. This has been publicly considered by Iran on several
occasions. Again, whether it has the capability, particularly in light of the US naval capabilities in the region
is problematical. But the threat could have a major destabilising impact on world oil prices if nothing else.

It is also possible that limited strikes have every potential of escalating, leading eventually to a major ground
war. In the cold, hard light of logic, such an outcome would seem to be far from what the United States, in
particular, would want.

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 American political and military leaders are painfully aware that the United States is stretched thinly in
conventional military terms with Iraq and, to a greater extent, Afghanistan consuming a significant portion
of capabilities, especially those related to ground forces. The US simply does not have the force needed to
defeat, occupy and administer a country that has three times Iraq’s population and is four times as large.
Nor is there a significant force in-country that would be prepared to support an invader. Equally, a sizeable
part of the population would not only oppose the invasion, but also the occupation.

Some analysts suggest that Israel has seriously considered the option of attacking Iran’s nuclear sites. Israel
is, of course, within range of Iranian missiles and President Ahmadinejad has said Israel should be destroyed.
But what could the Israelis do when the United States, with its vastly superior military force, is doubtful of
doing?

Israel does not have the conventional force to conduct a several day operation. Certainly, it might destroy
some of the facilities, but it can also expect a major campaign across its northern border from Lebanon and
from Hamas, in the Gaza Strip to the south.

It has been suggested that Israel’s best option would be to use its nuclear capability, possibly striking from its
nuclear capable submarines. Even assuming Israel has such a capability and that it is able to accurately target
nuclear facilities, there is still the problem of collateral damage. Israel could expect a significant backlash
from within the region if there were extensive civilian casualties.

Of course, the state of Iran’s nuclear developments is a significant consideration. This has not been verified
although there are widely different claims. Some analysts believe Tehran has no intention of developing a
weapon, as Iranian spokesmen are quick to claim. Others suggest that such a weapon is one to two years
away. This, of course, is understandable depending on the perceived threat; Israeli commentators would
suggest an imminent threat while those in the US would not necessarily be so concerned.

What is clear is that Iran has yet to test a nuclear device. This also suggests that it has yet to master the
deliverable aspects of such a weapon. Over recent years, Iran has very publicly shown its abilities to launch
increasingly more capable rockets. In its most recent launch, a Kavoshgar-3 rocket purportedly was capable
of carrying a 60-kilogram satellite 800 kilometres into space. Even assuming that Iran were capable of
developing a nuclear capability, it would need to consider the consequences of launching such a strike.
Nations that have acquired such capabilities soon realise the implications of the counter-strike.

Given the above, the defensive implications of the recently announced deployments now start to make
sense.

The US and Israel are not prepared to take military action against Iran, either because they do not have the
capabilities to do so, or recognise the consequences of such an action. They also recognise that diplomacy
and sanctions have either failed or are not possible.

As an alternate strategy, the US has been deploying and developing additional capabilities in the Persian
Gulf region for some time. These have included arms sales to Saudi Arabia and a number of Gulf State
countries. Part of these capabilities has resulted in improved security for key infrastructure, including oil
terminals.

The most significant recent deployments have included Ballistic Missile Defence (BMD) capable Aegis-
equipped warships in the Persian Gulf, where they are capable of shooting down missiles in flight. The
Aegis/Standard Missile 3 (SM-3) successfully brought down an out-of-control US satellite in 2008.

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BMD-capable Patriot Advanced Capability-3 (PAC-3) batteries have been deployed in Kuwait, the United
Arab Emirates, Qatar and Oman. This system is a far more capable variant of the original Patriot that was
deployed in the First Gulf War of 1990-91. A recent exercise with the Israeli Defence Force named Juniper
Cobra further refined its employment.

Both the PAC-3 and SM-3 are untried, however, against Iran’s Shahab-3s. This adds an element of uncertainty
to the strategy espoused by their recent deployment. This is particularly felt by Israel.

Nevertheless, this defensive strategy, from an American perspective, makes sense. By destroying Iranian
missiles shortly after their launch, the risks of not having precise intelligence are overcome. Nor is there a
need for a pre-emptive strike with the attendant risks of collateral damage.

There is even the possibility that an effective shield that destroys Iranian missiles may convince Tehran to
abandon its pursuit of a nuclear capability that has to be delivered by missiles.

While neighbouring Arab countries can probably live with this situation – they are unlikely to be primary
targets – the same cannot be said for Israel, where a single nuclear strike, or several conventional strikes,
could result in serious damage.

This leads to the issue of timing.

For some time, Israel has regarded February as the decisive month for sanctions to make an impact. If this
does not happen, then either a more aggressive strategy is required, or there is an international acceptance
that Iran will develop a nuclear capability.

Therefore, the US Administration’s announcement just before the start of February of a defensive strategy
is set, at least in part, to mollify Israel. Equally, the Obama Administration needs to reassure the American
public that, although Iran has refused to be influenced by diplomacy and the imposition of sanctions, there
is another strategy in place that neutralises the Iranian threat.

So, where does the US go from here?

Future options are not made easier by Tehran’s launch of its latest missile. But Iran has also played one of its
most favoured strategies. Ahmadinejad has publicly announced that Tehran is prepared to accept a proposal
that would see the bulk of its partially enriched uranium processed in France and Russia, thus ensuring it
could not be used for weapon purposes. At the same time, he was “hopeful” concerning the release of
three detained Americans.

Again, this has had the desired effect. Some Western politicians have characterised Ahmadinejad’s remarks
as an Iranian “retreat”, indicating that Tehran is prepared to reduce tensions over the nuclear issue. Others,
however, are not nearly so convinced. They see nothing new in his statements, which are not dissimilar to
what he has said before, when nothing has happened. This sentiment is possibly best summed up by [then]
French Foreign Minister Bernard Kouchner, who said he was ‘perplexed and even a bit pessimistic’ about the
proposal, which he interpreted as ‘buying time’ ahead of possible new United Nations sanctions.

Uncertainty on how to handle Iran is still a dominant feature. One aspect that receives considerable attention
is the so-called Green Movement. Many Western analysts believe that this is the main challenge for the
Iranian government. Certainly, the country has witnessed widespread protests against perceived fraud in
the elections of 12 June last year.

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 Some commentators claim that these developments have seriously limited the ability of Tehran to govern
effectively. They suggest that Iran’s leaders may decide to compromise with the international community
over the nuclear problem so they can concentrate on domestic issues. There is also a suggestion that
international outrage over repressive measures will further isolate Tehran leading to increased condemnation
of Iran and thus strengthening the move for more effective sanctions.

There is little doubt that Western countries, and the United States in particular, are increasingly frustrated by
Iran. This disappointment is reflected in the more aggressive tone of the proposed courses of action. There
is also the hint of regime change being back on the agenda.

But is regime change a viable option? Much of the coverage of Iranian discontent is limited to the larger
cities where urban middle classes and students seem to dominate. The government, on the other hand,
is able to organise significantly larger demonstrations and there is every indication that many, if not most,
Iranians are not prepared to support a mass uprising. This situation is not helped by the repressive nature of
Iran’s internal security forces.

So, the new defensive strategies in the Persian Gulf may well be the only available option to deter, or at
least control, Iran’s developing nuclear capability. Certainly, this strategy increases pressure on Iran; reassures
Arab countries that they do not have to acquire nuclear weapons; attempts to convince Israel that it does
not need to attack Iran; and, reassures the American public that Washington does have a viable strategy
with which to confront Tehran.

*****

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 Yemen: An Uncertain Future

28 January 2010
John Hartley
FDI Institute Director & CEO

Summary
The Christmas Day 2009 attempt to destroy an American airliner has brought Yemen again into the
international spotlight. Most reporting has focussed on the al-Qaida connection and US options to deal
with this threat. But there are other, more fundamental, concerns. Yemen faces at least three insurgencies
and is increasingly becoming a failed state with a large, youthful population that is highly vulnerable to the
dictates of militant Islam.
Analysis
By any measure, Yemen is a fragile state. Its institutions are failing; its economy is in a state of collapse. The
World Bank ranks it 166th out of 174 in terms of prosperity. Its oil exports, which account for 70 per cent
of its GDP, are expected to dry up within a decade. The government will not be able to generate sufficient
wealth to maintain the tribal patronage on which it depends. It has an acute water shortage, with many
cities having access to water for less than two hours a day. Indeed, water supplies for the capital, Sana’a, are
expected to be exhausted within 20 years. The UN World Food Programme states that Yemen is the most
food-insecure country in the Middle East.

It has a burgeoning population which has doubled since 1990 and which will double again by 2025. Fifty
per cent of its population is under 15. Almost 40 per cent of its 23 million people are unemployed. More
than a third are under-nourished and half live below the poverty line.

The country is a topographical mix of desert and mountains. It has a fractured tribal culture, resulting in
seven dialects. It has been called “Afghanistan by the Sea”.

The regime of President Ali Saleh is autocratic, corrupt and inefficient. Once known as “Little Saddam”,
Saleh is the longest-serving ruler in the Middle East after Libya’s Gaddafi. But his control over the country is
faltering, with popular movements in the north and south increasingly gaining momentum. His government
has little control outside the capital and must also contend with a mix of competing tribal, clan and family
differences.

Saleh also faces another issue for which he is partly responsible. In 1994, he relied heavily on those who
had been influenced by a strong Wahhabist culture to subdue the socialist south. In part, this resulted from
a deliberate Saudi project to finance schools and other institutions that graduated thousands of radicalised
Yemenis who would fight in Afghanistan against the Soviet occupiers. Unlike other Middle Easterners,
Yemeni returnees were welcomed by the Saleh regime.

While a considerable number of Yeminis subscribe to a Wahhabist-Salafist version of Islam, and do not
advocate the militaristic outlook that is symptomatic of al-Qaida, there appears to be an increasing number
whose only option to show their opposition to a corrupt and incapable regime is to call on their militant
faith. Of course, others will seek to exploit this militancy, resulting in even greater destabilisation.

Yemen is presently host to three separate insurgencies.

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 The most significant is probably that on the Saudi-Yemeni border area, involving the Zaidi Shi’ites of the al-
Houthi clan. This conflict pits minority Shi’ite rebels against the Sunni-dominated forces of the government.
Insurgents, who seek to establish an independent state, have been active since 2004. Quelling the uprising
has been beyond the capability of the Yemeni armed forces.

Recently the Houthis have conducted operations across the border in Saudi Arabia. This has led some
analysts to consider this a proxy war between Saudi Arabia and Iran. Certainly, there have been numerous
reports indicating Iranian involvement in terms of supplying arms and equipment and even fighters. Riyadh
has responded by deploying forces to the area but the possibility for further deterioration continues.

The second insurgency is that of a separatist campaign in the south. Yemen was only formed in 1990 with
the unification of north and south Yemen. This was followed by a brief civil war in 1994 when the southern
breakaway forces were defeated by thousands of Yemeni mujaheddin who had fought in Afghanistan.

Ever since then, tension has gripped the region. Recently, a strong resurgent secessionist movement has
emerged with a significant number of people in the south demanding a separation from what is perceived
as a forced union by the north.

Poverty, instability, poor health care and low-quality education have enabled al-Qaida to establish a base. In
January 2009, the leader of al-Qaida in Yemen, Nasir-al-Wahishi, announced that he was uniting with the
Saudi al-Qaida faction and forming al-Qaida in the Arabian Peninsula (AQAP).

Little is known outside of intelligence circles about AQAP. Some analysts claim they number between 100 and
300 operatives, with many more supporters, but that few have operational experience gained elsewhere.
But there is little doubt that it is a growing force with the potential to attract many disenchanted youth.

Of course, al-Qaida elements may also be a proxy for indigenous tribal confederations, clans and powerful
families. Various factions have been quick to claim that al-Qaida is supporting someone else or confronting
a particular opponent when it is not clear that this is the case.

There is also a perception that AQAP is attempting to develop a transnational operational capability. Not
only was there the attempt on the US airliner, but AQAP also tried to assassinate the Saudi Deputy Interior
Minister in August 2009. What is even more concerning is that the government is incapable of dealing with
this threat while also confronting two other insurgencies. There are also many other major state players but
two, in particular, are worthy of consideration: the US and Iran.

The US is faced with limited options. Certainly, it will increase its advising, training and equipping role,
noting that it has recently doubled the value of its military support. President Obama is also faced with the
difficult option of reassuring the American people that enough is being done to counter the latest threat.
Had the aircraft attack succeeded, for instance, then this would have been the second-deadliest attack in
the United States since 9/11. But, becoming more aggressive in Yemen itself carries substantial risk.

American policymakers are fully aware of this dilemma. They have no alternative to supporting President
Saleh, who is only recently starting to recognise the threat from al-Qaida. But such support could also lead
to conditions of anarchy and an implosion of the state.

Recently, a well-known and respected religious and political figure, Sheikh Abdul Majeed al-Zindani, publicly
delivered a nine-part religious pronouncement warning against any foreign military intervention. In this he
was supported by 150 Muslim scholars, sheikhs and imams. If nothing else, this would complicate markedly
any attempt to increase overt activities in Yemen.

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American policymakers are also fully aware of the need to improve living conditions and recognise that
counterterrorist activities are but one part of the solution. To improve living conditions, however, also
requires better governance and a willingness of the people to accept aid and other measures. This probably
also requires the involvement of other Arab nations, such as the Gulf States and Saudi Arabia. None of these
conditions are guaranteed.

There is considerable speculation regarding Iran’s role in Yemen. Certainly, there is some evidence that Iran
attempted to support the Houthi rebellion in mid-2009. This would not have been an easy task, given the
logistic difficulties imposed by distance and terrain, and the sectarian challenges involved.

But Iran has shown that it is willing and capable of moving beyond its traditional Shiite strongholds in
Lebanon and Iraq. Tehran, for instance, has developed close ties with the Sunni group Hamas in the Gaza
Strip. There are also persistent rumours that al-Qaida elements have worked with the Islamic Revolutionary
Guard Corps.

It is also in Iran’s interest to highlight its ability to retaliate in as many parts of the Middle East as possible, as
it faces increasing uncertainty as the US and others attempt to deal with the nuclear issue. Yemen’s strategic
significance, therefore, is threefold.

First, it sits on one side of a strategic waterway through which a high proportion of the world’s oil shipments
move. This situation would become even more pronounced should the Gulf of Hormuz be closed.

Second, a secure bastion for al-Qaida would enable the movement to plan and prepare for transnational
terrorist strikes not dissimilar to the failed aircraft attack.

Third, from Yemen, al-Qaida could again strike into Saudi Arabia, thus possibly earning support from Iran.

While the challenges are clear, the options for dealing with them have yet to be demonstrated.

*****

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Indian Ocean: A Sea of Uncertainty
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 Closing the Strait of Hormuz -
An Ace up the Sleeve or an Own Goal?

10 February 2010
Leighton G. Luke
Manager, Indian Ocean Research Programme

Summary
As the diplomatic manoeuvring surrounding the Iranian Government’s nuclear programme continues, so
too does the possibility that Iran might attempt to interdict traffic passing through the Strait of Hormuz
or even to close the waterway entirely. The Strait of Hormuz is a key energy shipping lane and the planet’s
most crucial chokepoint.

Such a move would have profoundly negative consequences, not just for the hydrocarbon exporters of the
Persian Gulf, but also for the global economy and Iran itself.
Analysis
The Strait of Hormuz is the most crucial of all the world’s chokepoints. It links the otherwise enclosed waters
of the Persian Gulf with the Arabian Sea and the Indian Ocean via the Gulf of Oman, with the Islamic
Republic of Iran occupying its northern shores and the Sultanate of Oman’s Musandam Peninsula to the
south. The two 3.2 kilometre wide shipping lanes (one lane in each direction), separated by a buffer zone
also 3.2 kilometres in width, are located just inside Omani territorial waters. Approximately 32 kilometres
across at its narrowest point, the Strait is the conduit through which the majority of the Middle East’s
hydrocarbons exports must pass before they can power the global economy.

Ninety per cent of the Persian Gulf’s oil exports, more than 40 per cent of globally traded sea-borne oil
(between 16.5 and 17 million barrels per day (bbl/d)), and the liquefied natural gas exports from LNG giant
Qatar, transit this confined waterway. Keeping the Strait of Hormuz open is therefore vital not only to
regional producers and Western energy consumers such as the United States, Europe, Japan and Australia,
but to the world economy in general.
Naval Mines Likely Method
The only state likely to attempt to close the Strait of Hormuz is Iran; the best method available for it to
do so is the use of naval mines. Indeed, Iran has threatened shipping in the Persian Gulf on a number of
occasions and has already used mines to do so. During the so-called “Tanker War” phase of the 1980-88
Iran-Iraq War, Iran laid a number of naval mines in the Persian Gulf, one of which struck the USS Samuel B.
Roberts, a patrolling United States guided missile frigate, resulting in the death of over 30 crewmembers.
While the incident did not sink the vessel, nor did it take place in the Strait of Hormuz itself, it nevertheless
demonstrated the vulnerability of shipping to mine damage. Despite advances in mine clearing and
countermeasures, it is a vulnerability which still remains.

With the obvious discrepancies between the Iranian and US military forces and the relative ease with which
the US could destroy even the mobile batteries of anti-ship missiles installed along the Iranian shoreline,
Iran’s ability to close or, at least, threaten, the Strait of Hormuz hinges on its capacity to deploy mines.
Hormuz Closure as a Negotiating Tool
While it is not the purpose of this paper to delve deeply into the exact circumstances under which Iran may
feel compelled to attempt to close the Strait of Hormuz, it is nonetheless worthwhile to note them at least
briefly.

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 The Islamic Republic’s threats to close Hormuz are inextricably entwined with the country’s nuclear
programme. Tehran no doubt views this ability as an integral component of its negotiating strategy; while it
may not yet actually possess a nuclear weapon, the capacity to cut off the lifeblood of the world economy
is potentially – despite the pitfalls of retaliation – an ace up its sleeve.

Speculation that Iran might attempt to close the Strait followed the declaration on 8 February 2010 by
Supreme Leader and Commander-in-Chief, Ayatollah Ali Khamenei, that on 11 February (the 31st anniversary
of the Iranian Revolution), ‘the Iranian nation … will punch the arrogance (of the West) … in a way that will
leave them stunned’. Some time previously, in August 2008, the commander of the Revolutionary Guard,
Mohammad Ali Jafari, went on record as threatening to close Hormuz if negotiations over the nuclear
programme did not go Iran’s way.

The United States is equally on the record, however, in stating that no country would be permitted to
close the Strait, even if it had the capacity to do so, which the US felt that Iran lacked. Eighteen months
on, analysts remain of the opinion that, despite its rhetoric, Tehran could still not actually close the Strait
of Hormuz and that, as before, its best option would be to instil fear into energy markets and consumers
through disruption. By unsettling energy markets and pushing up marine insurance premiums with a few
well-publicised detonations, even a relatively small quantity of mines could produce results. For Iran, the
problem, of course, would be getting those mines into the shipping lanes under the watchful eye of the US
Navy, which monitors the waterway very closely. Nevertheless, were Iran to succeed in laying the mines, they
would continue to achieve results until such time as allied forces and commercial traffic could be certain
that the shipping lanes were completely cleared as, despite technological advances, mine clearing remains
a relatively slow and under-resourced process.

In the absence of a nuclear arsenal, an ability – either perceived or actual – to close the Strait of Hormuz
is therefore Iran’s greatest weapon. Even the threat of closure would be sufficient to unnerve the global
economy as it recovers from the global financial crisis, with prices for the region’s oil and liquefied natural
gas (LNG) products certain to rise, as would maritime insurance premiums. It is for that reason that some
analysts, such as the Stratfor organisation, have described a threatened closure of the Strait of Hormuz
as Iran’s real nuclear weapon. It is an apt description because, as would be the case with using an actual
nuclear weapon, closing the Strait of Hormuz would also ultimately inflict significant pain on Iran itself. That
pain would most likely come in the form of retaliation from the United States or Israel – possibly even from
Iran’s Arab neighbours – not to mention additional damage to the already faltering Iranian economy.
Effects of Closure
In the hypothetical event that Iran were to successfully close the Strait of Hormuz, what might be the
effects of that closure? To begin with, it is important to note that the following consequences, although
speculative, are centred on what is very much a worst case scenario: that Iran has not only been able to
close the Strait to all traffic, but that it is also able to maintain that closure for some time. A disruption or a
brief closure would most likely result in a spike in the spot prices for oil and LNG that would lessen as mines
were cleared and traffic returned to normal levels. A brief disruption would not be sufficient to produce the
results below.

In a worst case scenario, with the Strait of Hormuz closed for a lengthy period, the effect on the global
economy would be significant. Deprived of its lifeblood, with oil and LNG supplies from the Persian Gulf
severely curtailed or completely cut off, the global economy would be likely to contract once again in the
face of higher energy prices. In such circumstances, the spot price per barrel of oil would quickly break
through the US$100 mark and would likely continue to rise until the Strait could be re-opened and normal
supply resumed.

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The effects would be felt even more acutely in those economies still slowly emerging from the recent
economic slowdown. As other analysts have noted, closing Hormuz during a recessionary period would – at
least in the very short term – have provided Iran with the most “bang for its buck”, with the pain decreasing
as the world moves further out of the recessionary cycle. For the US, however, as the world’s largest energy
consumer and stuck in a quagmire of 10 per cent unemployment and government deficits in the region of
US$1.5 trillion, the lengthy recovery process leaves it especially vulnerable.

That vulnerability is, however, the very reason why the US would not tolerate a closure of the Strait of
Hormuz.

Some oil and LNG could still leave the Persian Gulf via Saudi Arabia’s East-West pipeline to the Red Sea
port of Yanbu al-Bahr, which has a capacity of five million bbl/d. The Abqaiq- Yanbu al-Bahr LNG pipeline,
running parallel to the East-West pipeline, has a capacity of 290,000 bbl/d and would facilitate LNG exports.
Even at full capacity, however, the quantities would simply be insufficient to meet demand and offset the
higher prices.

Even in the event that Iran were unable to completely close Hormuz and succeeded in merely restricting
traffic through the Strait, energy consumers would still face higher prices due to curtailed supply and as
a consequence of the higher insurance premiums levied by marine insurers for any vessels attempting the
passage.

For Iran, already dependent on imported petroleum and with a stagnating economy largely dependent on
oil and gas exports, closing the Strait of Hormuz would be a risky strategy. It might very well invite direct
military retaliation from the US or Israel – or even a coalition force – potentially resulting in the loss of
military personnel and assets, infrastructure and, perhaps, the destruction of the country’s nuclear facilities.
Even if Iran closed Hormuz with the intention of allowing its own exports through, the US and its allies
would be certain to prevent Iranian vessels from leaving the Persian Gulf. For Tehran, the sole plus-side of
any retaliation would be an increase in support from other anti-American groups for its self-proclaimed role
in fighting what it terms “the Great Satan”. It may also be able to garner condemnation of any US or Israeli
actions from a number of United Nations members, possibly even including Security Council heavyweights,
Russia and China.

Were Iran to successfully close Hormuz, the response of the wider international community would certainly
include economic sanctions. Regardless of any rhetoric coming out of Tehran, sanctions would hit the
Iranian economy hard, particularly since the subsidised price of petroleum would have to rise substantially
to compensate for the lack of imported product. With Iranian motorists being restricted in the quantity of
subsidised petroleum they can purchase each month as of December 2009, it is possible that prolonged and
large-scale economic hardship could eventually undermine the regime by acting as a further catalyst to the
anti-government protests which have occurred since the disputed 2009 presidential election. This would
particularly be the case if the country’s poor and rural populations, the strongest supporters of populist
president Mahmoud Ahmadinejad and those most likely to be hardest hit, were to tire of the continually
straitening circumstances and turn against the government.

The vastly reduced income resulting from an economy based on oil and gas exports, but cut off by economic
sanctions, would also curtail Iran’s ability to fund its proxies operating around the region, such as Hezbollah in
Lebanon, Hamas in the Gaza Strip and, allegedly, the al-Houthi insurgents in Yemen. For Arab governments,
Israel and the US, that at least would provide a welcome degree of breathing space.

As a significant oil producer and the world’s largest exporter of LNG, the effect of a Hormuz closure on Qatar
would be negative in the extreme. Although beginning to successfully diversify into areas such as tourism

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 and financial and educational services, the Qatari economy remains based on the export of hydrocarbons,
which has given the country the world’s highest per capita Gross Domestic Product.1 Unfortunately for
Qatar, in order to achieve that high standard of living, its oil and LNG must first navigate the Strait of
Hormuz, the closure of which would deprive it of over 80 per cent of its export earnings.

Similar fates also lie in store for the oil-based economies of nearby Kuwait, Bahrain, the United Arab Emirates
(UAE) and Iraq. The Habshan-Fujairah pipeline, if it were completed prior to a Hormuz closure, would
provide the UAE with an economic lifeline capable of bypassing Hormuz and delivering 1.5 million bbl/d to
the Gulf of Oman. For Iraq, the loss of oil income would come as a devastating blow to a government still
working to stabilise the country and establish its authority. Baghdad might be able to counter that – and
reap the benefit of higher spot prices – by exporting some of its oil through Turkey via the Kirkuk-Ceyhan
pipeline (which requires significant upgrading to carry its full capacity) and through Syria via the Kirkuk-
Banias pipeline (which would have to be repaired before it could be re-opened).

For non-Persian Gulf hydrocarbon producers, the higher spot prices resulting from a Hormuz closure would
deliver a significant windfall, which could help to offset the attendant decline in the world economy. In
Venezuela, for instance, the government of President Hugo Chávez is, like its Iranian counterpart, overseeing
a steadily declining economy and would no doubt be pleased to have its depleted coffers replenished.

While an Iranian attempt to close the Strait of Hormuz appears unlikely and its capacity to actually carry it
out for any period of time even less likely, the Iranian Government remains aware of the pain it could inflict
on its enemies if it chose to do so and, indeed, has actually threatened to do just that.

Its best option would be disruption via the laying of mines. A sustained full-scale closure, which would have
serious consequences for the global economy, would be much more difficult to achieve. Unfortunately for
Iran, those consequences would also extend to the Islamic Republic itself, transforming an ace up the sleeve
into an own goal.

*****

1 Calculated by the International Monetary Fund on purchasing power parity (PPP) basis.

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 An Increasing Arc of Influence:
Iran in the Indian Ocean Region
21 June 2011
David Alexander
Research Assistant
FDI Indian Ocean Research Programme

Summary
Iran has made it a strategic imperative to overcome its relative geopolitical isolation and adopt a more
prominent position within the Indian Ocean region. Iran has been progressively intertwining itself with
a number of Indian Ocean states, forging strong economic and security relations in an attempt to make
it a key player in regional strategic thinking. An integral component of Iran’s strategy is the diplomatic
leverage that it attains from energy diplomacy, combining economic interests with larger strategic goals.
Iran’s strategic ambitions and willingness to challenge the regional status quo are further confirmed by its
efforts at gaining increased influence with strategically important states.
Analysis
One of the largest states in the region, Iran has long been an influential power within the Persian Gulf and
has a history of regional influence. Iran is now, however, extending the reach of its influence to the wider
Indian Ocean region and the arc that borders it. The push to increase Iran’s trade relations with many of
the states within the Indian Ocean region has both economic and strategic elements. Iran, as a significant
supplier of energy resources, can create strong bilateral relations with many countries that need those
resources; the need to secure energy resources can supersede many aspects of the general international
sentiment surrounding Iran. By forming closer ties with a wider range of countries, Iran is firmly intertwining
itself into the Indian Ocean region, thus making decisions on issues such as obtaining a regional consensus
on the Iranian nuclear programme increasingly difficult. Iran’s increasing ambitions are demonstrated by
the enlargement of the Iranian naval capability and the increased role that it has chosen to play within the
Indian Ocean.

As energy security becomes an area of greater strategic relevance to many developing states, strong relations
with net energy suppliers are crucial. To this end, Iran has the capacity to use energy diplomacy to further
its strategic goals. Iran will increasingly be able to make a stronger case for a greater regional presence with
which to secure its trade and economic interests. This increased presence has the capacity to grow into a
bluewater capability for the Islamic Republic of Iran Navy, which then poses strategic issues for other states
with a naval presence in the Indian Ocean. Iran’s efforts at greater regional involvement and integration,
in conjunction with ambitious regional goals, signify a desire for a leading role within the Indian Ocean. A
change in the regional balance of power is unlikely to appeal to those states also wishing to maintain or
increase their influence, such as the United States. Tehran’s dual strategies of energy diplomacy and securing
its economic interests with a maritime presence are tactics designed to demonstrate the importance of Iran
to the region.

The ties between Shia Iran and neighbouring Sunni Pakistan have become increasingly strong as both
countries endeavour to expand their economies. There are obvious security concerns that both countries
share – Afghanistan and a refugee crisis among them – but the growing depth of economic interaction
between the two countries is forging stronger relationships. Pakistan had increased its exports to Iran by 80
per cent in 2009 to become an important trading partner. Iran could potentially become one of Pakistan’s
largest export markets. The level of non-energy related imports from Iran to Pakistan increased by 11 per
cent in the same period. On the other hand, the lack of a suitable international banking system based in
Iran is a hindrance to the continued advancement of bilateral trade relations. The core of the Pakistan-Iran
relationship, however, is built on Pakistan’s need for Iranian energy resources and Iran has become a major

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 energy supplier to Pakistan. Pakistan has been importing more energy than just oil and gas; since 2005
Pakistan has been importing electricity. While Iran currently exports 40 megawatts of electricity daily, there
was an agreement in 2008 between the two countries for the construction of a $60 million, 100 kilometre
electricity line capable of supplying 1,000 megawatts at discounted rates.

The construction of a pipeline between Iran, Pakistan and India has been discussed since 1994. While the
project has at times been delayed due to the frequently tense diplomatic relations between Pakistan and
India, plans for the project have been progressing between Iran and Pakistan. The project would deliver
increased energy security to Pakistan while also providing Iran with a route for its energy exports that
bypasses the Persian Gulf. In May 2009, Pakistan and Iran signed a purchase agreement for the supply of
30 million cubic metres of natural gas. This is to increase to 60 million m3 during the course of the 25-year
agreement. The gas pipeline agreement negotiations came to a successful conclusion on 13 June 2010,
with the pipeline between Pakistan and Iran due to be completed by the end of 2014.

The agreement was made despite objections from the US. The late Richard Holbrooke, the US special envoy
to Pakistan and Afghanistan, warned Islamabad that, although Washington understood Pakistan’s energy
crisis, any new sanctions against Iran could have a heavy impact on Pakistan. India, with some pressure
from the US, declined to become a participant in the pipeline despite its own need for energy resources.
China has indicated that it would be interested in taking India’s place within the project. By proceeding with
the Iranian pipeline, Islamabad can claim to be taking a stand against US pressure. In complying with US
demands to act against Islamist insurgents, the government is regarded by many within Pakistan as a stooge
of Washington.

India’s relations with Iran have been difficult in recent years. Historically, the two countries have had positive
relations with good diplomatic ties and a growing trade relationship. India, with its rapidly growing economy,
has relied heavily on energy imports from Iran, which have formed a significant portion of bilateral trade.
India currently imports approximately 400,000 barrels of oil per day from Iran, its second biggest supplier
after Saudi Arabia. India and Iran started a joint venture project to develop the Iranian Farzad B offshore gas
field, which could provide greater diplomatic depth to the two countries’ trade relations.

India and Iran also have a history of strategic co-operation and have worked together to reduce
the impact of Afghani and Pakistani internal crises on regional stability. To signify the strategic
co-operation relationship in 2003, Iran and India signed the New Delhi Declaration for regional stability and
held joint naval exercises in 2003 and 2006 which focussed on sea lane control and security.

India’s relationship with Iran is, however, complicated by the developing relationship that India has with the
US, and the influence that the US is willing to exert on India to achieve its own strategic goals. New Delhi’s
strategic involvement with Tehran has since decreased significantly due to US pressure. In March 2011, India
banned trade in all goods and technology which could help Iran’s nuclear programme. This was done with
the stated goal of aligning India’s policy with the sanctions imposed by the United Nations Security Council,
where New Delhi is currently a non-permanent member. To date, India has followed UN sanctions on Iran,
but says it is not bound by tougher US or European sanctions. Due to the December 2010 scrapping of a
long-standing payment mechanism under pressure from Washington, India is, however, struggling to pay for
its Iranian oil imports and must walk a tightrope to ensure future supply.1 As noted above, the application of
US pressure has also been attributed to the Indian withdrawal from the Iran-Pakistan-India pipeline project.

Iran has been increasing its influence further afield within the Indian Ocean region by creating a strong
relationship with Sri Lanka, through economic and strategic ties. Sri Lanka holds a critically important geo-

1 AlertNet, 1 April 2011, ‘India restricts Iran trade as oil payment row rumbles’.
<http://www.trust.org/alertnet/news/india-restricts-iran-trade-as-oil-payment-row-rumbles>.

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strategic location in the Indian Ocean and is well-placed for a naval presence which could influence seaborne
trade and the maritime presence of other countries. Iran, apart from providing 80 per cent of Sri Lanka’s
crude oil imports, has also signed three Memoranda of Understanding with the intention of significantly
increasing its trade with Sri Lanka. Iran has granted Sri Lanka numerous aid loans for essential infrastructure
projects. The projects are all joint projects using Iranian and Sri Lankan companies and are hence seen
as mutually beneficial. These infrastructure projects include a $1.5 billion loan for the building of a 100
megawatt hydroelectric project, the expansion of an oil refinery and an irrigation plan to be implemented
in the Uma Oya region. There was also a bilateral agreement in 2009 for a $106 million loan for an Iranian
firm to provide electricity to 1,000 Sri Lankan villages. Sri Lanka has also been in discussions with Iran over
a possible nuclear power plant to be built in Sri Lanka with Iranian assistance by 2030.

Iran has increased its strategic relevance considerably to Sri Lanka through support during the domestic
conflict with the Liberation Tigers of Tamil Eelam and the granting of loans for upgrades to Sri Lankan
military hardware. For instance, Iran has granted Sri Lanka a low interest loan to purchase Pakistani and
Chinese defence hardware and has offered assistance to train Sri Lankan military and intelligence officers;
at least ten officers are already visiting Iran for training. These closer security ties may also be associated
with the increased influence of Wahhabi Islam in the eastern regions of Sri Lanka, with Iran attempting to
counter growing Saudi Arabian influence in the country.

Further afield, Iranian Foreign Minister Ali Akbar Salehi called for stronger Iran-Indonesia ties following a
meeting with the Indonesian Minister of Marine Affairs and Fisheries, Fadel Muhammad, on 17 May 2011.
According to Salehi, initiatives such as the Group of Eight Developing Islamic Countries should be used
to build greater bilateral and regional co-operation between Tehran and Jakarta, a sentiment echoed by
Minister Muhammad.

The Islamic Republic of Iran Navy (IRIN) has been given the responsibility for expanding Iran’s maritime
presence from the Persian Gulf, leaving the Iranian Revolutionary Guard Corps Navy (IRGCN) responsible
for the defence of Iran in the Persian Gulf itself. According to Joshua Himes, an analyst for the Centre
for Strategic and International Studies, the increased responsibility for the IRIN is to extend Iran’s layered
defence against any direct seaborne threat, and to exert greater regional influence to counter perceived
threats from Tehran’s enemies.2 This increase in strategic focus for the IRIN has been attributed to a directive
given by Supreme Leader Ayatollah Khamenei to expand the navy’s reach as a critical underpinning to Iran’s
future prosperity. Rear Admiral Rostamabadi, the IRIN deputy for operations, explained the navy’s strategic
vision in 2010 as:

We plan on having a presence off the coasts of India and inside the Malacca Strait. The strait
forms a point of a triangle in which a high percentage of the world’s energy is exchanged and
transferred. Ships within the Persian Gulf which set sail towards the Suez Canal and enter the
Mediterranean Sea and those ships that set sail eastward, all pass through this triangle. By
expanding our presence with this triangle, we will be able to completely oversee the transit
of the world’s energy and at the same time protect our interests. At the same time, we will
have greater deterrence power within this region when facing enemies and rivals of the Islamic
Republic of Iran.3

An increased Iranian presence in the Indian Ocean will, coupled with a greater emphasis on partnerships
and relationship building, significantly increase the soft power influence that Tehran is cultivating. Iran’s

2 Himes, J., ‘The Iranian Navy’s Historic Mediterranean Deployment: Timing Is Everything’, Centre for Strategic and
International Studies, 21 March 2011. <http://csis.org/publication/iranian-navys-historic-mediterranean-deployment-timing-
everything>.
3 Ibid.

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 efforts at combating piracy in the Gulf of Aden and off the West African coast have given the Iranian naval
presence a high degree of legitimacy, with 12 anti-piracy patrols taking place since 2008. The International
Maritime Organisation praised Iran’s naval efforts against piracy in the Gulf of Aden in 2009.

To further strengthen its influence within the region, Iran has offered assistance to Djibouti to help combat
the presence of piracy off the Djiboutian coast. The two countries have agreed to broaden their co-operation
in logistics, maintenance and training for the purposes of combating terrorism, drug trafficking and piracy in
the Gulf of Aden. Djibouti has significant geo-strategic importance in the Horn of Africa due to its location
adjacent to the Gulf of Aden and the Bab el-Mandeb chokepoint leading to the Red Sea and Suez Canal. It
is a key US security partner and hosts a significant US and French military presence; a Japanese naval facility
is currently under construction at the port of Djibouti. While perhaps enabling the Djiboutian Government
to balance its Western links, greater Iranian involvement may be seen as another challenge from Tehran to
US primacy in the region.

Iran is determined to play a much greater role within the Indian Ocean region, and has indicated that it
is willing to use its energy resources to achieve that goal. Iran is intent on economically integrating with
key states in the Indian Ocean region with the aim of becoming a crucial component in regional strategic
thinking. Iran has already demonstrated some soft power success by the support which many Indian Ocean
region countries have voiced for its nuclear energy programme. Sri Lanka, Pakistan, Kenya, Djibouti and
South Africa have all expressed support for an Iranian civil nuclear programme; India’s previous support is
likely to have been since withdrawn.

Iran is firmly embedding itself as an important member of the Indian Ocean region, both as an energy
supplier and as a strategic partner. Iran is becoming quite adept at using energy diplomacy to increase the
regional influence that it possesses which, in a rapidly developing region, provides it with considerable
leverage. The maritime presence that Iran is already projecting, and which it hopes to project further, is
strengthened by the ever-increasing importance of trade and sea lane security. With a focus on anti-piracy
operations, the IRIN is creating a substantial degree of legitimacy which may, in the future, translate into
greater acceptance of a larger Iranian strategic role within the Indian Ocean region.

*****

Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future
Directions International.

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