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Speaker 1: The Maldives. It's a nation of twelve hundred islands in

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Speaker 1: the Indian notion, and it's known to most as a

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Speaker 1: luxury vacation destination. But at the same time that cocktails

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Speaker 1: are being served up to tourists, the Chinese government is

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Speaker 1: investing millions in the country to help pay for infrastructure.

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Speaker 1: China gets a port out of that deal, and for Beijing,

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Speaker 1: that trade is about more than just shipping. It's about

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Speaker 1: season control of the region from its natural leader, India.

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Speaker 1: Welcome to Benchmark, the show about the global economy. Pime

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Speaker 1: Scott Landman, economics editor for Bloomberg in Washington. I'm Daniel Moss,

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Speaker 1: economics writer and editor at Bloomberg View in New York.

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Speaker 1: The struggle for regional power between China and India goes

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Speaker 1: back to the sixties. So how did the Maldives become

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Speaker 1: a playground for great powers? And by the way, why

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Speaker 1: is it so important the game be played here? Isn't

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Speaker 1: the Maldives sinking and all its ways of being underwater

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Speaker 1: in a few decades? Let's find out from somebody who's

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Speaker 1: very familiar with the geopolitics of the region. Joining us

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Speaker 1: here in our DC studio is Shaleish Kumar, South Asia

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Speaker 1: analyst at Eurasia Group. He's a former India economist at

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Speaker 1: the U. S. Treasury and held various roles at HSBC,

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Speaker 1: Morgan Stanley and State Street. Shalish, welcome to Benchmark. Thanks

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Speaker 1: for having me. So too many people in the West.

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Speaker 1: The idea of an economic and military cold war being

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Speaker 1: fought in the Maldives just seems kind of incredible. You

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Speaker 1: have vacationers and honeymooners who are going there mainly to

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Speaker 1: get away from it all. So what's going on here?

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Speaker 1: Are there effectively to Maltives? So I think the term

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Speaker 1: cold war is very appropriate, and I would I think

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Speaker 1: it maybe a little too strong, But we are in

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Speaker 1: the midst of what is effectively a new form of

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Speaker 1: a Cold War between India and China. Why Maldives is

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Speaker 1: it's because of its geography where it's position. It's just

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Speaker 1: miles off of the coast of India, which makes it

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Speaker 1: particularly sensitive and very valuable to China. If you take

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Speaker 1: a look at what China's bigger play in South Asia is,

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Speaker 1: They've been slowly picking off, one by one all of

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Speaker 1: India's neighbors with various means of influence over these countries.

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Speaker 1: But the strategy is very clear. They want to encircle

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Speaker 1: India and they want to do so for a couple

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Speaker 1: of reasons. One, they want to contain India, they see

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Speaker 1: it as a threat too, they want access to the

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Speaker 1: Indian Ocean. And three, they want to have broader supremacy

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Speaker 1: in Asia and to do so you need to keep

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Speaker 1: India confined. And again, given where Maldives is located, it's

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Speaker 1: perfectly fits into the strategy. Now why would China feel

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Speaker 1: threatened by India or feel competition from India Its economy

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Speaker 1: is a fraction the size of China's. Well, there's a

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Speaker 1: couple of reasons. One Historically the two have had a

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Speaker 1: border dispute. So if you take a look at the

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Speaker 1: map of Indian China, there's a state in the northeast

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Speaker 1: Caldinurential British China claims it as its own, the whole state.

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Speaker 1: They say that it's part of Southern Tibet. Effectively, India

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Speaker 1: says it's its own states. So this is a big

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Speaker 1: source of issues between the two countries. They can't even

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Speaker 1: agree on the border. But that you could say is

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Speaker 1: the India China specific events, So why not just figure

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Speaker 1: out the border, the broader concern or the broader problem

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Speaker 1: China has with Indias. Yes, you're right right now India

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Speaker 1: is not a direct economic threat, but that may not

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Speaker 1: be the same case thirty years from today. As an

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Speaker 1: extension of that, we also need to consider who could

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Speaker 1: influence the global order in the next century. Our country

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Speaker 1: is gonna look and adopt quote unquote the Indian model

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Speaker 1: of democracy, its form of capitalism to the extent that

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Speaker 1: they are a capitalist, or are they going to look

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Speaker 1: more towards the Chinese model? And that's not just governance

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Speaker 1: and economics and institutions, but also in terms of what

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Speaker 1: type of ideology the rest of the world takes in,

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Speaker 1: what kind of development model, what kind of uh kind

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Speaker 1: of spheres of influence these countries want to project around

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Speaker 1: the world. If in fact, you agree that Western powers

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Speaker 1: are in the firm of decline. So with that in mind,

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Speaker 1: China really needs to go out of its way to

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Speaker 1: take care of its one close proximate threat, which is India,

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Speaker 1: because again it's right on its border. So is that

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Speaker 1: more of a military threat or an economic threat? I mean,

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Speaker 1: you talked a little bit about both, but which one

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Speaker 1: would you say is taking more precedents in the Chinese

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Speaker 1: political calculations. I'm gonna hedge a little and I would

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Speaker 1: say it is a mix of both. And the reason

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Speaker 1: I say that is the economic threat isn't yet as

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Speaker 1: obvious because India is not stealing jobs away from China,

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Speaker 1: and so from that perspective, the Chinese don't have to

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Speaker 1: worry about anything on the military threat part. Again, the two,

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Speaker 1: we don't see the two going to war. That's not

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Speaker 1: the that's not where this is going to play out.

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Speaker 1: But the strategic influence India can have over the region

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Speaker 1: and over the world does then become an economic problem

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Speaker 1: for China. So what I mean by that is China

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Speaker 1: has a lot of interest in Africa, for example, or

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Speaker 1: in Pakistan or Southeast Asia. And to make sure all

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Speaker 1: of this works the way the Chinese wanted to work,

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Speaker 1: they need to make sure India doesn't become a spoiler

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Speaker 1: in any of it or doesn't try to expand its

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Speaker 1: influence or its ideology into these countries. So to make

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Speaker 1: sure that doesn't happen, you then invoke the military option.

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Speaker 1: And by option, and I'm not saying the war, but

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Speaker 1: I'm saying you try to gain control strategically over countries

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Speaker 1: around India so that it cannot assert its dominance through

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Speaker 1: the military, and by doing so, you also then control

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Speaker 1: the economic side of the equation. Now, how does this

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Speaker 1: breakdown on the ground in the Maldives. There's been a

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Speaker 1: couple of changes of government and I believe a port

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Speaker 1: is also up for grabs, that's right. So for a

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Speaker 1: very long time, the Maldivian government was very pro India.

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Speaker 1: There was a lot of proximity between the leadership. A

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Speaker 1: lot of Indians would have vacation in the Maldives. Maldivians

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Speaker 1: by ancestry are part Indian in some cases, so there

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Speaker 1: was a lot of closeness between the two. What's changed

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Speaker 1: in recent years is that the current president has taken

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Speaker 1: the country in a decisively more Chinese stance. So part

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Speaker 1: of this means he's accepted a lot of money from China.

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Speaker 1: He has taken away a lot of the Indian influence.

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Speaker 1: So for example, that one of the airports in the

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Speaker 1: Maldives was being developed by an Indian company, that contract

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Speaker 1: was rescinded when the new president came in. So you

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Speaker 1: start to see that the country is pivoting towards China.

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Speaker 1: I think in general India would be okay if other

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Speaker 1: countries have some economic role, but when it starts to

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Speaker 1: tilt too far. Again, given the closeness of how close

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Speaker 1: the Maldives are to India, it becomes a problem. What

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Speaker 1: India's concern is is some of this economic influence going

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Speaker 1: to be translated into hard military assets. And this is

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Speaker 1: where the port comes into play. The port that's under

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Speaker 1: consideration for development right now, it's being marketed as simply

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Speaker 1: a commercial port. But what happens if that's not the case.

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Speaker 1: What happens if China starts to use this port as

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Speaker 1: a as a port of entry or for its v

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Speaker 1: and starts to dock naval ships there and again giving

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Speaker 1: how close to mall that other to India, that's a

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Speaker 1: direct threat. What happens if some of these assets are

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Speaker 1: used as listening stations on Indian communications? Because that's all

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Speaker 1: a lot of intelligence is gathered from a signals intelligence standpoint.

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Speaker 1: So what is for now just proximity or an economic

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Speaker 1: relationship could eventually translate into a very direct problem for India.

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Speaker 1: What's India doing to fight back against China? So first,

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Speaker 1: just to take a step back for a second how

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Speaker 1: the current problem came to be. The current president of

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Speaker 1: the Maldives, what he has done is he's declared a

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Speaker 1: state of emergency. India is using this as an opportunity

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Speaker 1: to paint him as a dictator who's subverting the democratic

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Speaker 1: ideals of the country. That's really the only way India

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Speaker 1: can get into this. For a while they had a

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Speaker 1: problem with this president and what they were hoping for

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Speaker 1: was that the domestic audience would finally come around to

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Speaker 1: see that the way he's running the country is not right,

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Speaker 1: and then the next elections, one of their one of

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Speaker 1: the more pro Indian presidents, can come into power. With

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Speaker 1: the current situation of the state of emergency, which has

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Speaker 1: sparked a constitutional crisis, India is using it to its advantage,

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Speaker 1: which is how they're going to probably play the going forward.

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Speaker 1: They've organized a global campaign of pressure. They've gotten the US,

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Speaker 1: UK in Germany to put pressure on the current government

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Speaker 1: to end the constitutional crisis. And along with that, what

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Speaker 1: India is not officially saying is they actually want him

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Speaker 1: to go. They want him to fall down from power.

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Speaker 1: They want one of their people to comment. Obviously, China

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Speaker 1: doesn't like this, So now you're hearing a lot more

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Speaker 1: pressure from China asking India to stand down, asking India

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Speaker 1: to respect the rights of the Maldivian government so that

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Speaker 1: they don't get involved in an internal affair that India

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Speaker 1: has no business being involved in. So it's not clear

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Speaker 1: yet if India's posture is going to work. But this

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Speaker 1: is India's game plan. They want this president out if

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Speaker 1: it didn't like the way things were going in the Multives.

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Speaker 1: Could China do what it's done in other countries and

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Speaker 1: say we're not going to send tourists there, or we're

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Speaker 1: not going to allow our country's tourists to go there anymore.

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Speaker 1: Does it have that kind of economic leverage? Is that possibility?

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Speaker 1: That is one option. It definitely has that economic leverage.

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Speaker 1: But the more longer term or the more obvious tool

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Speaker 1: that they'll probably use is no longer provide investments, or

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Speaker 1: in the instance those investments in those loans aren't adequately

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Speaker 1: financed to demand some form of retribution. So we look

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Speaker 1: at Sri Lanka as a model for how this could

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Speaker 1: end in the short term or how this could play

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Speaker 1: out in the short term. In Sri Lanka, the Chinese

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Speaker 1: invested heavily in the port of hem Bin Tata, which

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Speaker 1: from the beginning everybody said didn't really make a lot

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Speaker 1: of economic sense. There was not much value in this port.

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Speaker 1: The Indians said this to the Sri Lankans, that you

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Speaker 1: should not be taking this money. They went ahead, they

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Speaker 1: built the port and to this day it's not capable

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Speaker 1: of servicing its debt. So ultimately, what Sri Lanka did

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Speaker 1: is they sold the port to China or to a

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Speaker 1: Chinese owned company. In the process of the negotiation, one

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Speaker 1: of the concerns Indian other countries had was that could

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Speaker 1: this port, like I just mentioned with the Maldas, could

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Speaker 1: this port be used by the Chinese navy? And the

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Speaker 1: Sri Lankan said no, and they structured the deal in

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Speaker 1: a way that could prevent this. But it's still an

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Speaker 1: outstanding question because China partially owns that port, and so

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Speaker 1: this is where the Chinese could take it. They could,

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Speaker 1: like I said, stop the investments, which is a pressure tactic.

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Speaker 1: They could stop tourists as you noted, or they could

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Speaker 1: devote over time, look to convert some of these assets

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Speaker 1: over to it and hold these governments more beholden to

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Speaker 1: their interests and how many people sprawled out on the

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Speaker 1: beach sipping champagne are aware of all this happening around them.

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Speaker 1: Probably not one of them. It feels like there's a

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Speaker 1: massive disconnect like this two moldis I would say, yeah,

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Speaker 1: there is, absolutely And this is what makes this part

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Speaker 1: of the world so fascinating and so critically important, which

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Speaker 1: is when most people look at geopolitics or geopolitical risk,

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Speaker 1: they're the obvious outstanding issues in North Korea, Iran, Russia,

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Speaker 1: et cetera. But what's happening in South Asia, specifically with

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Speaker 1: these small islands and more specifically with port development in

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Speaker 1: and around India is one of the most critical and

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Speaker 1: sensitive things that more people need to start paying attention

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Speaker 1: to because it puts these two very large powers in

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Speaker 1: direct conflict with one another. So how direct is that

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Speaker 1: conflict going to get in the coming years. Well, if

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Speaker 1: you start to see if this starts to go out

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Speaker 1: the way it's currently happening, then you're likely going to

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Speaker 1: see more and more port development. I mentioned Sri Lanka

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Speaker 1: and the port of Hambitata. We were talking about the

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Speaker 1: Mall Dives and the port that's under consideration there. In Pakistan,

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Speaker 1: there's already a port under construction in Guada. That's part

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Speaker 1: of a broader project called the China Pakistan Economic Corridor,

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Speaker 1: which is part of the even bigger belt Road initiative

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Speaker 1: that China or oh Bor as they now call it,

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Speaker 1: or interchangeably call it the belt Road project that China

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Speaker 1: is embarking on. If that port comes to fruition, and

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Speaker 1: you have a port and Maldives and in say Shells,

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Speaker 1: and even one in Bangladesh that's partially being built with

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Speaker 1: Indian assistance, and you have the artificial islands built out,

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Speaker 1: and you have one in East Africa which the Chinese

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Speaker 1: do already control, then you're looking at a scenario where

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Speaker 1: there's greater and greater Chinese control of the Indian Ocean

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Speaker 1: and of South Asia. And again this all feeds back

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Speaker 1: in the broader problem India has, is it being encircled

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Speaker 1: and right now it seems like they are and chilly

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Speaker 1: in the background, India has been cuddling up to Japan,

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Speaker 1: the US, Vietnam, Israel. Not coincidence, surely, no, not at all.

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Speaker 1: We are in the midst of a complete reorientation of

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Speaker 1: foreign policy and foreign relations in South Asia, just as

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Speaker 1: recently as thirty years ago, Indian and the U s

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Speaker 1: did not see eye to eye. Where now in an

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Speaker 1: environment where India is actively and very closely working with

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Speaker 1: the US on sensitive areas like defense cooperation. For example,

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Speaker 1: India is deepening its ties with Vietnam. They're reaching out

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Speaker 1: to Israel, a country that they didn't even have any

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Speaker 1: diplomatic relations with thirty years ago. Japan fits into this,

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Speaker 1: so you're seeing a string of relationships being developed that

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Speaker 1: are more for India's self interest and self preservation, which

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Speaker 1: was not always the case in the past. Just for context,

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Speaker 1: India had a very ideological approach towards foreign policy. It

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Speaker 1: now has it very much of a pragmatic or real

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Speaker 1: politic approach towards foreign policy. So let me ask one

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Speaker 1: more question related to that. If India is aligning with

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Speaker 1: the US and the US is taking a stance right now,

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Speaker 1: I mean, I'd say there's a lot of anti China

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Speaker 1: rhetoric coming from the Trump administration, but you know, in

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Speaker 1: terms of actual actions to contain China in the region,

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Speaker 1: you know, we haven't really seen a lot of concrete

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Speaker 1: moves in the past couple of years, am I, or

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Speaker 1: at least since the Trump administration came into office. Is

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Speaker 1: my impression of that correct that even a US India

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Speaker 1: alliance probably wouldn't be much to stop China from doing

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Speaker 1: what it wants to do. You are correct, and this

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Speaker 1: is kind of This is one of the challenges that

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Speaker 1: face is India and a lot of its foreign policy

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Speaker 1: and a lot of its engagements with the world. The

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Speaker 1: first is the word alliance in Indian domestic politics. Having

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Speaker 1: a formal alliance with America is for now not an option.

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Speaker 1: It's just it's just too politically challenging to become an

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Speaker 1: ally of America. It's not something India's looking at, which

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Speaker 1: is why you'll see the phrase strategic partnership used. It's

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Speaker 1: a proxy for the word alliance or ally. So that's

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Speaker 1: the first. The second is what is the give and

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Speaker 1: take in this partnership. Is India willing to send troops

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Speaker 1: to fight alongside US troops in places like Afghanistan? Probably not.

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Speaker 1: That also means in a future event or in a

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Speaker 1: future military engagement, will India partner along with America? Also

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Speaker 1: probably not. So it's not yet obvious what the two

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Speaker 1: can do together. Yes, India wants more defense cooperation. Yes,

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Speaker 1: they also want more cutting edge weapons, but they're very

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Speaker 1: slow in the weapon procurement process. They're not willing to

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Speaker 1: do certain things. They're not willing to fully join hands

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Speaker 1: with American sercenarios. So this makes the engagement a lot

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Speaker 1: more challenging, which also makes the how do you deal

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Speaker 1: with China part of it not very clear all for

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Speaker 1: a few coral reefs. So let's just close on the

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Speaker 1: issue the Maldives. Rising sea levels. Won't this country be

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Speaker 1: underwater in a few decades. Perhaps so, But between now

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Speaker 1: and then, a lot of damage can be inflicted on

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Speaker 1: India through the Maldives. As I noted, the port is one,

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Speaker 1: but also given the proximity an intelligence base in the

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Speaker 1: Maldives for the Chinese could be very destructive for India.

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Speaker 1: It could be a very strong position in terms of

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Speaker 1: listening in on Indian signals and communication networks. All right,

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Speaker 1: Chaleish Kumar from the Eurasia Group, thanks so much for

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Speaker 1: joining us. Thanks for having me well, Scott. There's a

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Speaker 1: perspective on the Maldives that you don't hear every day.

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Speaker 1: It's like there are two Maldives. There's the tourist brochure

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Speaker 1: honeymoon destination and then there's the great strategic game. That's right.

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Speaker 1: And I have to say, as somebody who lived in

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Speaker 1: Beijing for three years, I think when I was there

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Speaker 1: there was sort of increasing chatter about the Maldives as

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Speaker 1: a tourist destination. I might have even looked at myself

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Speaker 1: what kind of beaches and resorts they had there, And

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Speaker 1: little did I know even at that time that even

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Speaker 1: just a few years later, it would be the focus

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Speaker 1: of such a huge geopolitical tussle between China and India. Well,

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Speaker 1: I have been there, and as I sipped champagne on

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Speaker 1: the beach, not for a moment did I think that

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Speaker 1: the fate of the world might hinge on the sand

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Speaker 1: around me. Benchmark will be back next week. Until then,

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Speaker 1: you can find us on the Bloomberg term, Little, Bloomberg

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Speaker 1: dot Com or Bloomberg app, as well as wherever you

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Speaker 1: listen to podcasts, including Apple Podcasts, Overcast and Stincher. Please

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Speaker 1: take the time to rate and review the show, and

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Speaker 1: you can also find us on Twitter. You can follow

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Speaker 1: me at scott Landman Dan you are at moss under

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Speaker 1: School Echo, and you can find Shaleish on LinkedIn or

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Speaker 1: his employer, Eurasia Group at Eurasia group on Twitter. Benchmark

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Speaker 1: is produced by Toper Foreheads. The head of Bloomberg Podcasts

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Speaker 1: is Francesco Leavey. Thanks for listening, See you next time.