South Asia | Big India-Bangladesh power deal dims China's shine in South Asia

Big India-Bangladesh power deal dims China’s shine in South Asia

March 10, 2016 2:59 PM (UTC+8)

 

India has bagged a major deal to build a power plant in Bangladesh’s Khulna district. The contract is significant. The $1.6-billion-project is the largest to be implemented by an Indian power company abroad. More importantly, India’s state-run Bharat Heavy Electricals Limited (BHEL) beat China’s Harbin Electric International Company Ltd to win the contract

india_bangladesh_flag-650x487India’s bagging of the power project marks an important victory for India in the Sino-Indian contest for influence in Bangladesh. This is likely to be quietly applauded by the United States, Japan and other countries that are concerned over China’s mounting economic and military presence in Indian Ocean littorals.

The India-Bangladesh Maitree (Friendship) Power Project will energize a relationship that has been generally warm and on a marked upswing since 2010, when the Awami League (AL) came to power in Bangladesh. In the years since, the two countries have ratified the 1974 Land Boundary Agreement. Bilateral trade has surged and the AL government has cracked down on anti-India militants based in Bangladesh.

Importantly, the AL government appears to be responding with greater sensitivity to India’s security concerns over China’s expanding economic and military role in Bangladesh. In recent decades, China’s influence in Bangladesh has grown rapidly propelling it to become the latter’s largest trade partner and military supplier. China’s role in developing physical infrastructure in Bangladesh too was on the rise.

However, China has suffered two stunning setbacks in Bangladesh in recent months.

Bangladesh cancelled China port project

Scheme for Sonadia port project in Bangladesh
Scheme for Sonadia port project in Bangladesh

In January, the Bangladesh government cancelled a Chinese project to fund and build an $8-billion deep-sea port at Sonadia in Cox’s Bazaar in the southeast corner of the country. Close on the heels of that blow has come another – the loss of the power project deal to India.

The cancellation of the Sonadia port project is perhaps the more painful of the two losses.

Like other Indian Ocean ports it has financed and built in recent years such as the Gwadar port in Pakistan, Hambantota port in Sri Lanka and Kyaukpyu port in Mynamar, the Sonadia port would have been an important link in China’s ‘One Belt, One Road’ initiative. Like Gwadar and Kyaukpyu ports, Sonadia port would have provided China’s oil and other imports from the Persian Gulf and Africa with a shorter route to western and southern China.

It would have reduced China’s dependence on the Straits of Malacca – around 80% of China’s crude oil imports traverses this waterway – and eased its ‘Malaccan Dilemma’ i.e. the Chinese worry that in the event of a military confrontation between the US and China, the US could block the Straits of Malacca, thus paralyzing the Chinese economy.

Bangladesh’s cancelling of the Sonadia port project is thus a loss for China.

Dhaka’s decision is likely to be welcomed not only in India but also the US, Japan and other China wary countries in the region.

The Sonaldia port was perceived as a potential “pearl” in China’s “string of pearls” in the Indian Ocean i.e. a China-backed commercial port that could  become a naval base for Chinese vessels should the need arise. Delhi in particular views these “pearls” as part of a Chinese strategy to encircle India and maintain a permanent presence in the Indian Ocean. Such fears have gained momentum with vessels of China’s People’s Liberation Army Navy (PLAN) visiting these China-backed ports. In January, for instance, three PLAN vessels, including two guided missile frigates and a comprehensive supply ship docked at Bangladesh’s China-built Chittagong port for the first time ever. It set alarm bells ringing in India.

A China-backed port at Sonadia would have brought China closer to India’s Andaman and Nicobar Islands, home to the Andaman and Nicobar Command, India’s only strategic command comprising the Army, Navy and Air Force. Thus Dhaka’s cancelling of the Sonadia port project has prompted a sigh of relief in Delhi.

Japan pushes rival port project

Deep-sea port at Matarbari
Deep-sea port at Matarbari

Bangladesh has cited lack of commercial viability of the Sonadia port as the reason for the project’s cancellation. However, it has given the green signal to a Japanese proposal to finance and build a port at Matarbari, which is located just 25 km from Sonadia.

What makes the Japan-backed Matarbari port more ‘economically viable’ than the China-backed Sonadia port? Did strategic considerations rather than economic viability determine Bangladesh’s decision to cut China out of the Sonadia port project?

Meanwhile another tussle to develop a Bangladeshi port looms. Bangladesh is said to be keen to develop a deep-sea port at Payra in its Patuakhali district. Payra port is closer to the Indian mainland than is Sonalda and India is eyeing the project.

But other countries including China, Britain and Netherlands have expressed interest in the Payra port project. Given Payra’s proximity to its territory, India will be anxious to clinch the Payra port deal.

Sudha Ramachandran is an independent journalist/researcher based in Bangalore, India who writes on South Asian political and security issues. She can be reached at sudha.ramachandran@live.in

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