June 12, 2018        Reading Time: 3 minutes

Your weekly digest of foreign policy commentary*

LKI Weekly Insights Reading Time: 3 min read

Raja Mohan urges India to maximise gains from both the Indo-Pacific and Eurasia. – valipatov / depositphotos



China’s Debtbook Diplomacy: How China is Turning Bad Loans into Strategic Investments, The Diplomat, by Sam Parker and Gabrielle Chefitz, MPP Program, Harvard Kennedy School

“[Some] countries have taken on massive Chinese loans with little clear prospect for repayment and have strategic assets or diplomatic sway that China could demand.”

  • The authors argue that China’s loans to build infrastructure in debt-laden countries—like Sri Lanka—give it leverage to acquire strategic assets in such countries, in lieu of being repaid the loans.
  • In their view, the Hambantota port deal is an example of this strategy of “debtbook diplomacy.” The US and India are concerned that China may use Hambantota and other ports in the Indian Ocean region for military purposes.
  • Rather than trying to outbid China as a response, the US should adeptly leverage its diplomatic, economic, and military power in the region. This would include supporting India’s ascendance as a regional leader and providing debt management and contracting expertise to debtor nations.

LKI Take: A recent report by a US think tank indicated that China holds less than 6% of Sri Lanka’s debt; compared to, for example, 39% of Laos’ debt and 49% of Cambodia’s. However, Sri Lanka needs to monitor the upward tick of debt to China and its implications for governance, rights and the environment—aspects that receive relatively scant international attention.



From Indo-Pacific to Eurasia, Indian Express, by C. Raja Mohan, National University of Singapore

“That Delhi must look for stronger ties with both the maritime and continental powers does not mean the nature and scope of these possibilities is symmetric.”

  • C. Raja Mohan notes that India is located amid two geopolitical concepts: the maritime concept of the Indo-Pacific backed by the US and Japan; and the continental one of Eurasia backed by China and others in the Shanghai Cooperation Organisation (SCO).
  • India has developed its engagement with the US and Japan for over a decade, while also engaging with Russia and China in a trilateral forum and in BRICS.
  • While some argue that India needs to choose one side or the other, it should maximise gains from both, even if in an asymmetric way. India should engage its Indo-Pacific partners for trade and maritime security, while also using the SCO to address other issues e.g. to unblock access to Central Asia and limit conflict with China.

LKI Take: Sri Lanka is also located at the heart of competing geopolitical frameworks, including the Indo-Pacific and Belt and Road Initiative. Like India, New Zealand and other nations, it should resist pressure to choose one over the other, and instead maximise gains from different frameworks for diverse aims, such as for investment, security, and strengthening democracy.



Why A Flexible Donald Trump Unnerves An Unyielding Shinzo Abe, The Financial Times, by Robin Harding, The Financial Times Tokyo Bureau Chief

“Yet whereas China, South Korea and Russia are talking directly with Pyongyang, and have some power to shape events, Mr Abe must rely on Mr Trump.”

  • Robin Harding highlights Japan’s increasingly vulnerable international relations, due to its dependence on Prime Minister Abe’s personal friendships with world leaders to achieve its foreign policy goals.
  • As a former colonial power and likely target of North Korea, Japan strongly desires to keep US forces in South Korea, see North Korea surrender its nuclear weapons, and address the issue of Japanese abductees during the Cold War.
  • Japan, however, is not in direct contact with Pyongyang. Prime Minister Abe must, therefore, rely on President Trump to achieve Japan’s goals. This reliance has created a divergence between Japan and other G7 states in their relations with the US.

LKI Take: This week’s Singapore summit underscored Japan’s vulnerability. While President Trump stated that he raised the issue of Japanese abductees, he also unexpectedly indicated the US would suspend military exercises with South Korea. Any major gap between Japan’s goals and US practice may complicate the development of the Indo-Pacific framework.

*Written by Malinda Meegoda and Barana Waidyatilake and edited by Anishka De Zylva. The opinions expressed in these Weekly Insights are not the institutional views of LKI, and do not necessarily reflect the position of any other institution or individual with which the authors are affiliated.

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