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The Indian Ocean Region - A Framework for Australian Policy OptionsLandmark Study - Future Directions International

The Indian Ocean Region A Framework for Australian Policy Options

IOF_SINGLE PAGE SPREAD_2014_UPDATED BLUE.indd 1 1/12/2014 3:42:51 PM


Foreword........................................................................................................................5

Introduction...................................................................................................................7

Chapter 1Proposed Australian National Objectives in the Indian Ocean Region...................11

Chapter 2Strategic Objectives of the United States in the Indian Ocean Region..................25

Chapter 3Strategic Objectives of China in the Indian Ocean Region......................................41

Chapter 4Strategic Objectives of India in the Indian Ocean Region.......................................57

Chapter 5Strategic Objectives of Japan in the Indian Ocean Region.....................................73

Chapter 6Strategic Objectives of France in the Indian Ocean Region....................................81

FDI: Donors and Sponsors .......................................................................................101

FDI wishes to thank all the individuals and organisations who have so generously contributed their time and expertise to this study.

Contents


4 Landmark Study – The Indian Ocean Region - A Framework for Australian Policy OptionsFuture Directions International



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Foreword

Much of Australia’s external focus has centred on the Pacific, South-East 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.

This strategic importance will only continue to grow in the years ahead because it fronts much of our coastline, including our key minerals and energy regions. It is the location of key sea lines of communication (SLOCs) that are crucial to the global economy. Approximately 35 per cent of all

seaborne traded oil travels through the Strait of Hormuz alone, of which over 85 per cent goes to Japan, China, South Korea and India – all major trading partners of Australia and drivers of global economic growth. The consequences of a prolonged disruption to the SLOCs and chokepoints of the Indian Ocean in terms of economic wellbeing and security would be catastrophic.

The Indian Ocean Region is also one of the least secure regions in the world. The waters of the Indian Ocean are surrounded by mainly poor countries and contain some of the world’s most difficult security challenges, including nuclear, non-conventional (piracy, smuggling, transnational crime, poverty, water, food and environmental) issues, and a potentially emerging security dilemma between India and China. At the same time, it is also the part of the globe that is least developed in terms of its co-operative mechanisms and Australia, in partnership with other states in the region, should strive to make organisations such as the Indian Ocean Rim Association (IORA) more truly inclusive and effective.

This Landmark Study seeks to determine what Australia wants from this region and concentrates on six countries: Indonesia, India, Pakistan, Iran, Saudi Arabia and South Africa.

It is a work in progress that will be regularly updated.

I commend the Study as the time for a considered analysis of Australia’s objectives and policy options in the Indian Ocean Region has never been more appropriate.

Major General the Honourable Michael Jeffery AC, AO, (Mil), CVO MC (retd) Chairman, Future Directions International (Former Governor General of Australia)

Foreword


6 Landmark Study – The Indian Ocean Region - A Framework for Australian Policy OptionsFuture Directions International


Introduction

As Future Directions International noted in its 2012 publication, Indian Ocean: A Sea of Uncertainty-

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.

For all of the above reasons, a detailed knowledge of the evolving nature of the Indian Ocean and its littoral states is essential.

Defining the Indian Ocean Region

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 hydrographic experts. The Indian Ocean’s northern, north-western and south-western extremities are now universally agreed upon: the Persian Gulf, Suez Canal and Cape Agulhas, respectively. With the Southern Ocean now receiving widespread acknowledgment as a discreet body of water located between the Antarctic coast and latitude 60°S – and therefore quite separate to the Indian, Pacific and Atlantic Oceans – the southern boundary of the Indian Ocean can also be considered to be defined.

Some disagreement remains, however, over the eastern extent of the Indian Ocean; a situation complicated by whether maritime boundaries are best defined by major undersea features, ocean currents or geographical co-ordinates. While all non-Australian authorities include all the waters lying between Australia’s southern coastline and latitude 60°S, some place Bass Strait within the Indian Ocean, while others place it in the Pacific. To the north, the Indian Ocean is considered to extend to the western limits of the Arafura Sea, although some see it reaching as far east as Torres Strait. Equally, just how far the Indian Ocean reaches into the waters of the Indonesian archipelago is open to question, although the Strait of Malacca is almost universally agreed upon as a starting point.

With that in mind, and drawing wherever possible on the definitions given by the International Hydrographic Organisation and a general consensus of experts in the field of maritime boundaries, FDI delimits the Indian Ocean by the points below:

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Introduction



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In addition to Australia, FDI’s Indian Ocean studies include the following littoral and island states:

Bahrain Kenya Seychelles Bangladesh Kuwait Singapore Burma/Myanmar Madagascar Somalia Comoros Malaysia South Africa Djibouti Maldives Sri Lanka Egypt Mauritius Sudan Eritrea Mozambique Tanzania France1 Oman Thailand India Pakistan Timor-Leste Indonesia Qatar United Arab Emirates Iran Saudi Arabia Yemen

1 In respect of the départments of La Réunion and Mayotte, the Îles Éparses (the islands of Bassas da India, Île Europa, Îles Glorieuses, Île Juan de Nova and Île Tromelin) and the southernmost islands of the French Southern and Antarctic Lands (Les Terres Australes et Antarctiques Françaises): the Crozet and Kerguelen archipelagoes and Îles Saint-Paul and Amsterdam.



The following states, loosely defined as adjacent to, or dependent on, the Indian Ocean are included as and when events in them directly affect Australia or one or more of the states listed previously:

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

Having defined the parameters of the region, and some of the reasons for its growing importance, this study will now examine some of the options by which Australia may gain a deeper engagement with the region, together with the strategic objectives of five major powers in the region: the United States, China, India, Japan and France.

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9The Indian Ocean Region - A Framework for Australian Policy OptionsLandmark Study - Future Directions International


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Proposed Australian National Objectives in the Indian Ocean Region

The Indian Ocean Region is rich with potential and the opportunity exists for Australia to capitalise on its Indian Ocean frontier by boosting its diplomatic, trade and people-to-people links with emerging regional economies including those of Indonesia, India and the African littoral.

As part of its programme of Chatham House-style research workshops, FDI convened experts and practitioners from a number of backgrounds, including diplomatic, government, defence, academic and the business sectors, to ascertain:

What should be Australia’s national objectives for the Indian Ocean Region? What recommendations would we give to our national policy makers?

This chapter makes a number of recommendations that are based on FDI’s discussions and research. These seek to be realistic rather than aspirational and are based on the recognition that Australia is a middle power of limited resources. They are intended as starting points from which to explore more detailed recommendations. FDI believes that adoption of these recommendations will help Australia to meet its broad foreign policy objectives and its specific needs in the Indian Ocean Region.

It should be noted at this point that these findings are intended to inform an Australian readership. While the document comments on selected countries, no judgement of those countries’ domestic circumstances is implied.

This chapter uses a format which sets out principal objectives (or outcomes) for each country discussed, including Australia. These are numbered according to priority, and are then followed by various enabling objectives (the processes) by which the principal objectives could be achieved. The paper comprises the following sections:

1. Australia’s Paramount National Objective .................................................................... 122. National Objectives for Australia in the Indian Ocean Region ...................................... 12

A Secure, Conflict-Free Indian Ocean Region ....................................................... 12 Deeper Levels of Engagement and Influence in the Indian Ocean Region .......... 13 Greater Business, Trade and Investment Links with the Indian Ocean Region ... 14 The Indian Ocean Region Incorporated More Fully Into Public Policy ................. 14 A Truly Inclusive and Effective Multilateral Regional Institution ......................... 14

3. Specific Objectives for Key States in the Indian Ocean Region ..................................... 15 Indonesia ............................................................................................................. 15 India ...................................................................................................................... 17 Pakistan ................................................................................................................ 18 Iran ....................................................................................................................... 19 Saudi Arabia ......................................................................................................... 19 South Africa .......................................................................................................... 20

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Proposed Australian National Objectives in the Indian Ocean Region 1

CHAPTER



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4. Specific Objectives for Extra-regional States in the Indian Ocean Region .................... 20 United States ........................................................................................................ 21 China ..................................................................................................................... 22 Japan ...................................................................................................................... 22 France ................................................................................................................... 22

Section One: Australia’s Paramount National Objective

Put simply, the paramount national objective for Australia remains the advancement of the security and prosperity of Australia and its citizens in accordance with the values of tolerance, opportunity and political and economic freedom. To that, might also be added a respect for the rules-based international system, a commitment to individual opportunity, the rule of law and the prevention and peaceful resolution of conflicts.

Within that framework, let us now consider possible Australian national objectives for the Indian Ocean Region and its key states. Some of these are already in place, some were charted by the Australia in the Asian Century White Paper and the 2013 Defence White Paper, and others are new, but all are able to help in securing Australia’s paramount national objective.

Section Two: National Objectives for Australia in the Indian Ocean Region

FDI’s programme of research workshops considered what Australia may need to do in order to engage more comprehensively in the Indian Ocean Region and to be more influential within it. FDI recommends that Australia should seek to achieve the following outcomes:

1. A Secure, Conflict-Free Indian Ocean Region .............................................................122. Deeper Levels of Engagement and Influence in the Indian Ocean Region ................ 133. Greater Business, Trade and Investment Links with the Indian Ocean Region ......... 144. An Indian Ocean Region that is More Fully Incorporated Into Public Policy ............. 145. A Truly Inclusive and Effective Multilateral Regional Institution ............................... 14

1. A secure, conflict-free Indian Ocean Region.1.1. Formulate policies that minimise the Indian Ocean Region from becoming an arena of

great power competition and conflict by influencing other, larger, powers.



1.2. Increase defence and security co-operation across the Indian Ocean Region through greater exchanges of defence and police personnel, intelligence-sharing exchanges and joint exercises, with a primary focus on non-conventional security.

1.3. Support the development of a suitable regional maritime security forum with a particular focus on the Indian Ocean’s sea lines of communication, either separate to, or as part of, a re-energised Indian Ocean Rim Association (IORA).

2. Deeper levels of Australian engagement and influence in the affairs of the Indian Ocean Region.2.1. Work with all key stakeholders, including multilateral organisations and bilateral partners,

to foster regional stability within a rules-based international system. 2.2. Develop policies, supported by appropriate levels of foreign aid (Official Development

Assistance) and the strengthening of the Bali Process, that reduce population displacements from the root cause onwards.

2.3. Create overarching Indian Ocean Region units within relevant agencies such as the Department of Foreign Affairs and Trade (now including AusAID) and Austrade in order to ensure the most effective and co-ordinated management possible of Australia’s international relationships.

2.4. Address perceptions of Australia as being too close to US policy by playing a more active role in Indian Ocean Region international organisations.

2.5. Seek membership or observer status in key Indian Ocean regional bodies, including the Indian Ocean Commission (COI), the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Co-operation (BIMSTEC), the East African Community (EAC), the Southern African Development Community (SADC) and the India-Brazil-South Africa (IBSA) Dialogue Forum.

2.6. Encourage Indian Ocean Region countries to establish embassies and consulates in Australia and vice-versa.

2.7. Send, whenever possible, regular ministerial and business delegations to cover all Indian Ocean Region countries.

2.8. Use Australia’s presence in the G-20 as a means of deepening relations with the other Indian Ocean G-20 countries: Indonesia, India, Saudi Arabia and South Africa.

2.9. Engage in annual Track Two and 1.5 Track Dialogues, as appropriate, with South Africa, France, Saudi Arabia, Iran, Pakistan, India and Indonesia.

2.10. Participate in bilateral agreements and multilateral fora that promote maritime security, responsible environmental practices, means of researching and mitigating the impact of climate change, food and water security, energy security, the sustainable management of fisheries and oceanographic capabilities, such as tsunami early warning systems and scientific studies, throughout the Indian Ocean Region.

2.11. Invest additional resources into Australia’s oceanographic science and research centres to enable an increased focus on the Indian Ocean.

2.12. Identify countries in the Indian Ocean Region that might welcome, and benefit from, Australian funding of local educational institutions and teacher training initiatives.




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2.13. Consult with Indian Ocean Region countries to determine what aspects of Australian public diplomacy would be most beneficial and appropriate in their countries.

2.14. Re-invigorate Australia’s public diplomacy in the Indian Ocean Region through soft power initiatives, such as improved and expanded television and radio networks and the secondment of qualified Australian agricultural and environmental management specialists to Indian Ocean Region countries as part of expanded research and science partnerships.

3. Australia’s influence and interests in the region maximised through greater trade, investmentand business links.3.1. Promote enhanced economic co-operation among Indian Ocean states with the objective

of achieving better developmental and stability outcomes, either within the framework of IORA or as a new, separate initiative.

3.2. Encourage frequent visits to Indian Ocean Region countries by Australian business delegations.

3.3. Increase the number of bilateral air services agreements between Australia and Indian Ocean Region countries with as generous passenger and cargo capacity entitlements as possible.

4. The cultures and countries of the Indian Ocean Region incorporated more fully into relevantAustralian public policy.4.1. Encourage Australians to see their country as an Indo-Pacific country; a truly “two-ocean”

nation. 4.2. Define and develop an Indian Ocean Studies body of knowledge to be included in the

educational curriculum at the secondary and tertiary levels across Australia. 4.3. Fund linguistic programmes in key Indian Ocean Region languages, including Hindi/Urdu,

Bahasa Indonesia, Bahasa Malaysia, Farsi, Arabic, French and Portuguese, to complement the language initiatives identified in the Australia in the Asian Century White Paper.

4.4. Promote greater commercial and people-to-people links, cultural and educational exchanges and events and bilateral air services agreements between Australia and Indian Ocean Region countries.

4.5. Support and encourage greater participation in the New Colombo Plan.

5. A suitable multilateral regional institution that successfully engages all regional countries andkey external stakeholders to facilitate co-operation across the full range of issues in the IndianOcean Region.5.1. Investigate the expansion or replacement of IORA, while Australia occupies the role of

Chair, to make it a more inclusive, acceptable, relevant and effective Indian Ocean Region multilateral institution that is capable of addressing important non-traditional security threats, such as piracy and environmental issues.


5.2. Establish a multinational taskforce utilising a whole-of-government approach to further the common good by fighting piracy and conducting oceanographic and scientific research and educational programmes.

5.3. Work with the other IORA states as part of a long-term “generational” strategy to address non-threatening issues and build confidence and a sense of the Indian Ocean as a discreet region, rather than a series of separate sub-regions.

5.4. Lobby for the inclusion of Pakistan, Saudi Arabia and Burma/Myanmar in IORA, as participating member states.

5.5. Encourage the European Union, as a key external stakeholder in the region, to join IORA, or its possible replacement, as a dialogue (observer) partner.

5.6. Engage in ongoing dialogue with key stakeholders, including the United States, the United Kingdom, France, China, Russia, Japan, South Korea and the European Union to ensure that regional policies are as synergistic as possible.

5.7. Formulate policies that better publicise the purposes and achievements of IORA.

Section Three: Specific Objectives for Key States in the Indian Ocean Region

Excluding Australia, there are six Indian Ocean littoral states of consequence that are developing regional aspirations: India, Indonesia, Pakistan, Iran, Saudi Arabia and South Africa. Australia needs to reconsider how it can effectively work with these countries to further enhance regional co-operation and security. In all cases, the overarching objective is to enhance the social and economic conditions of local populations through free trade and appropriate aid initiatives.

Indonesia .................................................................................................... 15 India ............................................................................................................ 17 Pakistan ...................................................................................................... 18 Iran ............................................................................................................. 19 Saudi Arabia ............................................................................................... 19 South Africa ................................................................................................ 20

Indonesia Objectives for Australia’s Relationship with Indonesia:

1. A stable and prosperous Indonesia that is supportive of Australia’s interests and security.1.1. Support Indonesia in its economic and social development by adopting policies that

dovetail with Indonesia’s own national Pancasila principles, recognising the changes that are already taking place in its population size, economic growth and more confident outlook.




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1.2. Inject additional resources to further boost bilateral trade, investment and foreign development assistance with a focus on aiding Indonesia to improve its institutional structures and governance as a means of reducing country risk levels and increasing Indonesia’s attractiveness to Australian investors.

1.3. Enhance bilateral defence and security co-operation, particularly in the maritime domain. 1.4. Further to the above, assist the Indonesian Navy in developing an effective capacity to

reach an appropriate presence in the eastern Indian Ocean in the shortest time possible. 1.5. Investigate the possibility of calibrating official travel warnings in such a way as to

maximise connectivity between Indonesia and Australia while still alerting travellers to potential threats.

2. Indonesia to play a greater role in the Indian Ocean Region in economic, social, environmentaland political matters.2.1. Support Indonesia’s role as a leader in ASEAN.2.2. Support attempts by Indonesia to resolve land and maritime boundary delimitation

differences between itself and Malaysia and Singapore, as fellow Indian Ocean littoral states.

2.3. Support initiatives from Indonesia to engage with India and China to reduce any possible tensions between the two potentially competing regional states.

2.4. Support any Indonesian attempts to resolve the South China Sea territorial disputes. 2.5. Aid the Indonesian Navy, particularly the Hydro-Oceanographic Office (Dinas Hidro

Oceanografi), in preparing more detailed and up-to-date maps of the Indian Ocean. 2.6. Assist the Indonesian Government in modernising the Metrological Service field stations

that monitor weather conditions in the Indian Ocean, and with training to enhance the competency of specialist and technical staff members.

2.7. Support joint research that enables Indonesia to more effectively confront its future food and water security challenges.

2.8. Allocate more resources to Indonesia to further aid it in its efforts to address issues of maritime security, fisheries management and unregulated population movements, particularly in the Timor and Arafura Seas.

2.9. Support Indonesia, whenever possible, to assume the role of Chair of IORA, following Australia.

3. An Indonesia that continues successfully to confront extremism.3.1. Acknowledge and continue to support Indonesia’s contribution to moderating extremist

groups. 3.2. Reinstate Australian funding of educational institutions in Indonesia.


4. Greater bilateral connectivity and improved images of Indonesia in Australia and of Australia inIndonesia.4.1. Foster more people-to-people and committed sister-state/city level partnerships through

bilateral programmes emphasising business, educational, cultural and sporting exchanges and dialogues.

4.2. Reinvigorate Australian/Indonesian Studies and appropriate linguistic and cultural programmes in both countries’ education curricula.

4.3. Conduct joint research into environmental pollution, including the prevention and control of wildfires.

4.4. Act, whenever possible, to reduce perceptions in Indonesia of Australia as a moralistic, overbearing and lecturing neighbour.

India Objectives for Australia’s Relationship with India:

1. A secure, stable and prosperous India.1.1. Develop long-term relationships with key Indian stakeholders that encourage India to

adopt policies that enhance Australia’s interests. 1.2. Identify common issues and, where relevant, develop common approaches to outcomes

relevant to the G-20, East Asia Summit and IORA. 1.3. Prioritise negotiations for the Australia-India Comprehensive Economic Co-operation

Agreement. 1.4. Foster sister-state/city level partnerships through bilateral programmes emphasising

business, educational, cultural and sporting exchanges. 1.5. Explore opportunities for the further enhancement of defence and security co-operation.

2. The resolution of India’s food, water, population and energy challenges.2.1. Assist India in its efforts to resolve the above challenges by building upon its capacity to

develop sustainable food and water management practices through the provision of educational, training and technical assistance, as requested.

2.2. Share research and other innovative developments that improve agricultural practices and output.

2.3. Conduct joint research on wild fire prevention and control. 2.4. Conduct joint research in regard to nuclear energy. 2.5. Engage with India in regional and international fora that address maritime security and

fisheries management issues.




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3. India to continue adopting global and regional postures that are both non-confrontational andcommensurate with its size, population, economy and location.3.1. Reiterate Australia’s ongoing support for Indo-Pakistani and Sino-Indian dialogues or other

suitable measures to improve relations between those countries and determine if there were some way in which Australia might be able to make a meaningful contribution.

3.2. Explore with India the accession of Pakistan, Saudi Arabia and Burma/Myanmar to IORA, as full members.

3.3. Support India’s bid for permanent membership of the United Nations Security Council as part of a broader strategy for a modest enlargement of the UNSC.

3.4. Promote multilateral approaches that include India – and China – to issues such as piracy and natural disasters in the Indian Ocean Region.

Pakistan Objectives for Australia’s Relationship with Pakistan:

1. A Pakistan with greater internal stability, strong democratic institutions, a responsible andindependent judiciary, media freedom, educational equality and improved income generationcapacity, which is better able to address its internal challenges.1.1. Develop a clearly articulated Pakistan policy that addresses Pakistan as a separate entity,

rather than as part of a collective “India-Pakistan” policy. 1.2. Foster deeper bilateral ties and economic openness to facilitate opportunities for

Australian investment. 1.3. Build upon Pakistan’s capacity to develop sustainable food and water management

practices through the provision of enhanced training and technical and research assistance, particularly in the fields of energy and agricultural expertise, and the identification of niche areas in which Australia can contribute to the optimisation of Pakistani agriculture.

1.4. Support Pakistani efforts to counter extremists through improved educational, social stability, health and employment opportunities and enhanced defence and security co-operation, in addition to intelligence sharing and law enforcement liaison programmes.

1.5. Make greater use of 1.5 or second-track dialogues with appropriate non-governmental and civil society organisations, including enhanced academic links and exchanges.

2. A more stable external security environment, so that Pakistan can focus more on its internalchallenges.2.1. Facilitate, if and where possible, constructive Pakistan-India dialogue and confidence-

building measures to address existing strategic tensions. This might best be done in the context of the South Asian Association for Regional Co-operation (SAARC), of which both countries are already members and where Australia has observer status.

2.2. Support Pakistan-Afghanistan dialogue and strategic co-operation.


2.3. Encourage other powers, such as the United States, China and India, to ensure that their Pakistan policies are consistent with fostering a broad, co-operative framework.

Iran Objectives for Australia’s Relationship with Iran:

1. A stable and prosperous Iran.1.1 Reduce tensions between Iran, the West and other regional states by promoting dialogue,

continuing to support IAEA non-proliferation initiatives and rewarding Iranian compliance with IAEA nuclear non-proliferation regulations by advocating the appropriate further review of sanctions and exploring ways to facilitate Iran’s reintegration into the global economy.

2. An Iran that is able to successfully address its economic, social and environmental challenges.2.1. Aid Iran, as appropriate, to address its food and water security issues.2.2. Engage with Iran in regional and international fora that address maritime security and

fisheries management issues. 2.3. Foster sister-state/city level partnerships/relationships through bilateral programmes/fora

emphasising educational, cultural and sporting exchanges.

Saudi Arabia Objectives for Australia’s Relationship with Saudi Arabia:

1. A stable, moderate and socially-inclusive Saudi Arabia that embraces regional stability initiatives.1.1. Reinforce Saudi contributions to peace, stability and security initiatives in keeping with the

Kingdom’s focus on deeper international engagement. 1.2. Lobby the Saudi authorities to streamline the issue of business visas to facilitate greater

opportunities for Australian investment in Saudi Arabia, particularly in the energy, construction, health and education sectors.

1.3. Encourage Saudi international engagement that is broader than support for educational institutions.

1.4. Promote the inclusion in IORA of Saudi Arabia as a full member. 1.5. Support the Saudi authorities in any efforts they may make to promote greater equality

and social inclusion. 1.6. Support the continuation of the House of Saud as a stable and moderating influence

within the Saudi domestic context. 1.7. Facilitate long term Saudi investment in Australian agricultural production.




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South Africa Objectives for Australia’s Relationship with South Africa:

1. A secure, stable and prosperous South Africa.1.1. Support South Africa through the provision of assistance and other relevant institutional

mechanisms to address its economic, social and environmental challenges. 1.2. Commence negotiations for an Australia-South Africa Free Trade Agreement, which, if

successful, could be used as a “trade diplomacy” springboard to a larger FTA with the Southern African Customs Union.

2. Encourage South Africa to take on a greater regional leadership role while promoting thebenefits of economic openness and the rule of law.2.1. Examine the range of military, intelligence and training capabilities required to enable

South Africa to provide an optimal level of regional security and in what ways, if any, Australia could contribute.

2.2. Make greater use of Track Two and 1.5 Track diplomacy to help build greater awareness of, and confidence in, Australia at official levels in South Africa.

2.3. Explore ways in which South Africa might benefit from Australian agricultural and water management expertise and opportunities for Australian businesses to invest in a wider range of sectors in the South African economy.

2.4. Conduct joint research in wild fire prevention and control. 2.5. Enhance fisheries’ management and disaster response capabilities to further engage with

South Africa in regional stability operations in southern and eastern Africa and in the south-western quadrant of the Indian Ocean.

2.6. Work with South Africa and France to create a formalised southern Indian Ocean version of the France-Australia-New Zealand (FRANZ) disaster response arrangements that operate in the Pacific Ocean.

2.7. Support greater South African involvement in IORA and other Indian Ocean fora, particularly in terms of Africa-related issues and as a means of demonstrating independent Australian policies in the region.

2.8. Foster sister-state/city level partnerships/relationships through bilateral programmes and fora emphasising business, educational, cultural and sporting exchanges.

Section Four: Specific Objectives for Extra-regional States in the Indian Ocean Region

In looking at Australia’s national objectives in the Indian Ocean Region, it is necessary to consider four important extra-regional actors that have significant national interests in the region: the United States, China, Japan and France.

In addition to being Australia’s third-largest trading partner, the United States remains, and will continue to be, this country’s leading security partner. Through its security presence, Washington is also the guarantor of the global commons and effectively underwrites regional security, particularly


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in the maritime domain. The island of Diego Garcia, located in the British Indian Ocean Territory and leased from the United Kingdom, is a vital component of US global strategic reach.

China – Australia’s largest trading partner – is a substantial economic actor in the Indian Ocean Region. It has a vital interest in the security of the region’s sea lines of communication and has invested heavily in large-scale infrastructure projects in such key locations as Gwadar, Pakistan and Hambantota, Sri Lanka.

Australia has described Japan as its greatest friend in Asia. Apart from being Australia’s second-largest trading partner, Japan shares many of Australia’s values, such as democracy, free trade, and the preservation of the maritime commons. Japan remains a major economic and potential military power with considerable investment in Indian Ocean littoral states, such as Burma, Bangladesh, India and countries in eastern and southern Africa.

France is a longstanding and likeminded partner that has around one million French citizens living in the Indian Ocean départments of La Réunion and Mayotte, very large Exclusive Economic Zones (due in no small measure to its territories in the Indian and Southern Oceans), and military bases at La Réunion, Djibouti and Abu Dhabi. The 2012 Australia-France Joint Statement of Strategic Partnership formalises existing Franco-Australian co-operative efforts and identifies future areas of co-operation across the relationship. While the main focus is on Europe and the Pacific, the agreement nonetheless makes special mention of the French Indian Ocean territories. Natural emphases for enhanced bilateral relations in an Indian Ocean context are improved defence and security co-operation, and resource and disaster response management. Such engagement should also be supplemented by increased people-to-people, scientific, educational and cultural linkages. Working in concert with France also offers great potential as a springboard for deeper relations with South Africa and other regional states, particularly mineral-rich, French-speaking, Madagascar. It may also offer a useful platform for closer co-operation in largely Francophone western and central Africa that may be of value to Australian diplomats, NGOs and companies active in those areas.

United States Objectives for Australia’s Relationship with the US in an Indian Ocean Context:

1. The continued economic, defence and security engagement of the United States in the IndianOcean Region.1.1. Contribute to maritime security initiatives in the Indian Ocean Region, particularly those

pertaining to sea lines of communication, anti-piracy and counter-terrorism. 1.2. Emphasise, as appropriate, the beneficial aspects of US policy and involvement in the

Indian Ocean Region.




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China Objectives for Australia’s Relationship with China in an Indian Ocean Context:

1. A China that continues to contribute to regional security as a responsible stakeholder.1.1. Acknowledge and support China’s anti-piracy efforts in the Indian Ocean.1.2. Work to encourage greater dialogue and co-operation between China and India in the

Indian Ocean Region. 1.3. Support increased Chinese participation in Indian Ocean fora, with a particular emphasis

on multilateral economic, defence and security initiatives. 1.4. Encourage China to more fully use the soft power aspects of its growing regional presence

as a way of reducing any misunderstandings surrounding its intentions in the Indian Ocean Region.

2. A reassured Beijing that recognises that Australia’s commitment to the US alliance is not aimedat containing China.2.1. Enhance defence and security co-operation with China, particularly in terms of maritime

security and anti-piracy patrols. 2.2. Use multilateral institutions to assuage Chinese fears of containment or US dominance.

Japan Objectives for Australia’s Relationship with Japan in an Indian Ocean Context:

1. An expanded and re-invigorated engagement with Japan in the areas of maritime security,defence-co-operation and humanitarian assistance and disaster relief operations.1.1. Work with Japanese naval personnel in counter-piracy and other security operations in the

Indian Ocean region. 1.2. Utilise Japanese maritime assets and expertise in managing humanitarian assistance and

disaster relief operations. 1.3. Work with the Japanese Navy in maintaining the maritime commons, access to sea lanes of

communication and rights of passage.

France Objectives for Australia’s Relationship with France in an Indian Ocean Context:

1. A deeper strategic engagement with France in the spheres of business, tourism, defenceco-operation, maritime security, disaster relief operations, scientific research and fisheriesmanagement in the southern Indian Ocean Region.1.1. Expand the regular Australia-France political-military and senior officials’ dialogues to

include discussions of the Indian Ocean Region as an integral component.


1.2. In keeping with the 2012 Australia-France strategic partnership agreement, support the increased engagement of French territories in the Indian Ocean with IORA.

1.3. Boost business, tourism, education and people-to-people links by promoting the benefits of direct air services between Perth and La Réunion.

1.4. Engage with France in more frequent Track Two and 1.5 Track Dialogues across as wide a spectrum of Indian Ocean issues as possible.

1.5. Introduce, with France and South Africa, a formalised southern Indian Ocean version of the France-Australia-New Zealand (FRANZ) disaster response arrangements that operate in the Pacific Ocean.

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Strategic Objectives of the United States in the Indian Ocean Region

Summary

The strategic objectives of the United States in the Indian Ocean region reflect a paramount national objective that is underpinned by a broader foreign policy outlook. That outlook is, in turn, influenced by a number of core regional and country-specific objectives, by Washington’s perception of what might be threatening those objectives and how it seeks to curtail or eliminate those threats.

As the location of much of the world’s energy supplies, key trade routes, the incipient Sino-US and Sino-Indian rivalries, an Iranian nuclear programme of uncertain purpose, Islamist extremists, and a number of failed and failing states, the Indian Ocean region will, over the coming decade and beyond, command the attention of US policymakers and strategists in a way that will be matched by few other regions. At this point, however, exactly what capabilities will be allocated to the region still remains unclear.

US foreign policy, particularly as it relates to the Indian Ocean region and, especially India, Pakistan and China, can be summarised in the list below.

In determining the drivers of US foreign policy, three important points must be noted:

US domestic and foreign considerations can be highly interlinked and foreign policyannouncements can sometimes be designed primarily with a domestic audience in mind.

The current economic circumstances of the US will have ramifications for foreign anddefence policy for some time to come.

Despite the increasing importance of the Indian Ocean region, no single region-wide policyexists as yet. It is a state of affairs which is not confined to the United States.

In essence, the paramount national objective of the United States is to maintain its status as the world’s leading economic and military power. That implies, of course, a continuation of the existing international order which, despite its limitations and failings, has generally served the international community well since 1945. Even though economic circumstances may have necessitated a greater emphasis on partnerships and the sharing of burdens, and placed greater constraints on its military, the US remains the most powerful country in the world. While Washington is not opposed to sharing more of the international space with other, rising, powers, it is not about to give up its status as the world’s sole superpower and any notions of US decline, even in a relative sense, are premature.

After identifying the overall strategic objectives of the United States, this chapter sets out the principal objectives of its relationships with what are key regional states for the US: China, India, Pakistan, Afghanistan, Iran, Indonesia and Australia.

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Strategic Objectives of the United States in the Indian Ocean Region 2

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Paramount National Objective

Maintaining the economic and military pre-eminence of the United States within the existingrules-based international order.

Primary Foreign Policy Objectives

Ensuring continued US primacy in the international system. Using diplomacy, co-operation, partnerships and foreign aid to ensure support for US

interests and the international system in general. Ensuring the security of US interests and assets. Preventing “rogue states” from threatening US interests. Reducing or eliminating the activities of extremist groups or individuals and any foreign

support that they may receive. Ensuring the continued availability of, and access to, resources and markets.

Indian Ocean Objectives

Ensuring that US objectives are not jeopardised by states such as China and Iran. Preventing new or established extremist groups from harming the interests of the US or

allied Indian Ocean littoral states. Ensuring that US policy is supported by a network of diplomatic relations with which to

secure trade relations, military co-operation and influence. Ensuring continued access to markets, energy supplies and raw materials. Ensuring the security of maritime chokepoints and sea lines of communication (SLOCs).

Specific US Foreign Policy Objectives for Key Actors in the Indian Ocean Region

China

Working with China as appropriate to maintain regional and global stability (but not at theexpense of US interests or strategic dominance).

Encouraging Beijing’s continuing commitment to the international system which hasgenerated China’s economic rise.

Engaging in confidence building measures with the Chinese military, but also acting tocontain Chinese military expansionism (actual or perceived).


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India

Deepening strategic ties with India and supporting it as a counterweight to China. Encouraging India as a pro-Western regional power. Encouraging India’s “Look East” policy and greater involvement with East Asia. Ensuring Indian support for a continued US presence in the region. Gaining increased access to India’s markets and banking sector.

Pakistan

Supporting secular, democratic governments to ensure a stable, more prosperous Pakistanwith a pro-US outlook.

Working with Islamabad to:o Deny Pakistan as a base for extremist groups.o Disrupt, dismantle and defeat such groups, including the al-Qaida core.o Increasing the ability of the Pakistani Government to meet the needs of its citizens,

thereby reducing the appeal of extremists. Preventing extremists from gaining access to Pakistan’s nuclear arsenal. Ensuring that extremists in Pakistan are unable to undermine the work done by the US in

Afghanistan (and vice-versa).

Afghanistan

Supporting Afghanistan as it attempts to make the transition to a stable, democraticeconomically successful state.

If necessary, keeping Afghanistan as “quarantined” as possible to prevent instability fromspreading to neighbouring states.

Iran

Preventing the development of an Iranian military nuclear capability while working towardsa mutually acceptable outcome that meets Iran’s wish for a civil nuclear programme and allinternational obligations and safeguards.

Continuing the process of diplomatic engagement with Iran to address such common threatsas the extremist Islamic State militia.

Indonesia

Encouraging Indonesia as a bulwark against Chinese expansion in South-East Asia. Supporting Indonesia’s growing role as a regional leader and using it as a possible means of

securing influence in South-East Asia and the Muslim world.




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Securing the sea lines of communication through the Indonesian archipelago, particularly insupport of important US allies such as Japan, Taiwan and South Korea.

Australia

Maintaining Australia as a key regional partner and ally. Working with Australia to address threats to the international system. Ensuring that Australian policies are sympathetic to US interests, particularly in regard to

China.

US Interests in the Indian Ocean Region

The overarching US aim for the Indian Ocean region is to be the most significant strategic power in the region, rather than necessarily dominating it. The United States aims – as former Secretary of State Hilary Clinton noted – to be pushed out of East Asia by nobody; that sentiment will apply equally to the Indian Ocean Region, even if policy approaches to the region are still being worked through and force levels and budgets are currently uncertain. The US may leave Afghanistan, for instance, but it will not leave the region because it is too important to the United States’ national interests (and neither do the majority of states in the region want it to leave).

On the other hand, creating a single Indian Ocean policy would be immensely difficult, particularly in view of the many different agencies and bureaux that are responsible for various aspects of policy in the region. There is a certain degree of inertia to be overcome if an Indian Ocean policy as such is to be crafted. An all-encompassing Indian Ocean policy thus looks to be some way off.

Other key Indian Ocean objectives are to maintain the international order in a way which best suits the US, to internationalise the protection of that international order and to ensure the free flow of trade across the region’s sea lines of communication and through its chokepoints.

There are differing schools of thought when it comes to thinking about the importance to the strategic objectives of the United States of the Indian Ocean Region in the years to 2025.

One contends that the region will become more important to the US because of its continuing links with the Middle East, the uncertain yet evolving relationship with Iran and the need to maintain strategic pre-eminence in the face of increasing Chinese activity in the region. In the event of a conflict with China, the Indian Ocean would certainly assume great significance, particularly in terms of supply lines.

Another says that much of the Indian Ocean Region will actually become less important to the United States after the 2014 Afghanistan drawdown, even more so if relations with Pakistan are allowed to weaken. It may then become easier for other states to challenge the pre-eminence of the US in the Indian Ocean, particularly in regard to its naval primacy; unless, of course, US sovereignty or security is directly threatened. In terms of what foreign involvement it does have, the US will strive to shift its focus from the Afghanistan-Pakistan theatre to South-East Asia. Even so, the Middle East and India will continue to command Washington’s attention, however; the former due to the


implications of the continuing unrest there, and the latter for its potential as a counterweight to China, even if it is not completely clear just how close India wishes the relationship to be.

A third hypothesis offers an interesting synthesis of the above two schools of thought. That is that, while the region will continue to attract the attention of policymakers in Washington, the actual resources allocated to it will not increase and may even be reduced. Despite an increasing focus on the Indian Ocean region in the future, the movement of new, major assets into the area does not seem likely. Modern technology aids such thinking, as it is no longer necessary to have large numbers of bases in the region, at least in order to monitor it. Greater use will be made of UAVs to conduct maritime surveillance, for instance, while a judicious use of drone strikes might be made in support of US allies.

The above considerations aside, it appears that there will be a greater use of multilateral arrangements by the US, which will see Washington looking to work closely with selected partners on particular issues. This also reflects the (current) awareness that it is not feasible – or perhaps even desirable – for the US to be involved in all issues. Similarly, the US could be confronted in the near future by issues of sustainability. Is it approaching the point at which it is no longer able to sustain its strategic interests? The positioning and nature of US assets and capabilities in the Indo-Pacific region is likely to change and Australia may be in a position to benefit from that. The US may yet be forced to scale back its presence in the region and, if so, it might then look to other partners, such as India, Indonesia and Australia, to play a greater role in the region’s security.

As such, there may be a possible shift of foreign policy resources to East Asia by 2025. If that were to happen, it would be a continuation of the recognition that began nearly a decade ago, of the increasing importance of the Asia-Pacific region. The transfer of staff and resources from European duty stations to key states in the Asia-Pacific (and Indian Ocean) regions would be a natural consequence of such a shift. While the Global Force Posture Review aimed for a more flexible range of US assets in the region, a future withdrawal of the Fifth Fleet would be highly unlikely. There may, however, be changes to the locations and nature of US bases in the region, with more of an emphasis on logistics hubs – so-called “hub and spokes” arrangements, rather than actual bases.

In Central Asia and the Middle East, especially, there is the potential for a convergence of US, Chinese and Indian interests. All three powers want stability in the region. China is especially mindful of unrest and Islamist activity in Xinjiang and neighbouring states. China is therefore probably quite nervous at the prospect of a post-US Afghanistan. None can afford for Pakistan to collapse and become a failed state and want any instability to jeopardise their energy supply lines. Thus, in the Middle East and Indian Ocean, the national objectives of all three countries converge to a large degree: all want unimpeded access to shipping lanes, freedom of the global commons, maintenance of the rule of law, and an end to extremist violence.

They diverge in the South China Sea, however, largely because of its proximity to China; neither India nor the US has a direct territorial interest in the South China Sea (although US allies do). Nevertheless, as a leading flashpoint, this is one of the more likely locations where the US and Chinese maritime capabilities may come face to face in the future.

Food and water security issues are increasingly on the minds of US policymakers and this will continue to raise awareness of countries in the Indian Ocean region. Although foreign assistance




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programmes have come under budgetary pressures, food and water security projects might be among the last to be affected and will keep the US involved in the Indian Ocean region.

Defence and Foreign Policy Implications of the US Economic Situation

Straitened economic circumstances have led to a greater emphasis in the US on domestic issues, combined with a renewed vigour for finding diplomatic solutions in preference to military ones. It will not mean an end to US foreign involvement, but the American public has little appetite for further expeditionary ventures. Precision air strikes and unmanned aerial vehicles will continue to be the preferred methods of applying US military might.

One question worth considering is, if there were a Republican presidency from 2016 onwards, would it really have any different foreign policy options? In all probability, they would not be markedly different, but there is always the possibility that a Republican president may choose to adopt a more inward-looking foreign policy, even though that would be at odds with the Republican Party’s traditional interest in foreign affairs.

There is, so far, little direct connection between the recent budget cuts (sequestration) and spending on defence, which has, to date, generally been secure. The cuts made thus far have largely been confined to peripheral projects; core capabilities are, as yet, largely unaffected. A case could even be made that a large bureaucracy, such as the Department of Defence, might benefit from the greater efficiencies enforced by the budget cuts. That may change in the future, though, as subsequent tranches of spending cuts are required. In addition to new platforms and potentially reduced capabilities – the number of aircraft carrier strike groups may be reduced from 11 to eight, for instance, leading to a choice between capacity and capability, as Defence Secretary Chuck Hagel put it – another possible casualty of future budgetary pressures could be exchange programmes.

One consequence of any future funding cuts will almost certainly be a greater emphasis on partners doing more. The US will, therefore, have higher expectations of its security partners. The Australian-led International Force for East Timor, operation in East Timor, in which the US played a background role, may offer a template for the future.

There are certain inherently positive qualities in the US economy, which continue to give optimism for the future. Among these are the resilience of the American people and their capacity for innovation and renovation. Also important are simple demographics: the relatively young age structure of the US population will enable the workforce to keep growing, albeit at a slower pace than in the past. Corporate profits are still high, but while uncertainty remains, they are not being re-invested. If Congress and the White House can impart a greater sense of certainty, the nascent economic recovery should continue apace.

It is also worth remembering that the US system is one of checks and balances. Tension between the different levels of government is a feature of the system, which was specifically designed to force compromises on the different branches of government. The debt ceiling, budget sequestration and partisan wrangling are perhaps best seen in that light.


The US economy still faces many challenges. Creating more skilled, value-adding jobs and improving education are crucial and the US economy will require this in the future. The National Export Initiative is one attempt at boosting the economy (doubling exports within five years), but the difficulty is that it is aimed at producing short-term results when the education and skills required to fully achieve that will take much longer for the workforce to acquire. Unemployment and the need for up-skilling and/or re-skilling are other problems. There may be a growing awareness of the benefits of linking diplomacy and business, as well as the future importance to the US economy of the economies of the Indian Ocean and many of the BRICS countries: Brazil, India and China.

It is tempting to draw parallels between the United States’ current circumstances and those of the post-Vietnam War era. The Vietnam conflict was a significantly more traumatic experience that dented the national psyche at a time of economic difficulties. By 1984, however, a great measure of confidence had been restored.

Just what degree of confidence can be restored five years from now is hard to predict but, if the past is any guide, few Americans in 1979, confronted with economic malaise at home and Cold War competition with the Soviet Union abroad, would have predicted just how much how much more confident they and their compatriots felt just five years later.

This time around, while unemployment now is still higher than it was in 1979, after peaking at ten per cent in October 2009, it had receded to 5.8 per cent by October 2014.1 While that figure is almost equal to the 6.0 per cent recorded in August 1979, it is still well below the rates of over ten per cent that were the norm for much of 1982 and 1983. As is also the case now, those figures had dropped by 1984 as economic confidence recovered, despite the loss of large numbers of jobs in the industrial sector. Equally, inflation in 2014 is not at all the problem that it was in 1979. At a rate of 1.7 per cent in September 2014 (the most recent period for which inflation data are available, as measured by the Consumer Price Index), as against 12.2 per cent in September 1979, inflation clearly does not need taming. This is also partly reflected in interest rates. In 1979, interest rate settings were geared towards controlling inflation and were subsequently ratcheted up to double digits in 1980. In 2014, even with the end of quantitative easing, rates remain low to help facilitate growth and the Federal Reserve, like the Administration, is far less concerned by the prospect of creeping inflation than it is by a lack of growth.

Importantly, corporate America is still making a profit. In 2013, for instance, corporate earnings had risen at an annualised rate of 20.1 per cent since the end of 2008.2 According to the US Bureau of Economic Analysis, despite some hiccups, Gross Domestic Product continues to grow, increasing at an estimated annual rate of four per cent in the second quarter of 2014 and going some way towards offsetting the 2.1 per cent decrease recorded in the first quarter (the economy’s worst performance in three years). Small ups-and-downs notwithstanding, these are not numbers from a power in terminal decline.

In contrast to 1979, the wars in Afghanistan and Iraq, while difficult, are not affecting the national psyche in the way that the Vietnam War did. Now, too, the US has deep economic links with its apparent rival, China, which was not the case with the Soviet Union. Confronted by any number of

1 Unless otherwise noted, all economic statistics are from the US Bureau of Labour Statistics. 2 Schwartz, N.D., ‘Recovery in US is Lifting Profits, but Not Adding Jobs’, New York Times, 3 March 2013.




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domestic pressures – not the least of which is demography – the continued economic rise of China is by no means assured. In terms of military technology, the United States remains far more advanced than any of its possible competitors. Beijing may be Washington’s future rival but, sequestration side-effects aside, its military capabilities still lag behind the US – a good 20 years, by some estimates. The Soviet Union, on the other hand, was seen as a military peer competitor until the mid-1980s. The gap may yet turn out to be moot as, in the future, the ability to deny maritime access may compensate for capability shortfalls.

In any event, regardless of the validity or otherwise of any parallels with the recent past, the ability of the United States to renew itself is undeniable. As the above examples show, it has done so in the past under different, but equally trying circumstances. It should not be ruled out now, even though it may take longer than on previous occasions. While competitors may be growing at faster rates and challenges certainly remain, many of the underlying fundamentals of the US economy are positive, thus enhancing Washington’s ability to fund its defence and foreign policy objectives – possibly, perhaps, more efficiently than in the past.

The above is a revised version of an FDI Workshop Report, originally published 29 September 2011.

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The following briefly summarises aspects of US involvement with key countries in the Indian Ocean Region.

China

The question of how to cope with the rise of China is at the core of much of US policy in the Indo-Pacific region. Looking out to 2025, this is likely to continue to be the case. Exactly how the US might adjust to having to share more of the international space with a rising China, and what the US actually views as being China’s legitimate interests in the Indian Ocean and Asia-Pacific regions, remain equally uncertain. If not managed well, friction could result from China’s military build-up and increased assertiveness regarding Taiwan, Japan, South Korea and the South-East Asian countries, particularly in the East and South China Seas. For the US, this reinforces the need to maintain its partnerships with Australia, Japan, South Korea, Singapore and Vietnam. On the other hand, because China and the US (and India), all have too much to lose from a conflict in the Indian Ocean, efforts – although sometimes clumsy – will be made to manage differences and prevent them from escalating.

Given that China’s interests in the Indian Ocean region (and beyond) are, in most instances, broadly the same as those of other countries, the potential for future co-operation therefore exists and the US is interested in pursuing it, as confirmed by the invitation to the People’s Liberation Army Navy to participate, for the first time, in the 2014 Rim of the Pacific (RIMPAC) exercise. Co-operation builds confidence and, if nothing else, is cheaper than doing it alone.


But, China may be unwilling to commit too deeply. While it wants the region’s sea lanes to be secure and is acutely conscious of its vulnerability in that regard, there are few, if any, signs that Beijing would be willing to act as guarantor of the global commons in the way that the US does. In many cases, just getting China to discuss the issues can be difficult, although counter-piracy co-operation in the Gulf of Aden, for instance, proves that Sino-US co-operation on regional strategic issues is possible. Equally, China’s involvement in such other undertakings as the removal of chemical weapons from Syria, the search for the missing Malaysia Airlines flight MH370 aircraft and its assistance to the Philippines in the wake of Typhoon Haiyan give China an opportunity to demonstrate its credentials as a responsible international citizen.

Equally important is the fact that, just as the US has an economic interest in China, the US is of tremendous economic importance to China, which therefore has an interest in the US economic recovery. A conflict would harm the economies of both countries.

It is worth remembering, however, that while the above relates to the Indian Ocean, matters are very different in the South China Sea, even though the US itself is not directly involved – other than insofar as it is a guarantor of the global commons and the other claimants are all US allies to one degree or another. For China, the issue is a more existential one of encirclement and a perceived threat to territorial security. Nationalism, possibly stoked by the Communist Party itself, will only serve to inflame Chinese sensitivities.

The willingness of the United States’ partners to keep the US engaged in this area may offer Washington an ideal opportunity to pursue the notion that its partners must do more while it continues to provide a security umbrella. More bases in this region are unlikely – the US and its partners will be unwilling to raise the ire of China – but the concept of “places, not bases” is well suited to both the area and the financial circumstances of the US. Although the US has no intention of withdrawing from this region in the next decade, it will look to refine its assets in the region for optimum efficiency and impact.

India

Looking out over the next ten years, a more active, supportive India will be a primary US objective for its relations with New Delhi. Washington would like to see India become a more active partner that is also more attuned to US interests, such as those relating to Iran, Pakistan and Afghanistan. The US will be happy for India to play a stabilising role in post-2014 Afghanistan.

The US will emphasise the need for peaceful co-existence between India and Pakistan. It will want India to not only manage, and reduce, tensions with Pakistan, but also to be more accepting of US involvement with Pakistan, recognising that it is not balancing, hedging or anti-Indian in nature, and that the US must be in Pakistan for its own national security.

The US will continue to endorse India as a democratic, economically growing regional power committed to the rule of law (which carries with it an implicit preference for India to act as a counterweight to China). The intense US diplomatic activity at the Nuclear Suppliers’ Group (NSG) on behalf of India in 2008 and the June 2011 statement by outgoing US Ambassador to India, Timothy Roemer, that ‘the US and the Obama Administration strongly and vehemently support the clean




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waiver for India’, given to it by the NSG in September 2008, can be seen as demonstrations by the US of its commitment to India.

The US can be expected to help India further develop the capabilities to deal with border and maritime issues in the Indian Ocean. This fits comfortably with the notion of burden sharing that the US military is increasingly expected to adopt. India, for its part, has the ambition, but does not yet have the capabilities to achieve it. Possible trilateral co-operation between the US, India and Australia may fit neatly into this context, particularly if broadened to include disaster response management. One model which Australia could offer New Delhi and Washington for use in the Indian Ocean region is the successful FRANZ trilateral disaster relief arrangements conducted in the Pacific by France, Australia and New Zealand.

Washington will also be looking to draw India eastwards into greater strategic engagement with East Asia, thus further cementing its role as a counterweight to China. In this context, the US would probably like to see a greater awareness of India in Chinese strategic thinking – not in the sense of being a threat, but more as a brake on Chinese behaviour in the Indo-Pacific maritime domain. This taps into India’s own sense of itself as a rising maritime power with expanding interests that is the equal of China.

While the US would like to have a closer military relationship with India, it is uncertain whether India wants the relationship to be quite so close. Even under the Modi Government, the US-India relationship will face uncertainties and, while it will be a friend, India may not be a close ally of the US in ten years’ time. What might be more likely is something akin to an interest-specific partnership that allows India to maintain at least a veneer of its commitment to non-alignment. India, for instance, may not necessarily be one hundred per cent aware of what the US may be wanting from it as a partner. Negative Indian perceptions of US involvement with Pakistan is one potential stumbling block, though this should lessen as Pakistan’s strategic importance to the US decreases – at least to some extent – after the 2014 drawdown in Afghanistan.

Washington, on the other hand, might be a little too optimistic about the degree to which India is willing to commit to US goals. Nevertheless, the US would still like to see India as an active, reliable partner in the Indo-Pacific region. At the very least, the US wants a non-obstructive, neutral India willing to co-operate with it in regional and international fora. India may therefore be asked to contribute more to the protection of the international system from which it has benefitted.

The US will want New Delhi to display a greater openness to foreign trade and investment, along with access to India as a market for US goods and services. Of particular interest will be the removal of restrictions on foreign investment in sectors such as retail, defence, agriculture and insurance, all of which have the potential to be significant growth markets for US companies. While a rising India will benefit the US economy, it will also pose economic challenges; for instance, increased competition for white collar jobs.

From a US domestic political viewpoint, while the Indian diaspora in the United States is generally well-off and culturally and socially active, it is as yet still politically unaligned. Leading individuals within the diaspora may wish to tap into it as a source of influence or, in the case of US political leaders and strategists, as a source of votes. If that happens, India’s prominence in Washington will be boosted.


Pakistan

The chief US strategic objectives for Pakistan are to have a Pakistan that is: as stable as possible; which remains in control of its territory and nuclear capabilities; and that prevents the development and export of terrorist groupings.

The US would also expect Pakistan over the coming years to be more active in reducing tensions between itself and India, thus improving regional stability and allowing both countries to better concentrate on their own economic and social development.

Recent US expectations of a transformed relationship with post-Musharraf Pakistan have not come to pass. Indeed, other than publicly distancing itself from Washington, there are no signs of willingness on the part of Pakistan for any kind of transformational relationship with the US in the future. Incremental changes could still occur and they could be beneficial to the US. Rather than high profile bilateral agreements, quieter elements of diplomacy, such as increasing the number of Pakistani military personnel studying at US training institutions or Pakistani students studying at American universities, may be the way forward for US-Pakistan relations over the next decade. The fact that Osama bin Laden was found in Pakistan caused a great deal of anger in the US and might continue to affect US aid to Pakistan in the future, which is politically unpopular in both countries. This may lead to demands for nation-building at home, rather than in Pakistan.

The US-Pakistan relationship has always had twists and turns, but Pakistan is too important for the US to ignore. There may well be less US interest in Pakistan after the Afghanistan drawdown in 2014 but, given Pakistan’s internal situation and its security ramifications, it cannot simply be left alone and allowed to possibly implode. Given the forces at work in Pakistan, its potential to become a failed or failing state, its status as a nuclear power, and as a home to Islamist extremists, the US does not want Pakistan to fail. In the future, the US may look to work with different partners – some decidedly non-traditional – China, India, Russia, possibly even Iran, for instance, that also have a stake in preventing Pakistan from failing. As noted above, the international anti-piracy co-operation in the Gulf of Aden might offer a maritime template which could be adapted to suit co-operation in Pakistan.

Sino-US co-operation could serve Islamabad’s own interests, too, in having two wealthy partners and being able to appear less beholden to the US than may be the case currently. From a US perspective, this would ease the financial and military burdens, although there may be some unease at the prospect of increased Chinese involvement. Such unease, however, ignores the fact that, despite the degree to which Islamabad has drawn closer to Beijing, the US-Pakistan relationship is not at all a new phenomenon and includes their shared membership of the South East Asia Treaty Organisation (SEATO), for instance. Paralleling US concerns over the export of terrorism, Beijing will also be very mindful of the possibility of Islamist extremists using Pakistan as a gateway to Muslim-majority provinces, such as Xinjiang.

Another possibility that cannot yet be ruled out is the prospect of a military coup in Islamabad, though whether that would necessarily work to Washington’s advantage is by no means certain; a lot would depend on how the military would wish to present the US relationship to the Pakistani public.




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Kashmir is an ongoing problem and one that is bigger than a ten-year timeframe, particularly since the élites in both India and Pakistan have a vested interest in maintaining the status quo. The weight of inertia regarding Kashmir is simply too great for the United States to overcome, even assuming that Washington were willing to attempt to force the two sides to a resolution.

Afghanistan

The US has been left feeling fatigued by the situation in Afghanistan and, in the coming years, will most likely give up any hope of seeing the country as a functioning democracy, as was originally envisaged. Washington will aim to make the best of a difficult situation by keeping Afghanistan as “quarantined” as possible. It will increasingly look to do that by working with neighbouring states to contain the situation to the fullest extent possible. In ten years’ time, from a US perspective, that may be the best outcome that be hoped for.

In the years after the 2014 drawdown, Afghanistan may provide an opportunity for the US to act in the role of something akin to an “honest broker” in improving India-Pakistan relations.

As noted above, while the problem of Kashmir is unlikely to be solved any time soon and any progress made will be incremental – if it occurs at all – there is a convergence of Indian and Pakistani interests in a stable Afghanistan. The US, in concert with China and other regional powers, may be able to bring together some form of regional solution. Stability is important for both the US and China, so the potential exists for an Afghanistan accord, particularly if there were a re-emergence of an al-Qaida node.

The future shape of Afghanistan remains one of the biggest unknowns of the next ten years, but the US will try to maintain influence with whatever central government exists, weak as it may be.

Iran

The key US strategic objective for Iran is to prevent it from acquiring nuclear weapons. A second, longer-term objective is to see a successful, Western-oriented, liberalising youth revolution leading to regime change. Nuclear concerns and nascent rapprochement aside, given the demographics of Iran, the US may simply be able to bide its time until that happens. In the meantime, however, just how much change is embraced by Supreme Leader Khamenei, such bodies as the Council of Guardians, the Expediency Council and the Revolutionary Guards – or President Rouhani himself, for that matter – remains to be seen, but the nuclear negotiations nonetheless represent significant progress in the bilateral relationship, especially given the two countries’ thirty-plus years of estrangement. The full normalisation of relations will still be a long way off. Even so, the resumption of Iranian energy exports to Europe could serve US interests by weakening the influence that Russia is able to exert over much of the Continent with its energy exports.

In the meantime, Washington will be highly unlikely to launch an attack against Iranian nuclear facilities and will continue to employ sanctions and diplomacy against Tehran to prevent the development of a nuclear weapons programme. At the same time, however, there is now the


potential for some form of US-Iranian co-operation to address shared security concerns in the wake of the instability currently gripping Syria and Iraq. While most likely to be of a back-channel nature, due to domestic considerations in both the US and Iran, such co-operation would help to carry forward a possible rapprochement. Securing regional security will continue to be a key objective for Washington but the US may need to reassure certain partners, such as Saudi Arabia and Israel, which have been left feeling somewhat unsettled by certain recent US Middle East policies, that it is not abandoning them or the region.

Indonesia

Although US-Indonesia relations have been somewhat stunted in recent times, they will grow along with Indonesia’s own democratic and economic achievements and its strategic location. The recent positive trend in US-Indonesia relations can therefore be expected to continue and Indonesia will occupy an increasingly important place in future US foreign policy calculations. This will be principally due to five key factors: it is a democracy; it is the largest Muslim-majority country in the world; despite erroneous perceptions regarding the nature and extent of Islamist militancy, it is pro-Western (and, indeed, has been for most of the time since independence); it is strategically located; and, economically, it is a major emerging market enjoying good, albeit slowing, rates of growth.

Despite this, Indonesia has not figured highly on the US “strategic radar” in the past and, when it has done so, it has usually been because of a crisis of some kind. The US still needs to develop a consistent and coherent Indonesia policy for the years ahead.

Although Indonesia has made tremendous progress since 1998, there are still some frailties: despite the success of the 2014 presidential and legislative elections, its democracy is still to demonstrate an unassailable robustness, and the government can appears reluctant to crack down too strongly on religious violence. Depending on how they play out, and the responses to them from the Indonesian government and public, factors such as these could conceivably have altered Indonesia’s trajectory in ten years’ time. While they would complicate, or alter, how the US relates to Indonesia, given the geopolitics of the region and Indonesia’s location, the US would seek to maintain relations with Indonesia as a balance against weaker ASEAN states that might possibly tip towards China, such as Burma/Myanmar, Laos and Cambodia and, of course, against China itself. As well as deeper relations with Indonesia itself, the country also provides a focus for greater US engagement with ASEAN. As the leading ASEAN state, and with a rising China nearby, Indonesia has an interest in keeping relations with the US on an even keel.

Other key US objectives for Indonesia in the years to 2025 will include co-operating with Jakarta on shared security and diplomatic concerns by working with Indonesia as a partner and a bridge into the region and the Muslim world. The utility of soft power will need to be more fully realised. In this case, the US can work towards achieving increased cultural understanding by encouraging Indonesian students to study in the United States (although, in what will be a concern for Washington, the US has fallen well behind Saudi Arabia as a destination of choice). Similarly, defence personnel will encourage the continuation of the successful – and low cost – International Military Education and Training Programme, in which Indonesia has participated. It was of particular value to




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the US during the East Timor crisis, as it allowed US personnel to communicate with their Indonesian counterparts despite the concurrent diplomatic difficulties.

On the economic front, bilateral trade relations will continue to grow, potentially to the extent of Indonesia joining the Trans-Pacific Partnership trade agreement. The US will emphasise the importance of good governance and the rule of law. This will primarily take place at the diplomatic level, but possibly also in co-operation with the business community, as it stands to benefit the most.

Australia

When the United States and Australia established diplomatic relations in January 1940, the US would, in just a few tumultuous years, replace the United Kingdom as the guarantor of Australia’s security. In the years since, the US alliance has remained the cornerstone of Australia’s security posture.

For the US, the relationship remains one of great depth and importance based on shared security and economic interests, in addition to democratic values and a number of other cultural similarities. The alliance with Australia has been of inestimable value to the US, contributing to the United States’ global strategic reach through such means as port calls, exercises, intelligence sharing and the hosting of various bases. Defence and intelligence relations between the two countries remain close and will continue to be so.

As outlined in the 2010 Melbourne Statement and reconfirmed at the 2014 AUSMIN meeting, Washington and Canberra hold shared views on many international issues, such as the desire for stable, peaceful and prosperous Asia-Pacific and Indian Ocean regions; appropriate and effective regional and global institutions; the continuation and enhancement of the rules-based international order, currently underwritten by the US; nuclear non-proliferation in general and a non-nuclear armed Iran more specifically; addressing climate change, particularly its security implications; and a commitment to free trade, including a comprehensive conclusion to the Trans-Pacific Partnership free trade agreement negotiations.

In the future, the key objective for Washington in its relationship with Canberra will be to secure Australia’s continuing support for US policies in the Indo-Pacific region. In the meantime, ensuring Australian support for US trade and strategic postures will be of great importance. In East Timor, Australia’s $5 million contribution to the US$14.7 million Health Improvement Project led by USAID that aims to improve maternal and child health is a tangible example of Australian support for US soft power activities in the far reaches of the eastern Indian Ocean region.

Militarily, Australia’s role as a reliable alliance partner will continue in the years ahead, with the sense of shared values continuing to underpin the relationship, reinforced by Australia’s economic strength and further cemented by initiatives such as the rotation of US Marine Corps personnel through Darwin for training. There might still be, however, a slight reorientation of the alliance, in which its focus might shift from the Pacific to the Indian Ocean. In that event, Australia would be encouraged, or perhaps expected, to be a more active partner.


Cyber warfare will continue to pose a growing security threat and Washington, like Canberra, is interested in adapting the US-Australia alliance to better counter cyber threats. In the future, that may even to the development of international norms for cyber warfare.

The US will continue to take great heed of Australia’s input on foreign and defence policy issues; honest advice from Canberra is usually very well received. There is, nonetheless, a small possibility that, because of its reliability as a partner and distance from key flashpoints, Australia will continue to be important to the US, but will lack significant strategic influence, particularly when compared to countries such as South Korea, Japan, or, in the future, Indonesia. US policymakers will ultimately act in accordance with what they perceive to be in their country’s best interests and, in those circumstances, it can be hard for Australia to have its voice heard.

In terms of both countries’ policies towards China, there could be a future divergence. This is not likely in the near future, but could perhaps be possible further out. A possible US-China conflict would be a nightmare scenario for Australia, but Canberra would be unlikely not to side with Washington. In this sense, there would be no radical shift in the relationship.

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As the sole superpower, the United States naturally has a wide range of varied interests spread across the Indian Ocean region. In the years to 2025, it will strive to maintain its position of strategic pre-eminence in the face of the challenges posed by its currently straitened economic circumstances. It will also look to work as closely and co-operatively as possible with key regional partners such as Australia, India and Indonesia.

Equally, the United States will aim to keep relations with China on as even a keel as possible, as a conflict between the two powers would benefit neither country. Beijing is nothing if not pragmatic and it, too, realises this. While there will undoubtedly continue to be ups and downs in the Sino-US relationship, neither side will allow matters to get too out of control. Co-operation is the greatest confidence building measure of all, and already, in the Gulf of Aden, and, in the future, possibly in Afghanistan, the Indian Ocean Region offers tangible opportunities for co-operation between the two powers.

As a continuing source of US energy imports, although less so now due to advances in the domestic shale oil and gas industries, and as the home of partners that are themselves mindful of the implications of a rising China, the US will continue to be engaged in the Indian Ocean region, even if the exact nature of that engagement, and the capabilities allocated to it, are not yet entirely clear.

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Strategic Objectives of China in the Indian Ocean Region

Summary

China’s strategic objectives in the Indian Ocean region, like its broader foreign policy outlook, are underpinned by the need of the Communist Party to retain its legitimacy in the face growing domestic uncertainties. Having successfully based its legitimacy on the provision of higher living standards, the challenges of a slowing economy, economic inequalities and growing disparities between rich and poor, urban and rural, east and west, endemic corruption, an opaque financial system strained by large and numerous non-performing loans, tainted food products, environmental degradation and pollution now all combine to collectively undermine confidence in the party. Under President Xi Jinping, the party is attempting to address, or head off, those challenges, but underpinning all other initiatives is the need for secure energy supplies with which to power the economic growth that the party’s legitimacy continues to depend upon.

China’s strategic foreign policy objectives, including those for the Indian Ocean Region, are summarised below.


Maintaining the supremacy of the Chinese Communist Party (CCP).

Core Domestic Objectives

Ensuring ongoing popular support for the CCP government via the continued security andprosperity of the Chinese people and the ongoing development of “comprehensive nationalpower” uniting the military, economic, diplomatic and cultural spheres.

Maintaining China’s internal stability. Maintaining China’s territorial integrity. Continuing China’s economic growth and thus maintaining the implicit trade-off above

between greater economic freedom and restricted political freedoms. Preparing for China’s future domestic challenges including: food, water and energy security;

an ageing population; coping with environmental pressures; and a sustainable and balancedeconomic growth that ensures high employment, distribution of wealth and low inflation.


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Strategic Objectives of Chinain the Indian Ocean Region 3

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Ensuring the legitimacy of the Chinese Communist Party as the only government of greaterChina and thus the acceptance of the “One China” policy.

Ensuring that China achieves international status as a major power, concentrating on itseconomic influence and development.

Ensuring the availability of, and continued access to, markets and resources, particularlyenergy supplies.

Reducing foreign support for internal dissident groups or individuals. Ensuring China’s territorial integrity and the security of its borders.


Ensuring unimpeded access to markets, energy supplies, raw materials and technology andthe security of maritime and land transport corridors.

Preventing the development of dissident groups in neighbouring Indian Ocean littoral statesthat might challenge China’s internal security.

Ensuring that China’s national image is supported by a network of diplomatic relations withwhich to secure trade relations and influence.

Ensuring that China’s objectives are not jeopardised by India, the United States or non-stateactors.

Specific Foreign Policy Objectives for Key Indian Ocean

States India

Pursuing a balancing act between containing a possible rival and competitor for influenceand resources, and encouraging an increasingly important trading partner.

Ensuring that the US and India do not develop an anti-China relationship. Developing relationships that encourage India to adopt pro-China policies. Preventing conflict over potential border disputes and encouraging India to downplay

support for Chinese dissident groups, especially those related to Tibet. Ensuring that India understands, if not supports, China’s intention to be recognised as an

emerging world power, especially in the economic sector.

Pakistan

Ensuring a stable Pakistan with a pro-China outlook. Developing Pakistan as a transport corridor and conduit for energy supplies. Using Pakistan as an entry point into the markets and energy resources of the wider Islamic

world.



Ensuring the non-emergence of anti-Chinese Islamist groups, in both Pakistan and post-drawdown Afghanistan, and preventing them from establishing themselves, or acting in,China.

Iran

Continuing reliable access to energy supplies. Using Iran as a means of pressuring the US, but not to the extent of compromising China’s

energy imports. Encouraging Iran to not develop a military nuclear capability.

Middle East

Maintaining an unimpeded flow of the region’s energy exports. Ensuring that Chinese exports can pass unhindered through waterways such as the Gulf of

Aden.

Australia

Maintaining access to Australian raw materials and markets. Ensuring that Australia adopts China-friendly policies, particularly in regard to the US alliance

and foreign investments.

Indonesia

Securing and ensuring access to Indonesian markets and energy resources. Securing the sea lines of communication through the Indonesian archipelago. Using Indonesia’s increasing role as a regional leader to secure influence among the ASEAN

states and as a possible moderator in the South China Sea territorial disputes.

Domestic Considerations

This is not an easy analysis. The Chinese Government, for instance, has yet to make any statement that comprehensively describes its strategic goals and ways of achieving them.

That lack of clarity is reinforced by a widespread perception that China’s foreign policy has become more assertive over recent years. This is at odds with the perception of a fairly consistent policy that emerged in the 1980s when Deng Xiaoping reasoned that a non-confrontational posture would attract foreign investment to China and boost trade. There is even a perception that, as China emerged better positioned than most from the Global Financial Crisis, China’s model of governance could be preferred over that of Western economies.

China’s foreign policy was also considered by many analysts to have been more creative and proactive in the two years leading up to the Global Financial Crisis. Certainly, Beijing appeared to


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accept more constructive policies towards North Korea, Sudan and Somali piracy. China appeared to be more co-operative in attempting to ensure stability in north-east Asia, the Persian Gulf and Africa.

Since that time, however, there has been a marked rise in tensions in the region and between the United States and China over a number of issues, ranging from Internet hacking to US arms sales to Taiwan. The increasingly negative diplomacy appeared to be a mix of confidence on the international stage – at least in an economic sense – and insecurity at home.

Since that time, a new president has taken the reins in Beijing. Xi Jinping must navigate a slowing economy and simmering social discontent. As he grapples with these problems, there is the distinct possibility that foreign policy may command less attention from the leadership than it did during the boom times. If Xi is to achieve his goal of rejuvenating China, internal and external stability and prosperity will be crucial.

President Xi may, from time to time, find that he will have to relax the intention of never yielding to outside pressure while protecting China’s interests in the near and far abroad, particularly as they relate to the US, in view of the realisation that Chinese commentators may have exaggerated China’s rise and influence, as well as the level of perceived decline of the US, and understated the two countries’ increasing interdependence.

Neither is the Chinese domestic situation helped by an increasing number of bureaucracies entering the foreign policy-making process: the People’s Liberation Army, energy companies, major manufacturers of exported goods, regional party élites and provincial governments. The growth of media outlets and the use of websites and blogs have also led to a considerable increase in popular nationalism, undoubtedly heightening the government’s sensitivity to public opinion. We may even expect to see the government attempt to channel such nationalism as a distraction from domestic concerns.

In foreign policy, two very different proponents appear to have emerged.

The first considers the US to be a major threat to China’s continued development. This approach suggests that the US, along with other Western powers, Japan and regional states such as South Korea, the Philippines and Vietnam, want to contain China. Taiwan, sympathy for the Dalai Lama, Uighur separatism, currency and trade issues and military alliances that appear to encircle China are all part of a perceived containment process.

Advocates of this approach suggest that China’s approach to the US is too soft. They believe that China should champion those states that appear to be defiant towards the US: North Korea, Iran and, possibly, Russia. Rising nationalism may well be fuelling this issue.

Related to that is a sense of restoring China to its rightful place in the world and putting to rights the humiliations suffered at the hands of Japan and the Western powers. The legacy of that “century of humiliations” is a lingering distrust among many Chinese of Japan and the West which still colours China’s foreign policy. Although speaking of China’s wish for peaceful development, Jia Qinglin, Chairman of the National Committee of the Chinese People’s Political Consultative Conference, underscored just that point when, writing in the West Australian of 5 April 2011, he said that China had ‘... suffered long from the bullying of foreign powers in the past’.

44 The Indian Ocean Region - A Framework for Australian Policy OptionsLandmark Study - Future Directions International


Others contend that the approach espoused by Deng twenty years ago may no longer be relevant. There is also the perception that Beijing has to contend with a more complex world with climate change and food and energy security being added to the list of problems to be addressed.

But others do not support this more assertive approach. They reason, for instance, that few countries would want to join China in an anti-US alliance. Such an approach would undoubtedly hold back China’s economic development and antagonise its largest trading partner. Instead, those who advocate “keeping a low profile” believe that China should concentrate on economic development. To quote former Premier Wen Jiabao, ‘our common interests far outweigh our differences.’

The often bellicose rhetoric that came out of Beijing in the final years of the Hu presidency may now be giving way to a more moderate, collaborative tone which recognises that antagonising the US and its allies is not in China’s best interests. It also indicates that Washington may now more willing to allow China to play a greater role, seeing it as a way of anchoring China in the existing regional architecture and holding it more accountable for regional security. To what degree China would actually wish to be held accountable is debatable, however, but at this early stage it nonetheless accords with Beijing’s desire to be seen as a responsible global citizen and peaceful rising power.

Given the often fractious nature of Sino-American relations, the lasting success of initiatives such as the above cannot be assumed but, within limits, they do at least indicate a greater willingness from each side to accommodate the other’s interests than has been seen for some time. The continuing US-China Strategic and Economic Dialogue also indicates a commitment to keep talking, an important confidence-building measure in itself.

Recent comments by China’s leaders suggest an increased concern over a number of domestic issues: the need to promote fast economic growth in order to reduce the disparity between the increasingly wealthy coastal élite and the largely impoverished rural majority, improving governance and reducing corruption, protecting the environment and stimulating domestic consumption. Rumours that the country’s top economic planning body, the National Development and Reform Commission, will refine its longstanding approach of basing regional development on the traditional four geographical regions of north-east, east, central and west, are in keeping with such concerns. The aspiration is that such a shift will facilitate more nuanced planning to better address the above issues.

In another approach to these challenges, China’s leaders appear to have decided to try to sustain high growth by increasing domestic consumption and by reducing over the long-term – although not replacing – the country’s dependence on exports and foreign investment.

China is also confronting a major inflation problem and a labour shortage that will only become worse as China’s population ages. A likely outcome is that interest rates will rise. Together with rising wages, the cost of capital could increase, leading to a lowering of capital spending and a reduced growth rate.

One outcome from all of this is that China is increasingly seeking to acquire natural resources from lesser developed countries where such resources will be less expensive and China will exert greater control over their acquisition. This will be particularly notable in parts of Africa.


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China may also be shifting its geo-strategic focus. Where previously much of its focus was towards north-east and south-east Asia and across the Pacific, followed by an intense engagement in South America and Africa, China increasingly is beginning to focus its attention to the west. Its Grand Western Development Programme in many western provinces was the start to this process.

It is now actively initiating and participating in new development projects – the so-called “New Silk Road” featuring resource extraction projects and transport corridors – in Afghanistan, Pakistan and Central Asia.

Key constraints to China’s ambitions in this area over the next six years will be the high degree of political instability across the region, and Beijing’s wariness of Islamism spreading to Muslim-majority provinces, particularly Xinjiang.

The above is a revised version of an FDI Workshop Report, originally published 23 May 2011.

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China’s Indian Ocean Region Interests

China’s foreign policy suggests that, for the Communist Party leadership, maintaining the Party’s supremacy, ensuring internal stability and the maintenance of sovereignty are the top concerns. Continuing its trajectory towards the status of a major global economic power is probably next and serves to underpin the other all-important objectives. In China, as elsewhere, foreign and domestic policies are interlinked.

To achieve those objectives within the context of the Indian Ocean region, China seeks to counter what it perceives as regional US interference and remains concerned by US-Japan, US-South Korea and, increasingly, US-India developments. Beijing perhaps now realises that the more aggressive foreign policy stance of 2010 was counterproductive, in that it pushed many of its neighbours closer to the US. Deeper US security arrangements with the likes of Indonesia and Vietnam potentially contribute another layer to the strategic encirclement so feared by China and reduce its ability to operate beyond its coastal waters.

In terms of its own immediate region, China remains overwhelmingly concerned with north-east, eastern and south-east Asia. In particular, it remains concerned that Taiwan does not seek a separate identity or that the mainland is encircled by other powers. Increasingly, however, China is seeking to ensure access to markets and to sources of raw material and energy. It is also actively seeking ways to ensure its future food security. In so doing, it is increasingly engaging Central Asia, the Middle East, Africa, Australia and, further afield, South America.

China also recognises that, should the US withdraw from its global commitments, the ensuing vacuum may not be in China’s interests. China is in the fortunate position of being able to “free-ride”



on the regional security architecture and stabilisation work that is underpinned by the US. Given the financial commitments required and that it would compete with domestic concerns, China may actually be quite unwilling to undertake such a role in the future.

In the Indian Ocean region, China probably does not have a clear regional policy as such. But there is little doubt that China increasingly is aware of the Indian Ocean and the protection of its sea lines of communication.

To date, however, Beijing has been prepared to use soft power, especially diplomacy, investments, loans and aid, rather than overt military force. In part this may be an attempt to convince India that it does not need to invest heavily in military capabilities, especially naval forces. But China’s soft power may also be a means to develop and deploy military forces in the region quickly should this be considered necessary.

Another view, however, is that China is deliberately using soft power to extend the US and India to expend more resources in confronting China. Beijing may also be using such a strategy to isolate India. If this is the case, then there is considerable risk involved, as the US may counter such moves by seeking to arm Japan, and possibly South Korea, with a nuclear capability.

China is also mindful of what former President Hu Jintao called its “Malacca Dilemma”. Chinese involvement in port and pipeline developments in Pakistan, Sri Lanka, Bangladesh and Burma/Myanmar also is aimed at enhancing energy security and reducing China’s dependence on the Malacca Strait chokepoint.

Ultimately, however, China’s interests in the Indian Ocean region underpin its evolving geo-strategic focus and reliance on domestic growth and consumption to maintain or improve living standards, societal cohesion and internal stability.

While it remains difficult to determine China’s policies at this time, a balanced assessment suggests that Beijing continues to be highly aware of the vulnerability of its sea lines of communication as well as access to its markets and sources of raw materials. At best, it is hedging its bets and would prefer that India did not develop a major naval capability.

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The following briefly summarises aspects of Chinese involvement in the Indian Ocean by country/sub-region.

India

China appears content to allow India to play a greater role in the Indian Ocean region but not to the

extent that it interferes with or jeopardises China’s own objectives. Despite the difficulties, it is in


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China’s best interests to have a good relationship with India. India’s rise took China somewhat by surprise, but the deepening of US-India relations has made China take a greater interest in India, although China recognises that India would not wish to be a junior partner to US.

There are a number of tensions in Sino-Indian relations. These include Chinese support for Pakistan; disputes over the 3,500 kilometre border; the implications of climate change; competition for water, food and energy resources; China’s reluctance to back India’s attempt to obtain a permanent seat on the UN Security Council and even as a future rival for superpower status.

China will undoubtedly watch the growing India-Japan political, economic and security ties under the Modi Government closely for at least two reasons. First, from a security perspective, a New Delhi-Tokyo nexus has the potential to derail Beijing’s ambitions in South and South-East Asia. China, moreover, fears potential intra-Asian balancing of its strategic ambitions, as such a balance will merely replace the US should China succeed in reducing that country’s influence regionally. Second, a growing economic relationship between India and Japan could potentially reduce Sino-Indian trade, which, in turn, could reduce India’s need to obtain capital from China to develop its infrastructure. New Delhi could, instead, turn to Tokyo to provide the capital and technology required for India’s railways, for example.

China probably wishes to give India membership in the Shanghai Co-operation Organisation (SCO) in order to obtain a moral victory over the United States and its allies, including Japan. It, moreover, need not worry about an antagonistic India to its west in case the current tensions in the South China Sea expand into conflict. Membership in the SCO could also dissuade India from aligning further with the US and its allies. Similarly, as a member of the SCO, India will be hard-pushed to side with Vietnam in that country’s ongoing tussle with China over territory in the South China Sea. This means that the Communist Party leadership would not have to back down over that dispute, thus preventing perceptions of weakness in the eyes of many increasingly nationalistic Chinese.

Importantly for each country, bilateral trade has nonetheless increased dramatically over the last decade, reaching a peak of US$74 billion in 2011, when China became India’s largest trading partner. Since then, that figure has dropped to US$66.5 billion in 2012 and US$65.47 billion in 2013. Even so, it is a remarkable increase on the US$2.9 billion recorded in 2000. The ambition of increasing bilateral trade to US$100 billion by 2015 will require considerable effort.

Both China and India (and their populations) see themselves as re-taking their rightful places in the world order. Rising nationalism, suspicion of each other’s motives and a lingering distrust will continue to contribute to the tension in Sino-Indian relations. Ineffective dispute resolution mechanisms, Chinese apprehension at the US-India relationship and negative Indian perceptions of infrastructure developments in the border regions are also contributing factors.

While the media, militaries and commentariat in both countries may talk up the prospects of competition and conflict, the leadership of both countries recognise the importance of economic ties and the need for a peaceful rise for both countries. Economic links such as the above will contribute to attitudes of co-existence.



Pakistan

Pakistan is vitally important to China’s strategic calculations, not only in counterbalancing India, but in using Pakistan’s strategic position as an energy corridor to China’s western borders. China is keen to develop access to the Middle East and West Asia in this way, and the much-vaunted Gwadar to Kashgar economic corridor is intended to form the nexus for those links. Bilateral trade between the two countries increased to US$12 billion in 2012 and is expected to rise to US$14 billion by the end of 2014. There are now more than 60 Chinese companies operating in Pakistan on 122 projects employing an estimated 11,000 Chinese businesspeople, engineers, technicians and workers.

For Islamabad, the China relationship provides Pakistan with a counterbalance to the US and leverage against India.

Over the next ten years, China’s relationship with Pakistan is likely to continue along its current trajectory, serving the same purposes. A note of caution is warranted, however. Despite their closeness, China and Pakistan are not natural allies, having as they do widely differing cultures and languages. Beijing will also be very mindful of the possibility of Islamist extremists using Pakistan as a gateway to Muslim-majority provinces such as Xinjiang (although Central Asia is perhaps a more likely conduit were that to happen).

China would like Pakistan to assist it in filling the security vacuum left by the US drawdown in Afghanistan. It would likely want Pakistan to help it domestically also by controlling the radical madrasas that are beginning to export jihadists to fight with groups such as the East Turkestan Islamic Movement, which seek to foment Muslim unrest in Xinjiang. Mostly, however, it would want Pakistan to become politically stable as that would help China in its quest to secure the states to its west and keep ethnic and religious conflict from spilling over into its territory.

Iran

The focus of China’s relations with Iran chiefly encompasses energy and development of infrastructure. The continuity of energy supplies is at the forefront of Chinese policy in this sub-region. China sees Iran as a critical ally in its quest to access the energy reserves of the Middle East and Central Asia. China has moved aggressively to position itself as a key player in the Iranian energy market because Iran has the second-largest reserves of natural gas in the world. Since 1998, trade between Iran and China has grown markedly from US$1.2 billion to over US$10 billion. More than one hundred Chinese state companies are operating in Iran and Iran is now the largest importer of Chinese military hardware.

The need for uninterrupted energy supplies complements China’s support for nuclear non-proliferation, as a nuclear-armed Iran could destabilise the region and jeopardise Chinese energy imports. While China may be willing for Iran to threaten to develop a military nuclear capability, it would be less than keen to see it come to fruition.


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China may be willing to act as a mediator if any future regional conflict were to threaten the security of its energy supplies. China has, however, looked to exploit United Nations sanctions against Iran by offering itself as an alternative market.

Although Iran is an important ally for China and has attained Observer status at the Shanghai Co-operation Organisation, its bid to attain full SCO membership has remained stalled while United Nations sanctions are in place against Tehran. Even so, there are indications that both China and Russia are wary of unnecessarily aggravating relations with the United States by actively promoting full Iranian membership of the SCO.

Middle East

Even as China moves to diversify its energy sources with pipelines and multi-billion dollar gas and oil deals Russia and the Central Asian republics, the Middle East remains a key focus of China’s ever-growing energy demands. Around half of China’s oil imports, for instance, coming from the Middle East sub-region. Agreements covering energy supplies and investments are common. For Middle Eastern countries, China’s growth has offered an alternative to Western markets. Providing advice and assistance to Chinese Muslims for the hajj pilgrimage to Mecca offers Beijing a valuable soft power opportunity.

Reciprocal visits by high-ranking military have taken place with countries such as Bahrain and Egypt. China will be keen to see stability maintained around the Strait of Hormuz so that energy flows are not disrupted and the Bab el-Mandeb and Suez Canal so that Chinese exports can pass unhindered to European markets.

China’s anti-piracy patrols in the Gulf of Aden, in which its forces liaise with their counterparts from the US and other countries, have given it an opportunity to demonstrate its credentials as a responsible international citizen.

Australia

China will continue to ensure that it has access to Australia’s mineral and energy resources, delivered at favourable prices. It will seek to invest in the agricultural and pastoral sectors and take advantage of educational opportunities.

China will also seek to ensure that Australia continues its “One China” policy. Should rivalry between Washington and Beijing increase, China will attempt to weaken the US-Australia alliance by offering an assured market for Australian exports.

China’s policies towards Australia are unlikely to change significantly over the next six years. The acquisition of agricultural land for food production could, however, become an increasingly important aspect of the relationship and may require deft management if it is to be of maximum mutual benefit.



Indonesia

China has been active in infrastructure projects in Indonesia, constructing bridges and coal-fired power plants. Although Indonesia views an expanding Chinese military with some caution, high-level visits have taken place. Indonesia’s growing role as a regional leader offers China scope for increased influence among the ASEAN members and Indonesia may be called upon to act as a moderator among the states involved the South China Sea territorial disputes.

For Jakarta, engagement with ASEAN, the United States and Australia offers a means of counterbalancing China. Like Australia, Indonesia may find itself caught between its economic links with China and its security interests which require a continuing US presence in South-East Asia.

Eastern and Southern Africa

China has ambitious plans for Africa. Despite some dissatisfaction at the local level, African leaders will continue to embrace Chinese involvement as their countries or, in some cases, they themselves, can stand to benefit significantly from them. A key message that China uses is that of a shared underdog or oppressed status with Africa. Beijing is likely to continue to capitalise on the anti-colonial sentiment that can still be prevalent in Africa. Other than three exceptions,1 support for the “One China” policy is now uniform across the continent.

Across Africa, more than 1,600 Chinese businesses are currently investing in the mining, processing, commercial, agricultural, construction and manufacturing sectors. China will provide US$10 billion of preferential loans to African countries and support Chinese financial institutions in granting special loans to small- and medium-sized African businesses. Beijing will phase in zero-tariff treatments to 95 per cent of the products from the least developed African countries. China also aims to further enhance agricultural co-operation with Africa, to provide medical equipment, school construction and training for school principals, teachers and medical personnel.

Sudan is China’s third-largest African trade partner and a vitally important source of oil. Nearly 70 per cent of the oil produced in Sudan/South Sudan goes to China. With the independence of South Sudan in July 2011, it is reasonable to expect that China will continue to be heavily involved in the new country’s oil industry, although Beijing will most likely find that it needs to balance that interest with its longstanding relationship with Khartoum – a potentially unwelcome complication.

China has demonstrated an interest in mining operations and agricultural development and training in Djibouti. This has led to concerns that if China’s influence were to rise, it could threaten Western interests in the strategically located country, which is currently an important base for French, US and Japanese forces operating in the Horn of Africa and the Red and Arabian Seas. In the event that Chinese vessels were offered basing facilities in Djibouti, it is open to conjecture as to whether it would be a source of Sino-Western contention or co-operation.

Chinese investment in Zambia exceeded $1 billion in 2010, creating more than 15,000 local jobs. An Investment Promotion and Protection Agreement with Hong Kong-based Zhonghui Mining Group

1 Burkina Faso, São Tomé and Príncipe, Swaziland.


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has pledged US$5 billion for the mining of Zambia’s substantial copper reserves, while China has earmarked US$250 million for a new copper smelter.

While Mozambique imports low-cost Chinese manufactured goods and machinery, China’s involvement in Mozambique has centred on agricultural products. Unlike many other African countries, its trade is not focussed on the resources sector – which has largely been the domain of Australian and Brazilian firms – but has been dominated by agricultural goods, fisheries, forest products, construction and investment in the services sector. Recent offshore oil and gas discoveries could change that, however, by providing another source of energy for China while bringing in Chinese investment to construct the infrastructure necessary for the processing and export of LNG.

South Africa

The August 2010 Beijing Declaration set the scene for future co-operation between South Africa and China. Beijing has agreed to assist in the development of railways, power generation and transmission (including nuclear), construction, mining, insurance, agriculture and telecommunications. China will also play a role in other construction projects involving airports and housing. Beijing is already South Africa’s largest trading partner. An alignment of the two countries’ economic and security interests will be a significant feature of future co-operation. South Africa is a large importer of military hardware and is also home to a domestic defence industry. China will be keen to utilise and capitalise on this expertise through reverse-engineering or joint ventures.

Indian Ocean Islands

Excluding the French départments of La Réunion and Mayotte, the Indian Ocean islands of Madagascar, Comoros, Mauritius and Seychelles are important to China due to their location astride the sea lanes that pass through the Mozambique Channel and the south-western Indian Ocean. Other attractions for China are fishery resources and, particularly in the case of Madagascar – large areas of which are believed to have huge untapped reserves of oil and natural gas – the energy and mining sectors. China could also be seeking to counter Indian influence in the area; in addition to its cultural links, India has reportedly constructed listening stations in Madagascar and the Seychelles.

Soft power activities have been a key component of China’s approach in this sub-region. Projects such as the funding and construction of key government buildings, a water-supply project, an anti-malarial treatment campaign and the expansion of the Mauritius international airport have secured considerable goodwill for Beijing to build upon in the future.

Sri Lanka

For Sri Lanka, Chinese involvement serves as a counterweight to its giant neighbour, enabling it to adroitly balance the two. From the perspective of checking India’s expanding Indian Ocean influence, China’s interest in Sri Lanka derives from the island’s strategic position astride the major east-west



shipping arterial. Its mega-development projects, such as the Hambantota port, are designed to harness Sri Lanka’s position as a convenient stop-over point for oil and gas tankers.

The rise of China as the largest investor and donor in Sri Lanka is most notable in terms of projects such as the Hambantota Port Development Project (valued at US$1 billion); the Colombo-Katunayake Expressway (US$248.2 million), the National Performing Arts Theatre (US$21.2 million) and many other smaller projects. From 2006 to 2008, Chinese investment in Sri Lanka grew fivefold, replacing Japan as Sri Lanka’s largest donor. Sri Lanka’s growing relations with China have been further strengthened by its acceptance as a dialogue partner in the Shanghai Co-operation Organisation.

Bangladesh

Bangladesh is reportedly China’s third-largest trading partner in South Asia. Bangladesh relies heavily upon China to meet its defence requirements and is also seeking China’s support to counterbalance India and Burma/Myanmar (the two countries share a porous border along the Chittagong Hill Tracts). Bangladesh also needs to keep good relations with China due to the major river systems that emanate from the Chinese side of the Himalayas and which pass through Bangladesh.

Indian analysts believe that growing Bangladesh-China relations make the Siliguri corridor, which connects mainland India to its north-eastern provinces, more strategically vulnerable and therefore a possible point of contention between India and China. Military co-operation between China and Bangladesh is increasing, as is the purchase of Chinese military hardware by Bangladesh. This is only likely to continue in the future as Bangladesh seeks to balance a rising India, even against the backdrop of significantly improved relations between Dhaka and New Delhi.

Burma/Myanmar

China views Burma as an energy source and, perhaps even more importantly, as a means of bypassing the Strait of Malacca chokepoint. Port facilities and pipelines into south-western China enable Beijing to escape its “Malacca Dilemma” and aid in the development of those provinces.

Having previously had Burma to itself, China is now facing competition from India and the West in Burma, but Beijing’s wealth and long-standing warm relations with the Burmese authorities should see it maintain its good standing in Naypyidaw. Even in the face of competition, Burma still has the potential to serve as a conduit for China into South-East Asia, possibly to the extent of establishing a sub-regional trading bloc incorporating Thailand, Cambodia, Laos and Vietnam.

East Timor

China’s strategic interests in East Timor relate to the securing of energy supplies and influence. Despite its small size, East Timor is an attractive proposition for China, given its unrealised agricultural potential and sizeable oil and natural gas deposits. East Timor is a member of the


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Community of Portuguese Language (CPLP) countries, several of which are energy-rich. Since the mid-2000s, Beijing has been actively engaging with the CPLP countries in order to diversify its energy and food sources, export markets and trading opportunities. In light of the Portuguese and Brazilian involvement in East Timor, and its business and linguistic links with Macao, East Timor offers China an additional avenue into the CPLP.

Beijing has increased its involvement in East Timor via development aid, military links, high-profile construction projects and soft power initiatives such as the donation of farm machinery. Increased Chinese influence, Timorese acceptance of the “One China” policy and the continuing uncertainty surrounding the Greater Sunrise gas field could also serve to reduce the future influence of Australia.

China’s growing presence in East Timor may raise concerns in Jakarta if it extended to the opening of a Chinese naval base in what it, like Canberra, sees as its own backyard. Being reasonably well-endowed with natural resources of its own, East Timor’s resources will be of greater interest to China than they are to Indonesia.

Other South-East Asia

Strategically located along the eastern side of the Strait of Malacca, China’s relationships with Malaysia, Singapore and Thailand centre on trade and maritime security. China is acutely conscious of the vulnerability of its energy imports as they pass through the Malacca chokepoint. Although a long way off, if it eventuates at all, China has expressed interest in constructing a canal across the Isthmus of Kra and into the Gulf of Thailand, thus bypassing the Malacca Strait. In the future, China may be willing to deploy naval forces to protect its interests in the waterway, as it has in the Gulf of Aden.

Although economic relations with China are of great importance to the three countries, they use their relationships with the US to hedge against China. Malaysia, in particular, strives to maintain a non-aligned foreign policy but a stable trading environment is of paramount importance to all three. For Singapore, the US is viewed as an essential security guarantor, while China has ever-increasing importance as a cultural and economic partner. For Thailand, Chinese activities on the upper reaches of the Mekong River will likely continue to be an irritant to relations and reinforce support for the US as a hedge.

China’s territorial disputes in the South China Sea are a source of continuing unease among South-East Asian countries, including fellow claimant Malaysia.

*****

China’s interests and activities across the Indian Ocean region are many and varied. While the formation of Chinese foreign policy is opaque and is increasingly challenged and informed by a greater number of interest groups, several core themes can be identified.



The overarching aim – China’s paramount national objective – is to ensure the continued supremacy of the Chinese Communist Party.

Below that, the objective is to ensure that China’s internal stability and sovereignty are not compromised.

A further objective is to support the economic growth upon which the legitimacy of the Chinese Communist Party government is largely predicated. The security of sea lanes for energy imports and the export of manufactured goods is therefore of great importance. It will continue to be so as the Communist Party grapples with substantial domestic challenges over the coming decades.

Chinese foreign policy in the Indian Ocean region also supports the wider objectives of countering India’s growing influence and the United States’ ability to act as guarantor of regional security, in as much as China perceives them as potential threats to its own interests.

*****


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Strategic Objectives of India in the Indian Ocean Region

Summary

India wishes to build and strengthen its global image, commensurate with its size, population and the growth of its economy. It espouses the ideals of democracy, secularism and peaceful co-existence. These aspirations, however, are challenged by a range of factors: a large population; ethnic and religious differences; a large bureaucracy and complex Centre-State relations; food, water and energy security issues; and the underlying concern that it may face a challenging China and an unstable, nuclear-armed Pakistan. India sees the Indian Ocean Region as critical to achieving its national interests of restoring economic growth and achieving its great power ambitions.


To achieve international status in keeping with its geographic size and location, population andeconomy.

India’s Critical National Challenges

Achieving sustained rapid and substantial economic development. Securing access to new domestic sources of energy with which to sustain economic growth. Meeting the growing aspirations of an expanding population. Mitigating a growing food and water security crisis, worsened by climate change. Stabilising its internal and external security situations, which are sharpened by inter-regional,

political, religious, economic and social tensions.

India’s Core Foreign Policy Objectives

To be the strategically pre-eminent power in South Asia. Further developing its economy to enhance trade and foreign investment, foster internal

political stability and uplift its international profile. Securing new energy reserves worldwide to sustain its economic growth and its escalating

energy consumption. Directing its foreign policy to secure widespread international support and obtain a permanent

seat on the United Nations Security Council, commensurate with its great power ambitions.


Strategic Objectives of Indiain the Indian Ocean Region 4

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India’s Objectives for the Indian Ocean Region

Increasing its influence across the entire Indian Ocean Region, through trade and investment,diplomacy and strategic partnerships.

Upgrading relations with Africa, the Middle East and South-East Asia; regions that hold mineraldeposits and energy reserves critical to India’s economic development and great poweraspirations.

Positioning itself to emerge as the dominant Indian Ocean power in the decades ahead. Ensuring that China does not gain a significant strategic foothold in the region. Strengthening influence and control over Indian Ocean chokepoints through security

relationships with key littoral states such as Singapore, Mauritius and Oman.

Specific Foreign Policy Objectives for Key Indian Ocean States and Regions

Accessing Africa’s arable land as a means to enhance food production and address India’sgrowing food security concerns.

Ensuring continued access to Africa’s mineral and energy reserves.

Pakistan

Pursuing a balancing act that seeks to improve and stabilise relations, while constrainingPakistan’s ability to exert an adverse impact upon India’s interests.

Influencing US-Pakistan relations, to ensure that India’s national interests are preserved. Developing relationships that encourage China to adopt India-friendly policies. Maintaining India’s current policy stance towards Kashmir. Formulating policies to manage the potential water security challenges resulting from climate

change.

Other South Asian Countries

Restricting China’s influence in the region. Promoting the internal stability of neighbouring countries to prevent threats to India’s interests.

Middle East

Ensuring continued access to the region’s energy reserves. Preserving the security of sea lines of communication through bilateral defence

co-operation.




Ensuring that employment opportunities continue to be available to Indian expatriates. Preventing policies throughout the Islamic world that would be detrimental to India’s interests

by strengthening ties with both Shia and Sunni Muslim countries.

Iran

Continued access to Iranian mineral and energy reserves. Developing Iran as a strategically important corridor to Afghanistan and Central Asia. Cultivating Iran as a moderating influence on Pakistan and Afghanistan. Balancing the above with US concerns about Iran’s nuclear intentions.

Burma/Myanmar

Promoting amicable relations with Burma/Myanmar to mitigate cross-border issues thatthreaten India’s restive north-eastern region.

Securing influence in Burma through non-military initiatives. Seeking access to Burma’s mineral and energy reserves. Using Burma as a land conduit to South-East Asia.

Indonesia

Ensuring continued access to Indonesia’s mineral and energy reserves. Developing a stronger stake in Indonesia’s agricultural sector. Using Indonesia as strategic leverage against China. Working with Indonesia to secure the north-eastern Indian Ocean from non-conventional

security threats.

Australia

Enhancing access to Australian mineral and energy reserves. Completing negotiations for the export of uranium to India. Developing a stronger stake in Australia’s fishery, agricultural and pastoral sectors. Influencing Australia to adopt India-friendly policies, particularly in relation to China.

India’s National Challenges

As one of the fastest growing economies in the world, India’s demand for energy has also grown substantially and will continue to present a major challenge to achieving energy security. This factor was confirmed by the Secretary of the Ministry of Power, R.V. Shahi, who stated in 2006: ‘To deliver a sustained growth rate of eight per cent to nine per cent through the next 25 years till 2031-32 and to meet the life line energy needs of all citizens, India needs, at the very least, to increase its primary energy supply by three to four times and its electricity generation capacity by about six times. It is


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further estimated that, by 2032, our requirement will be of the order of 800,000 MW. Coal accounts for over 50 per cent of India’s commercial energy consumption and about 78 per cent of domestic coal production is dedicated to power generation. This dominance of coal in India’s energy mix is not likely to change till 2031-32.’

Presently, India’s population constitutes about 17 per cent of the world’s total population. Given current trends, the United Nations Population Division forecasts that India’s population will pass that of China after 2020. The US Population Reference Bureau reports that India’s population will reach 1.4 billion by 2025 and 1.7 billion by 2050.

Although the increase in India’s population has abated to a large extent, the base of its population remains very large. There is also substantial variation across Indian states in the rate of population growth; both of these facts were highlighted in India’s 2011 census. Attempts to engage in population control have had mixed results, for a variety of reasons: differences between the Centre and State governments; weak governance and corruption; and overlapping economic, ethnic, social and cultural factors.

The escalating problem of food and water security is among India’s most serious challenges. Although India has 15 large, 45 paper study notes that:

The current average per capita availability of water [in India] is 1,600m³ per year. Population forecasts indicate that, by 2050, this average will be reduced to approximately 1,000m³ per year. According to the UN, water scarcity occurs when per capita water availability is below 1,000m³ per year. The overexploitation of groundwater, a lack of storage capacity and increasing levels of pollution in a business-as-usual scenario, will greatly increase the risk of severe water insecurity across India.1

More positively, perhaps, the paper also observes that:

The resources required are available to meet this demand; however, inefficient resource use, mismanagement, unequal governance structures and increased vulnerability to climate change, will severely limit the access required. Vulnerable to upstream development in the Himalayan region, future food and water security will require greater regional co-operation.2

In addition, there is a growing consensus among officials of the Indian security forces that internal security is taking greater importance in national security calculations. For example, a January 2011 report tabled by the Institute for Defence Studies and Analyses, titled Internal Security and Centre-State Relations, affirmed that: ‘Internal threats to national security have assumed centre stage in the debates on Indian security. They are arguably more serious than the external threats.’ The issue also resonated strongly with then-Prime Minister, Dr Manmohan Singh, who said in February 2010: ‘Internal security is a critical issue which affects the pace of growth of development.’

1 Lehane, S., ‘India’s Food and Water Security’, Future Directions International Strategic Analysis Paper, 3 June 2014, p. 5. 2 Ibid., p. 1.



Trends in Indian Foreign Policy

During the Cold War, India’s post-independence foreign policy reflected its strong affinity with non-alignment. That affinity was illustrated by its reluctance to join SEATO and the Baghdad Pact; formally joining the Non-Aligned Movement, which was formed in 1961; courting the Soviet Union as a counterweight to the West, and the signing of the Indo-Soviet Treaty of Friendship and Co-operation in August 1971. India also strongly advocated the Indian Ocean Zone of Peace, which was purportedly designed to limit Cold War rivalry in the Indian Ocean.

The collapse of the Soviet Union led India to re-evaluate and realign its economic and foreign policies to a more liberal approach. This resulted in India’s greater integration into the global economy, with a foreign policy geared towards tangible and pragmatic interests resulting from the rapidly changing post-Cold War geopolitical environment. India’s foreign policy initiatives to court the West were based not only on the need to liberalise its economy and benefit from Western investment, but also a need to counterbalance the rise of China, especially in South Asia.

The end of the Cold War also led to a degree of introspection among Indian foreign policymakers and strategists, which spurred a longstanding aspiration to see India emerge as a great power in global affairs. Such aims have also produced increasingly louder calls by India for a seat as a permanent member of the UN Security Council, and which has received Western endorsement.

Among India’s first major foreign policy initiatives in the aftermath of the Cold War was its 1992 “Look East” policy, designed to enhance India’s relations with South-East Asia and Japan. As a result, India was accepted as a sectoral dialogue partner of the Association of South-East Asian Nations (ASEAN) in 1992, as a full dialogue partner in 1996, an ASEAN summit level partner in 2002 and, in 2005, as a member of the East Asia Summit.

The implications of the 9/11 attacks against the US bolstered India’s utility as an important ally to the West in combating Islamist terrorism, which also poses a threat to India’s interests. India has thus benefited from intelligence sharing, technology transfers, military co-operation and exercises, which have been beneficial to India’s defence and security interests. At the same time, 9/11 caused other problems for India by re-invigorating the US-Pakistan relationship.

As a reflection of its rising international profile, India is now an influential participant in a number of other regional fora, including: the Indian Ocean Region Association (IORA), the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Co-operation (BIMSTEC), G-4, G-15, G-20, G-24, G-77, the India-Brazil-South Africa Forum (IBSA), Shanghai Co-operation Organisation (SCO), and the South Asian Association for Regional Co-operation (SAARC).

More recently, in 2008, India founded two multilateral dialogue fora, the Indian Ocean Naval Symposium and the India-Africa Forum, which have served to further consolidate and extend India’s influence in the Indian Ocean Region. Similarly, India has significantly enhanced its profile in the region by signing defence co-operation agreements and a number of bilateral naval access agreements, including joint training/military exercises, with countries on the Indian Ocean littoral. With securing a permanent seat on the UN Security Council a central theme of India’s foreign policy, New Delhi is trying hard to win the confidence and support of the developing world.


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India’s Strategic Objectives in the Indian Ocean Region

Broadly speaking, the success behind India’s foreign policy in the Indian Ocean so far has been due to its focus on: using trade and investment; concessional loans; diplomacy, including the upgrading and creation of new embassies or consulates; multi-lateral initiatives, such as the India-Africa Forum and the Indian Ocean Naval Symposium; education/training placements for foreign students through the Indian Technical and Economic Co-operation, Tele-Education, Tele-Medicine and Pan African E-Network programmes; training billets in Indian military academies for foreign military personnel; capacity building programmes in education, government and military affairs; and defence co-operation.

The role of naval diplomacy in enhancing India’s influence is an increasingly important feature of its strategy for engaging Indian Ocean littoral states. India is currently modernising and expanding its navy, which is very much in line with its strategic objective of becoming a major Indian Ocean power. The naval modernisation programme includes such key aspects as the upgrading of naval base facilities and listening stations, and the acquisition of aircraft carriers and a nuclear-powered submarine capability.

India’s rationale for, and emphasis on, naval diplomacy and the general expansion of its navy, has been illustrated on numerous occasions by its most senior naval officials. ‘To fully understand the operational challenges to our fleet, it is important that we recognise that India is essentially a maritime nation and that our prosperity, power and prestige are inextricably linked to the oceans,’ stated Vice Admiral Sangram Singh Byce, Flag Officer Commanding-in-Chief, of the Indian Navy’s Western Naval Command. ‘The Indian Ocean encompasses about one-fifth of the world’s sea area and the Indian Peninsula juts two thousand kilometres into the sea, bringing approximately 50 per cent of the Indian Ocean within a 1,000-mile arc ascribed from Indian territory,’ he said. ‘India’s dominant position in the middle of the Indian Ocean and astride some of the busiest strategic Sea Lanes of Communications, imposes on us huge operational responsibility to ensure security of both the chokepoints and the SLOCs, so that there is free and unhindered flow of international trade,’ he added.

India-South Asia Relations

Unlike in other Indian Ocean sub-regions, expanding relations with its South Asian neighbours has been a greater challenge for India. Relations with Pakistan, for example, have been historically poor and remain seriously strained. They are characterised by the perennial dispute over Kashmir and, increasingly, tensions over water-sharing rights. Although both countries have more recently made attempts to stabilise relations, little progress appears to have been achieved and what has been accomplished could easily be undone.

India has, however, had more success with Nepal, Bhutan and the Maldives. Since late 2009, the latter has been incorporated into the Indian Navy’s southern naval command. In Nepal, around 44 per cent of Foreign Direct Investment is from India. Two-way trade increased from US$1.8 billion in 2008 to US$3 billion in 2013. India is also a significant investor in the Himalayan kingdom of Bhutan, especially since 2009, when India signed 12 agreements pledging assistance and financial aid in such



key areas as enhanced co-operation in law enforcement, defence, civil aviation, search and rescue operations, health, and information technology. India is assisting in the construction of ten hydro-electric projects in Bhutan by 2020, which will generate 11,000 megawatts of power. The foundation stone for the latest plant, the 600MW Kholongchu project, was laid by Prime Minister Modi on his June 2014 visit to the kingdom – his first foreign visit as Prime Minister.

India and Bangladesh share 54 rivers. Issues over water-sharing rights have often strained relations but, despite some setbacks, there have been promising signs in recent years. Additionally, tensions over cross-border terrorism, amplified by sensitivities over India’s north-eastern insurgencies, have also hindered the development of relations. In recent times, however, this has appeared to be less and less the case, with India making determined attempts to improve trade relations and connectivity between the two countries. According to Dilip Barua, then Bangladeshi Industries Minister, ‘The volume of trade between both the countries is gradually increasing. And, in the north-east, Bangladeshi products are largely popular and in future the trade in the region is likely to go up.’ In 2010, two-way trade had risen to US$3.5 billion and is likely increase further in the years ahead, particularly if a bilateral Free Trade Agreement can be concluded.

In Sri Lanka, India is the fourth-largest investor on the island, with two-way trade reaching US$5 billion. In June 2013, the two countries agreed that that figure should be doubled in three years’ time, although no further details have yet emerged. The India-Sri Lanka Annual Strategic Dialogue, launched in 2011, stalled in 2013 when threats from the Dravida Munnetra Kazhagam party to withdraw from the governing United Progressive Alliance coalition over the alleged killing of Liberation Tigers of Tamil Eelam (LTTE) chief Velupillai Prabhakaran’s 12-year old son by the Sri Lankan Army, led to India cancelling the Dialogue.

India is clearly intent on expanding its influence in South Asia, which is where it appears to feel most strategically vulnerable, especially in the face of perceptions of China’s rising influence. Therefore, bolstering India’s influence in neighbouring South Asian states is likely to constitute a primary strategic and foreign policy objective over the next decade and beyond.

“Look East” Policy

India’s “Look East” policy was first initiated in 1992, as part of its overall strategy to integrate itself into the global system, in the wake of the Soviet Union’s demise. The “Look East” policy coincided with India’s admission as a sectoral dialogue partner of ASEAN in 1992 and a full dialogue partner in 1996, which led to the expansion of ties with East and South-East Asian countries. Since then, in 2000, India has become a member of the six-country Mekong Ganga Co-operation, followed by admission into the Asia Co-operation Dialogue. India was made an ASEAN summit level partner in 2002, a member of the East Asia Summit and gained observer status to the Shanghai Co-operation Organisation in 2005. In 2010, the ASEAN-India Free Trade Agreement was signed. More recently, India’s efforts to engage with ASEAN countries have led to an ongoing dialogue that India hopes will lead to the construction of the Asian Highway Network, comprising the India-Burma-Thailand Trilateral Highway and the India-Burma-Laos-Vietnam-Cambodia Highway. India’s relations with South-East Asian and Indian Ocean littoral states have also seen it focus on improving relations with Indonesia, Malaysia, Burma/Myanmar and Thailand.


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The South-East Asian and Indian Ocean littoral countries of primary – and increasing – significance for India are Burma/Myanmar, Indonesia and Vietnam. As Burma/Myanmar is the only ASEAN country that India directly borders, it is of critical importance to India’s security, especially given the serious insurgency-related problems that plague North-Eastern India. The abundant natural resources of Burma/Myanmar have also attracted Indian firms, some of which are active in hydro-electric power projects, construction of roads and railways, and investment in the Burmese energy sector. To strengthen bilateral relations, India has jointly established several educational institutes, such as the India-Myanmar Industrial Training Centre; the Myanmar-India Centre for English Language; the Myanmar-India Entrepreneurship Development Centre; and the Myanmar Centre for Enhancement of IT Skills.

India’s relations with Indonesia have expanded rapidly over the last decade. In 2005, the two countries signed a Bilateral Strategic Partnership Agreement, followed by a defence co-operation agreement in 2006. Indonesia is now India’s second-largest ASEAN trading partner, and the two countries have set a goal of increasing their two-way trade to US$25 billion by 2015, up from the figure of US$20 billion in 2013-14. India’s interests in accessing energy reserves have become increasingly important in shaping relations with Indonesia. India is Indonesia’s most significant buyer of crude palm oil. Indonesia provides nearly half of India’s coal imports and up to 40 Indian companies are reportedly active in Indonesia’s mining and exploration industry. In fact, the major Indian multinational firm, the Tata Group, owns 30 per cent of Indonesia’s two largest coal mines. India is also seeking opportunities to access natural gas from Indonesia.

Although the “Look East” policy is primarily an initiative related to East Asia, Australia in some measure constitutes part of this approach, which is also linked to India’s improving relations with the West. Although there has been much talk of cultivating a strategic relationship with Australia since a defence co-operation agreement was signed in 2006, this has been limited to strategic dialogue, senior-level visits, staff college exchanges and multinational naval exercises.

India continues, however, to have a significant trading relationship with Australia, which has increased steadily from $7.4 billion in 2004 to over $17.7 billion in 2012, before falling by almost 14 per cent to $15.2 billion dollars in 2013 on the back of reduced gold imports from Australia and a slowing Indian economy. While neither country is among the other’s top ten two-way trading partners, India was Australia’s fifth-largest export market in 2013. According to the Indian Ministry of External Affairs, India is Australia’s largest export market for gold, second-largest market for coal and copper, and the third-largest for lead and wool. Over 80 per cent of India’s imports from Australia are made up of coal, non-monetary gold, copper ores and petroleum.

India-Middle East Ties

Due to its shortfall of domestic energy reserves, for India, the Middle East is arguably the most strategically important region in the Indian Ocean. Apart from significant two-way trade and investment, the region also employs millions of Indian expatriates. While counterbalancing Pakistan and also the threat posed by Islamist terrorism, remain high on India’s Middle East engagement strategy, its primary interest in the Middle East stems from its dependence on energy. The fourth-



largest consumer of crude oil and petroleum products in 2013, India imports 61 per cent of its oil from the Middle East.

Saudi Arabia is India’s main supplier of crude oil, accounting for almost one-fifth of total imports. Iraq is India’s second-largest supplier; in 2012, India imported more than US$20 billion worth of Iraqi crude. Another ten per cent of Indian oil imports come from Kuwait.

The UAE is the fourth-largest supplier of oil to India and – at almost US$60 billion – its third-largest trading partner for the 2013-14 financial year. The UAE is India’s second-largest export destination, worth over US$30 billion. India formed a Joint Defence Co-operation Committee with the UAE in 2003, which has led both countries to strengthen defence ties to encompass production and development of equipment, technical co-operation, joint military exercises, and the sharing of information on strategy and doctrines.

Under a long-term agreement, Qatar sells 7.5 million tons of liquefied natural gas to India every year. India’s bilateral trade with Qatar jumped from US$2.9 billion in 2007-08 to US$16.72 billion in 2013-14 on the back of India’s burgeoning energy needs.

The Ministry of External Affairs notes that, during the period from 2008-09 to 2012-13, India’s bilateral trade with Oman grew by 129 per cent. Over 130 Indian companies are active in Oman, and the US$969 million Oman-India Fertiliser Company project is India’s largest joint venture abroad. India continues to push for the construction of a 2,000 kilometre long sub-sea natural gas pipeline that will connect it, via Oman, to Turkmenistan, Iran, Qatar and the UAE.

India’s relations with Iran, however, have acquired a more significant and strategic dimension over the last decade, surpassing that of all other countries in the Middle East and, indeed, in the Indian Ocean Region. India’s primary interest in Iran is because it has ten per cent of the world’s proven oil reserves, the world’s second-largest natural gas reserves and, due to international sanctions imposed over its disputed nuclear programme, also accepts part-payments in Indian rupees, offering New Delhi significant foreign exchange savings. India’s heavy dependence on Iran’s energy reserves was demonstrated in 2009 when 16.5 per cent of India’s oil imports came from Iran, making it the second-largest supplier of crude oil to India. That level has since dropped due to international sanctions; in 2013, Iran became India’s sixth-largest supplier during 2012-13. Indian state-owned companies such as the Indian Oil Corporation have been operating in Iran on the South Pars gas field since 2005 and, in 2009, state-owned Indian energy firms announced plans to invest US$5 billion in developing an offshore Iranian natural gas field.

Apart from acting as a natural counterweight to Pakistan, Iran serves as a strategically vital access corridor for Indian interests in Central Asia. India and Iran are jointly engaged in funding and upgrading the Chabahar port facility in the Persian Gulf, including the construction of attendant highways, railways and, eventually, oil and gas pipelines that will link the port to Afghanistan and Central Asia, in what is referred to as the “Eastern Corridor”.

The significance of these projects was confirmed by Hamid Baqaei, director of Iran’s Free and Special Economic Zones Co-ordination Council, who said: ‘Lack of a railway link to Chabahar port has created restrictions for rapid transportation of goods, which is presently a function of road transit. When the railroad is constructed, the port will be connected to Iran’s national rail network and to Central Asia.


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The railroad will significantly shorten the distance between Iran and Afghanistan and the Central Asian republics. Chabahar is the nearest port to the five neighbouring Central Asian states and Afghanistan. Because of security reasons, the six countries conduct their imports and exports via Iran’s free zones.’

Given India’s rapidly expanding interests in Afghanistan, Central Asia and Russia, it has re-emphasised the rapid development of Iran’s Eastern Corridor. ‘There is a need for accelerating our joint efforts to fully realise the potential of the Chabahar port. This is a project that is in the common interest of not only India, Iran and Afghanistan, but also Central Asia,’ said India’s then-Foreign Secretary, Nirupama Rao, in 2010.

In Afghanistan, outside of ensuring that the Taliban remained marginalised, India has for decades supported anti-Taliban forces and, since US intervention first commenced in 2001, has moved to enhance its profile in Afghanistan. Over that time, India has become a leading donor to Afghanistan and has a substantial development assistance programme in the country, now totalling around some US$2 billion. The overall objective is to secure stability through long-term sustainable development and the provision of infrastructure and essential services. Indian foreign aid projects in Afghanistan include: the completion of the Zaranj-Delaram highway; a 220 kilovolt Double Circuit Transmission Line from Pul-e-Khumri to Kabul; a 220/11/20KV sub-station at Kabul, worth US$111 million; the new Afghan parliament building worth US$83 million; new telephone exchanges in 11 Afghan provinces, worth US$11 million; and the Salma Dam Power Project (42MW) in Herat Province, worth US$116 million. It is estimated that between 3,000 and 4,000 Indian nationals are working in Afghanistan. Since November 2011, all Afghan exports to India, apart from alcohol and tobacco, have had duty-free access to the Indian market.

The abundance of natural resources in Central Asia has been a source of increasing interest to India, which is trying to position itself as a powerbroker throughout the region. India has 150 military engineers stationed at Ayna, in Tajikistan, and a specialist team of instructors training the Tajik Air Force. In Uzbekistan, India is involved in oil and gas exploration.

India has been actively cultivating its interests in uranium-rich Kazakhstan, where the two countries have signed agreements promoting co-operation in the sale of uranium, agriculture, public health, information technology, education and oil and gas. Indian state-owned company, ONGC Videsh Ltd, is engaged in joint-exploration at the Satpayev oil block. India has also pledged to assist Kazakhstan to develop a Caspian Sea naval fleet. Given India’s strong interests in the Middle East and Central Asia, it is likely that India will continue to invest its attention and resources to enhance its influence in these regions, which are vitally important to sustaining its economic growth and strategic aspirations.

India-Africa Relations

Over the last decade, India’s profile in Africa has risen dramatically, with two-way trade increasing from US$1 billion in 2001 to US$93 billion in 2013. There are plans to make this US$90 billion by 2015. To strengthen its foothold in Africa, India has launched a series of multilateral initiatives to



project its influence. By emphasising capacity-building and mutually beneficial development, India aims to deliberately contrast its presence in Africa with that of China.

To that end, New Delhi has committed US$10 billion to infrastructure and development projects in Africa since 2008 and has pumped significant resources into such initiatives as the New Asian-African Strategic Partnership, the India-Africa Conclave, the India-Africa Project Partnership and, more recently, the India-Africa Forum. Part of the scope of these programmes has strongly emphasised Indian-sponsored capacity building projects, such as the India-Africa Institute of Foreign Trade in Uganda, the India-Africa Institute of Information Technology in Ghana, the India-Africa Diamond Institute in Botswana and the India-Africa Institute of Education, Planning and Administration in Burundi.

Africa’s abundant natural resources are of growing importance to India, most notably in the areas of agriculture and energy. For example, in the field of agriculture, UK newspaper The Telegraph, reported that 80 Indian companies have invested US$2.3 billion and purchased 350,000 hectares of plantations in Ethiopia, Kenya, Madagascar, Senegal and Mozambique. India has reduced import duties on African-produced food and has provided over US$790 million in concessional loans to assist African countries to export food to India.

India’s energy security interests have emphasised access to oil, coal and uranium and around 20 per cent of India’s fuel imports are sourced from Africa. In practically every African country, especially the Indian Ocean littoral states, there are examples of India’s rising influence. India is Kenya’s largest source of imports and Tanzania’s second-biggest investor. In Sudan, India’s investments are also significant, partly due its investments in the Sudanese (and South Sudanese) oilfields. India has funded, and is building the US$350 million, 500MW power plant at Kosti, through concessional loans. This also happens to be the largest power project in Sudan. Furthermore, India has pledged to build two hospitals as goodwill gestures and has provided up to US$1 billion in soft loans to Sudan. India, like China, has a large stake in the South Sudanese oilfields; ONGC Videsh Ltd, the overseas investment arm of India’s state-owned Oil and Natural Gas Corporation, has a 25 per cent share of South Sudan’s daily oil production of 350,000 barrels.

India has also established a major presence in Ethiopia. In 2007, India extended a concessional loan of US$640 million to develop Ethiopia’s sugar industry. This was the largest-ever line of credit provided by India to a foreign country. According to the Indian Embassy in Ethiopia, 379 Indian companies have secured investment permits making India the single-largest foreign investor in the country. India is the third-largest source of imports to Ethiopia, responsible for 7.5 per cent of all non-oil imports. It has more than US$4.1 billion in private sector investment, with 64 per cent of that in agriculture. Similarly, India is also active in the Ethiopian education industry, having jointly created the African Institute of Information Technology; the Institute of Educational Planning and Administration; the African Institute of Foreign Trade; and, the Ethiopian Police College.

The Indian Ocean island states of Madagascar, Mauritius and Seychelles have grown in their significance for India’s broader interests in Africa. For instance, as reported by the Indian Express, India-Madagascar relations have taken on a new dimension in recent times: in mid-2007, Madagascar sanctioned an Indian listening and surveillance station using radars. This marked the first time that India had set up a listening and surveillance station on foreign soil.


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Similarly, India secured the co-operation of Mauritius in allowing the Indian Navy to engage in surveillance and monitoring of the Mauritian EEZ. Since 2006 there has been unsubstantiated speculation suggesting that India has expressed interest in acquiring, on long-term lease, the North and South Agaléga Islands to develop tourist infrastructure. Some critics, however, argue that the islands are also destined to be developed into a listening station and facility for Indian maritime surveillance aircraft. India is Mauritius’ largest trading partner and the Mauritian Indian community enjoys close cultural ties with India, both of which ensure that, in Mauritius, India remains ahead of China in any incipient rivalry between the two giants.

Another example of India’s rising influence is in the Seychelles, where India has developed strong defence ties since the signing of a defence co-operation agreement in 2003. Since 2005, India has gifted a fast attack craft to the Seychelles Coast Guard, maintained a permanent presence patrolling the Seychelles’ EEZ, engaged in joint military exercises and trained Seychellois military officials in Indian defence establishments. As part of the 2012 visit to the Seychelles of then-President Pratibha Patil, New Delhi extended a US$50 million Line of Credit and a US$25 million development assistance grant to Victoria.

In the first half of 2014, according to data published by the Mozambican Government’s Centro de Promoção de Investimentos, India no longer featured among the ten largest foreign investors in the resource-rich country, a considerable drop from its fourth place position in 2009. Even so, the Bank of Mozambique estimates that Indian investments in Mozambique totalled US$625 million in 2013, while bilateral trade has grown from US$6.31 million in 2010 to just over US$1.5 billion in 2013-14, with Indian exports accounting for US$1.26 billion of that figure (an increase of 25.59%).

India has been instrumental in setting up the India-Mozambique Coal Partnership, alongside another two newly-formed training and planning institutes in the country’s burgeoning coal sector, which is estimated to contain deposits of around 20 billion tonnes. Tata Group, Adani Group, Coal India Limited and Varun Beverages are among the large Indian companies active in Mozambique. The Mozambican Government has also allowed Indian Navy warships to conduct regular patrols in its territorial waters and EEZ.

Mozambique offers a good snapshot of India’s approach to Africa in action. In 2014, 30 places on the Indian Technical and Economic Co-operation (ITEC) programme have been allocated to Mozambican government employees. In February and March 2013, 25 Mozambican police personnel received training in such measures as anti-terrorism, hostage rescue and bomb disposal from the Maharashtra Force One élite police commando unit under the ITEC programme. In addition, thirty-four scholarships are awarded each year to qualified candidates from Mozambique to undertake graduate, post-graduate and research studies in India under the Africa Scholarship Scheme of the Indian Council of Cultural Relations (ICCR). A small number of short-term training programmes are also available under the auspices of the India-Africa Forum Summits and the C.V. Raman International Fellowship for African Researchers. In all programmes, the Government of India covers all expenses and the ITEC programme, in particular, has been a valuable component of Indian soft power since its establishment in 1964.

Since the resumption of diplomatic ties in 1993, South Africa has continued to grow in importance to India. That trend has continued in recent years, with two-way trade more than doubling from 32.9 billion rand ($3.3 billion) in 2009 to R80.8 billion ($8.1 billion) in 2013, according to figures from the



South African Department of Trade and Industry. The intention – announced in 2011 – of increasing that figure to US$15 billion by 2014 looks to have been highly ambitious, however.

India is a major purchaser of South African minerals, including coal, gold, copper, and manganese and has shown a growing interest in developing the defence relationship. This led the two countries to sign a defence co-operation agreement in 2006. Progress on that front has been slow, however, and was not aided by India’s blacklisting of the state-owned South African aerospace and defence firm Denel, following allegations of corruption in its contract to supply India with NTW-20 anti-material rifles. The lifting of the Denel ban in August 2014, after a nine-year investigation found no instances of illegal activity, should enable a much greater degree of co-operation between Indian and South African defence contractors.

South Africa is also home to a large Indian diaspora. Numbering approximately 1.5 million, they have included Members of Parliament, Cabinet Ministers and Deputy Ministers. South Africa and India are, with Brazil, members of the IBSA Dialogue Forum, a linkage which has helped to foster co-operation between the two democracies in such key fields as agriculture, defence, science and technology, energy and trade and investment.

The above is a revised version of an FDI Workshop Report, originally published 20 October 2011.

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As the evidence suggests, based on India’s interaction with Indian Ocean Region countries, a clear pattern has emerged showing that India’s interests are heavily focussed towards improving trade, investment and economic growth while it also attempts to secure access to hydrocarbon reserves and arable land, to strengthen its food and energy security. Due to its heavy dependence on inbound seaborne trade, India has placed a premium on developing its naval capabilities to safeguard and project its influence across the Indian Ocean. Given that India sees itself as a major power with strategic interests across the Indian Ocean, and that its requirements for access to natural resources are set to grow, it is likely that India will aim to significantly expand its influence across the Indian Ocean in the years ahead.

Looking further out, it is worth noting that the IBSA (India-Brazil-South Africa) Dialogue Forum excludes China. In the future, if IBSA were to evolve into a vehicle capable of facilitating development assistance and mutually beneficial investment, especially in Africa, it could provide India with an additional means of differentiating its overseas presence, particularly in Africa, with that of China. Although it has not entirely escaped criticism, by emphasising development, its democratic credentials, common language and the employment of local staff where possible, Brazil has been able to contrast its involvement in the Portuguese-speaking African countries with that of China. Although an energy importer, unlike Brazil, by carefully building on its own credentials and


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initiatives thus far, India may be able to meet its strategic objectives in much of the Indian Ocean Region in a similar way.

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Strategic Objectives of Japan inthe Indian Ocean Region

Summary

Japan is no mere regional power. It is the world’s third-largest economy and is geographically situated at the junction of Chinese, Russian and US interests. This fact, combined with the nationalism of the second Abe Administration, ensures that Japan will remain central to any strategy in balancing the growth of China. In fact, until it was surpassed by China, Japan possessed the world’s second-largest economy, a notable achievement given the degree of ruin it faced in the aftermath of the Second World War. It, moreover, adopted a post-war Constitution that forced it to forever renounce war; in fact, Japan’s security was assumed by the US. It was this lack of responsibility to maintain its own security that enabled Japan to focus its national attention on developing its economy.

So obsessive did Japan become in achieving its economic goals during the Cold War period, that it strongly resisted all US attempts to draw it into shared and collective security arrangements even as it effectively followed the lead of the US in foreign affairs. This situation began to change in 1972, however, when then Secretary of State Henry Kissinger began his dialogue with Mao Tse Tung without informing Tokyo of his intention to do so. The focus on developing the country’s economy, nevertheless, did not diminish in any way.

With the end of the Cold War, the US began to concentrate more upon the trade imbalances that it suffered against Japan, creating a degree of resentment in Tokyo. Rising nationalism in Japan, moreover, lent added impetus to the growing debate on Japan’s rightful place in the world order, as was evidenced by a formal demand for a permanent seat on the United Nations Security Council. Even those Japanese who most strongly supported the pacifist constitution viewed Japan as the victim of Western nuclear aggression. Given Japan’s lack of natural resources, moreover, and the fact that its economy is fuelled by its oil imports from the Middle East, it was only a matter of time before Tokyo began to turn its attention towards the security of its maritime energy routes, the sea lines of communication, or SLOCs, across the Indian Ocean. The trend towards enhancing its military capacity has gained momentum more recently as a reaction to perceived increasing Chinese aggressiveness in the East China Sea. It must be emphasised, however, that this does not imply a resumption of the kind of Japanese militarism that existed at the beginning of the last century or before the start of the Second World War.

Paramount National Interest

To retain Japan’s standing as a major power, albeit through economic rather than militarymeans, while strengthening co-operative relations with countries having similar democraticvalues and strategic interests.

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Enhancing economic and security relationships with key states in the Indian Ocean Region. Developing new markets and expanding existing ones. Working in conjunction with Indian Ocean Region countries to achieve Japan’s security goals,

such as the reduction of piracy and the security of its energy imports from the region. Balancing the growing influence of China in the region. Maintaining a free and open maritime system and protecting Japanese trade.

Specific Japanese Foreign Policy Objectives for Key States in the Indian Ocean Region

India

Establishing economic and security partnerships. Establishing “industrial corridors” in India. Providing financial loans to assist in the upgrade of India’s infrastructure. Providing rail network technology and expertise to upgrade India’s railway infrastructure. Developing an agreement for the transfer of nuclear technology.

Sri Lanka

Aiding the development of maritime safety in Sri Lanka, including the provision of trainingand material assets.

Advising the Sri Lankan coast guard on managing oil spills and other maritime emergencies. Assessing Colombo’s need for patrol boats. Training Sri Lankan naval personnel.

Bangladesh

Developing road, rail and power infrastructure in Bangladesh. Creating infrastructural projects linking Dhaka with Chittagong, including a special economic

zone for Japanese companies. Enhancing the operations of Japanese companies involved in apparel manufacture, chemical

production, steel manufacturing and the development and management of power plants.

Burma

Providing economic aid for infrastructure development. Offering Burma a regional security partnership with the United States. Re-establishing Burma as a rice-exporting giant. Establishing processing plants to mill rice that is presently processed in China.



Japanese Interests in the Indian Ocean Region

The rise of China has forced Tokyo to re-visit the basis of its security. China’s economic growth has led it to behave with increasing aggression in the East and South China Seas. For instance, when a Chinese fishing boat captain rammed a Japanese coast guard ship in waters off the Japanese-administered Senkaku Islands, Japanese authorities arrested the individual. Consequently, China cut off its exports of rare earths to Japan. But China does not pose the only threat to regional security. Around the same time, North Korea sank a South Korean corvette and revealed a new uranium-enrichment facility. China sent its warships through the straits separating the Japanese islands and complained about the naval exercises that Japan had conducted with the US in the Yellow Sea. The region, in short, was growing more dangerous than Japan had anticipated.

Whereas the US had earlier guaranteed Japan’s security, there is growing concern about its ability to continue to perform that role. This perception has increasingly led Tokyo to believe that it will need to take over the responsibility for its own security while simultaneously adhering, inasmuch as possible, to Article IX of the Constitution, which renounces Japanese-initiated war and conflict. Japan has, therefore, sought new partnerships in the region and beyond (including with some of the littoral states of the Indian Ocean), to continue to grow its economy and to protect its trade and energy imports through a region in which China is perceptibly taking an increasing interest. To that end, it has initiated dialogue with Bangladesh, Sri Lanka and, arguably most importantly, India.

India appears to be the prize that both China and Japan seek to win over. For China, entering into a partnership of sorts with India would remove, more or less, a security threat from its western borders, leaving Beijing free to concentrate on its current conflicts in the East and South China Seas. India, moreover, promises to be a giant market for Chinese exports, investments and business opportunities. For Japan, India provides the same promise of economic growth as it does to China, potentially allowing Tokyo to rejuvenate its stagnant economy. India will also provide Japan with a western buttress against China, if New Delhi could be won over to its side.

India has had a fairly stable relationship with Japan, despite Japanese debate on whether India is Asian. During the Cold War, Japan saw India’s non-alignment as untenable and its economic policies unattractive to investment. That perception has changed. It became obvious when Prime Minister Shinzo Abe announced in 2007 that the India-Japan relationship ‘will be the most important bilateral relationship [for Japan] in the world.’ Despite a brief interregnum after India’s 1998 nuclear tests, Japan enhanced its ties with India because Japanese officials realised that they could be left isolated due to India’s growing regional relationships. A strategic relationship was proclaimed in 2005 and was extended to include formalised defence ties, especially maritime co-operation, in 2006. Foreign Minister Taro Aso proposed closer ties with India, Australia and the North Atlantic Treaty Organisation states on the basis of shared values.

This translated into the proposal by Prime Minister Shinzo Abe for a “quadrilateral” initiative in which Australia, India, Japan and the US would hold a security dialogue. April 2007 saw the first trilateral naval exercise between India, Japan and the US in the western Pacific and in August of that year the annual India-US Malabar exercise was transformed into large-scale exercises, involving Australian, Indian, Japanese, Singaporean and US ships. Speaking in the Indian parliament in the same year, Prime Minister Abe referred to an India-Japan relationship which could ‘evolve into an immense network spanning the entirety of the Pacific Ocean, incorporating the US and Australia.’ In


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2008, the Indian and Japanese Prime Ministers formalised an India-Japan Joint Security Declaration, describing it as ‘an essential pillar for the future architecture of the region’.

Both Prime Ministers emphasised that these treaties did not seek to isolate or contain China. Nevertheless, in the aftermath of the April-May 2013 border stand-off between China and India, and barely a week after Chinese Premier Li Keqiang visited New Delhi on his first international trip as Premier to calm the situation, Prime Minister Singh visited Japan. During this visit, the stand-off was discussed by the US, India and Japan at their fourth trilateral dialogue, emphasising ‘greater security co-operation at a time all three countries are facing what they perceive to be an increasingly belligerent China’. Though not a formal ally, India has reportedly ‘signed up for the dialogue that goes beyond security co-operation.’

The relationship has grown since late 2013. Prime Minister Abe was Chief Guest at India’s Republic Day parade on 26 January 2014. Japan has, furthermore, been asked to invest in areas that are strictly off-limits to China, notably in the north-eastern states. This is all the more telling since China, which claims the Indian state of Arunachal Pradesh as South Tibet, worked to deny an Asian Development Bank loan in 2007 to Arunachal Pradesh, claiming it was “disputed territory”. Furthermore, Japanese organisations have been invited to construct a new port in Chennai. The two countries will hold their third 2+2 Dialogue and fourth Defence Policy Dialogue later in 2014. Also, in the immediate wake of the visit to India by the Emperor and Empress of Japan, Japanese Defence Minister Itsonuri Onodera spent four days in India, which culminated in a joint statement with then Indian Defence Minister, A. K. Antony, that Japan and India will ‘further consolidate and strengthen their strategic and global partnership in the defence arena through measures ranging from regular joint combat exercises and military exchanges to co-operation in anti-piracy, maritime security and counter-terrorism.’

The Indo-Japanese relationship has, if anything, grown under the BJP leadership in New Delhi. Soon after coming to power, Prime Minister Narendra Modi travelled to Tokyo to seek Japanese investment in India, conclude a nuclear technology-transfer agreement and enhance security ties. The two Prime Ministers, who have a strong personal relationship, were unable to conclude the terms of a nuclear deal, but Modi returned to India with Japanese promises of investment in Indian infrastructure to the tune of US$35 billion over the next five years, a transfer of rail network technology and the enhanced security ties he sought.

These are the standards against which President Xi’s trade and investment visit to India will be measured. While Beijing could easily match, and even better, the thirty-five billion dollar investment figure, China will be hard-pressed to match the quality of Japanese technology, which has had time to mature.

It was reported that Japan has offered Sri Lanka aid to develop its maritime safety, including training and material assets. It will advise the Sri Lankan coast guard on how to manage oil spills and other maritime emergencies. Tokyo also plans to begin an assessment of Colombo’s need for patrol boats and to train Sri Lankan sailors, if Colombo asks it to do so.

Sri Lanka, which offers a strong vantage point from which to watch the energy SLOCs from the Middle East to East Asia, also has received more interest from China. China has assisted the Sri Lankan Government to develop and manage the Hambantota Port in the south of the country, as



well as other projects. It has also been reported that Colombo was able to win its war against the Liberation Tigers of Tamil Eelam only after it received arms and armaments from China. A more recent sign of the fast-warming ties between China and Sri Lanka came when a Chinese submarine docked at Hambantota, much to the consternation of India.

It is more than likely that another of Japan’s objectives in the Indian Ocean is to counter the growing influence of China in the region. Just as Hambantota does for China, a friendly administration in Colombo would enable Japan to secure its natural gas imports from Mozambique, once those supplies begin to be shipped, as well as the mineral and other resources that it imports from Central and East Africa.

Japan is also using its experience in creating infrastructure and its technological excellence to further its relations in the Indian Ocean Region. In Bangladesh, for instance, Japan plans to create an industrial base and is said to have allocated approximately US$5.7 billion over five years to that end. It also plans to create a series of infrastructural projects linking the capital, Dhaka, with the major port of Chittagong, including the construction of a special economic zone dedicated to Japanese companies. Tokyo will also provide financial loans to build railways and road networks. It is more than likely that due to the increasing number of Japanese firms establishing offices and factories in Bangladesh, the country’s creaking power infrastructure will also be upgraded. Japanese organisations are already involved in apparel manufacture, chemicals, power plants and steel manufacturing facilities.

As with Sri Lanka, it is worth noting that China has already established itself in Bangladesh, albeit not to the same degree that it has in Sri Lanka.

Tokyo’s approach to enhancing its relationship with Jakarta, however, takes a different route. A major Japanese bank is looking to offer banking facilities to an estimated 60 million Indonesians who do not have a bank account, by using a local affiliate. Japanese insurers, similarly, seek to enter the Indonesian market to take advantage of a predicted economic boom that is expected to take place in the near future.

China created a strong relationship with Burma while that country was ruled by its military. To gain acceptance in the international community, however, Burma’s military rulers changed the country from an autocratic one to a fledgling, even if flawed, democracy. This turn to democracy has upset China. Beijing’s ability to deal with Naypyidaw as one authoritarian regime to another has now changed. Also, bearing in mind the growing anti-China sentiment among the people of Burma, President Thein Sein terminated China’s involvement in building the controversial Myitsone dam and its joint venture at the Letpadaung copper mine in the north-west of Burma. Perceived Chinese slights to Burma, such as the televised humiliation and execution of a Burmese drug lord, Naw Kham, has added to this antipathy. Other analysts claim, however, that the military junta was panicked by Beijing’s sheer power and the thought of an increasing dependence on a single economic and military partner. One instance of China’s growing influence in Burma was evidenced by its open mediation of peace talks between the Kachin Independence Organisation and the Burmese Government in February 2013, a fact that did not sit well with Burma’s leaders.

Beijing did not take this turn of events lightly, being very forthright in expressing to Burma its security concerns over the state of affairs in Kachin state. It consequently decreased its funding in


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Burma. Chinese foreign direct investment in Burma – estimated at the time to be around 34 per cent of total investment in Burma – dropped from US$8.5 billion in 2011 to US$1 billion in the first eleven months of 2012, with a resultant impact upon its economy.

It is precisely this anti-China sentiment that Japan is playing upon. Japan agreed to import five thousand tonnes of rice from Burma, where rice production has reached record levels in the two years since the military ceded power. In a bid to further boost Burmese exports, Japanese conglomerate Mitsui set up a network of rice processing plants with the Burma Agribusiness Public Corporation Ltd (MAPCO). This is part of an Integrated Rice Complex Project, which is planned to have an annual rice intake of 400,000 tonnes. MAPCO also plans to enter into a second joint venture with another major Japanese conglomerate, Mitsubishi, to mill tropical japonica rice, which is presently processed in China. It would appear that Burma is on its way to regaining the world title for rice exports. In 2013, furthermore, the US invited Burma to observe the Cobra Gold military exercises, in which Japan also participates, alongside Thailand, Singapore, South Korea, Indonesia and Malaysia.

Apart from the South and South-East Asian regions, Japan also seeks to further its economic and diplomatic relations with Iran, Saudi Arabia and South Africa.

Japan’s relationship with Iran is based overwhelmingly on its need to secure its energy supply. Iran is Japan’s third-largest supplier of energy. Though trade between the two countries exceeds US$11 billion per annum, due to the volume of energy exports to Japan, the balance of trade favours Iran heavily. For its part, Japan exports automobiles and electrical products to Iran. More recently, there has also been an emphasis on environmental concerns, with Japan agreeing to support the preservation of Orumieh Lake and an exchange of views on water, atmospheric pollution, global warming and other environmental challenges.

As Saudi Arabia is Japan’s largest source of energy products, it is not surprising that energy dominates the relationship. In return, Japan provides Saudi Arabia with petroleum technology, medical equipment, transportation technology, water technology and agricultural products. In recent times there have been calls for expanded economic and diplomatic relations, likely due to Riyadh’s efforts to diminish Tehran’s economic and political clout in the region. The Japan-Saudi relationship, however, remains dominated by energy sales.

Japan’s fairly strong relationship with South Africa has extended over a century. In 2012, Japan was South Africa’s third-largest trading partner and its largest export destination in 2005, 2006 and 2008. In 2011, South African exports to Japan were worth approximately US$5 billion, while imports from Japan amounted to approximately US$3 billion. The largest South African export product to Japan was platinum, which was estimated to be 55 per cent of its total Japanese exports. The other major export items were iron ore, ferro-alloys and aluminium. In 2012, it was estimated that 108 Japanese firms operating in South Africa created approximately 150,000 jobs. The Japan Bank for International Co-operation injected around US$1.2 billion into South Africa between 2007 and 2012 to enable South African firms to export their goods and services to Japan. There have also been collaborations between the two countries in research ventures, science and technology. Pretoria has described the relationship with Tokyo as “strategic”.



Japan is also making inroads into the countries of Central and East Africa. In contrast to the simplistic Chinese model of investment in, for example, the minerals sector, mineral extraction and export in return for royalties, Japan is investing in infrastructure, including roads and bridges, and capacity, including educational and health facilities.

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While Prime Minister Abe does indeed seek to re-shape Article IX of the post-war Constitution, Japan still adheres for the most part to its renunciation of warfare. It has, however, used its economy, trade and technology as instruments to counter China’s influence in these regions, which it perceives as a distinct threat, given that country’s growing nationalism and aggressiveness in East and South-East Asia. Japan’s activities in the Indian Ocean Region are, therefore, essentially an extension of the contest that the two countries appear to be increasingly engaging in in the East China Sea.

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Strategic Objectives of France in the Indian Ocean Region

Summary

France is unique among the extra-regional powers active in the Indian Ocean Region in that it is both of the region and outside it. It may be a legacy of the French colonial empire, yet France has very much a modern and wide-ranging presence in the Indian Ocean and is invariably at the forefront of efforts to promote stability and development in the region.

Some one million French citizens live in the Indian Ocean départments of La Réunion and Mayotte, and France maintains military bases at La Réunion, Djibouti and Abu Dhabi. Former colonies Djibouti, Burundi, Comoros and Madagascar continue to maintain close relations with Paris.

The influence of France in the western Indian Ocean is aided by the fact that French is an official language of six countries. Although English may be the de-facto official language of Mauritius, French is far and away more widely used and understood, particularly in business and the media. In the Seychelles, French is one of three official languages. In both of those former British colonies, the French influence continues to be the touchstone of the cultural milieu and is at the heart of the French-based Mauritian and Seychellois Creole languages. In the Indian Union Territory of Pondicherry, French continues to enjoy official status and the French heritage of the former Établissements français dans l'Inde constitutes another small but useful link between the two countries.

This chapter establishes France’s paramount national objective (that is, the notion that underpins all other national endeavours), the primary objectives of its overall foreign policy and its objectives for the Indian Ocean Region in general, before identifying specific objectives for certain key states and areas in the Indian Ocean Region. These are then discussed in more detail subsequently, along with how France is seeking to accomplish them. Although the scope of French activity in the Indian Ocean Region is both wide-ranging and substantial, this chapter must necessarily restrict the focus to certain key activities in selected countries.


To preserve France’s position as an important and influential world power with globalinterests.

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The promotion of peace, stability, human rights, social justice and the non-proliferation ofnuclear weapons.

Affirming territorial sovereignty, ensuring the security of French citizens and defendingFrench interests overseas.

Employing “economic diplomacy” to facilitate economic recovery through increased exportearnings, more inbound tourist arrivals and the attraction of greater foreign investment toFrance.

Encouraging economically, socially and environmentally sustainable development that alsoboosts employment options in the recipient countries.

Being an integral part of NATO and the European Union but, at the same time, preservingFrance’s strategic autonomy and ability to act in its own national interests.

Ensuring the unimpeded flow of trade through key maritime chokepoints and across sealines of communication.

Boosting the influence and prestige of France through soft power initiatives such aseducation diplomacy, cultural diplomacy and scientific, technical and space co-operation.

Promoting the use and teaching of the French language.


Acting to end (or, at least, reduce) piracy in the Gulf of Aden and western Indian Ocean. Maintaining the security of maritime chokepoints and sea lines of communication. Supporting the work of the Commission de l’Océan Indien as a Francophone organisation and

voice for the island states of the south-west Indian Ocean. Maintaining the Indian Ocean Region as a valuable market for French defence exports. Preventing French extremists fighting in the Middle East from returning to France to launch

attacks.

Specific French Foreign Policy Objectives for Key States in the Indian Ocean

Region Australia

Expanding Franco-Australian co-operation regionally and within the shared membership ofinternational organisations.

Working with Australia to counter threats to the international system. Increasing French exports to Australia.



Indian Ocean Island States

Supporting the work of the Commission de l’Océan Indien. Maintaining the position of France as a major trading partner and security provider to the

island states. Ensuring continued French cultural and linguistic pre-eminence in the island states. Actively supporting the island states with sustainable development initiatives, the

development of the “blue economy” and the management of natural resources.


Supporting Djibouti as a close partner and strategic base. Working with South Africa to secure regional sea lanes of communication. Aiding the ability of the Mozambican Navy to carry out its functions through training,

capacity building and the sale of vessels.

India

Supporting the emergence of India as an important strategic, diplomatic and economic actorthat also prizes the notion of strategic autonomy.

Partnering with India in natural resources management, sustainable development andmaritime security initiatives in the island and littoral states of the Indian Ocean.

Garnering Indian support for French policy positions by endorsing India’s bid for apermanent seat on the United Nations Security Council.

Deepening economic and strategic ties for mutual benefit, including closer co-operation inspace and civilian nuclear energy.

Middle East

Contributing directly to the stability of the Middle East and the Persian Gulf. Engaging with Middle Eastern countries to facilitate peace and stability in the region. Ensuring the security of French oil and liquefied natural gas imports, principally from the

United Arab Emirates, Saudi Arabia and Qatar. Keeping diplomatic links with Tehran open while maintaining pressure on Iran until it is

completely clear on the purposes of its nuclear programme, renounces all militaryapplications of its nuclear technology and fully embraces international oversight.

Increasing sales of defence equipment and civil aircraft to the region.


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Indonesia

Strengthening political, economic, educational and cultural ties with Indonesia. Encouraging more bilateral co-operation, investment and research in the energy and mineral

resources sectors. Supporting Indonesia’s development through relevant development assistance initiatives,

such as sustainable development projects and education, teacher training and governanceprogrammes.

Capitalising on the relationship with Indonesia as a gateway to a deeper relationship withASEAN.

Working with Indonesia as a partner in efforts to address climate change.

French Interests in the Indian Ocean Region

At over 11 million square kilometres, France possesses the world’s second-largest Exclusive Economic Zone, a substantial proportion of which is located in the Indian and Southern Oceans. France, therefore, has significant expertise in the management of marine resources and the blue economy (the long-term economic and environmental sustainability of the world’s oceans). Maintaining sovereignty over those territories is a key objective of French foreign policy in the Indian Ocean Region, not least because, despite the otherwise warm nature of their relationships, parts of those territories are claimed by Mauritius, Madagascar and Comoros.

A general foreign policy goal, but one which is also applied in the Indian Ocean Region, is to raise the profile of the French language. Paris does this by working with local authorities to promote French within their education systems through such measures as campaigning for the teaching of at least two foreign languages, the training of language teachers, and the implementation of bilingual education. Teaching in foreign schools and cities is also provided by the Agency for French Education Abroad (L’Agence pour l’Enseignement Français à l’Étranger) and local branches of the Alliance Française. In addition to its role as a global language, in the Indian Ocean Region, French is very much a living, thriving regional language.

Trade is a key component of French foreign policy. Under the “economic diplomacy” rubric, the Ministry of Foreign Affairs and International Development (Le Ministère des Affaires Étrangères et du



Développement International), actively promotes the benefits of investing in France and identifies export opportunities for French companies.

Trade – and the appeal to others of the goods and services produced by another country – is, of course, also an important component of soft power. As Prime Minister Manuel Valls has said:

Businesses contribute to France’s strength and image abroad. Our major groups and high-tech companies, our brands are known and admired worldwide.1

Economic diplomacy is an integral component of government efforts to revive the still-flagging French economy and, given France’s position as a leading trading state and a major world economic power, trade necessarily figures large in any discussion of French foreign policy objectives. With the wealthy Gulf State economies of the United Arab Emirates and Qatar, plus the emerging markets of India and Indonesia, and the continuing weight of Australia and South Africa – by many indicators, still the largest economy in sub-Saharan Africa – the economic importance of the Indian Ocean Region to France is unquestionable.

For very similar reasons, tourism is another important aspect of French economic diplomacy in the Indian Ocean Region, again confirmed by Prime Minister Valls:

Our economic policy also aims to restore France’s attractiveness. That, of course, means promoting tourism, which is vital for our economy and for which the Minister of Foreign Affairs and International Development, Laurent Fabius, is very active.2

Inbound tourism plays a significant role in the French economy, accounting for 9.5% of GDP in the world’s most visited country. Increasing the number of visitor arrivals to France and its territories is thus an important foreign policy objective. The attention given to tourism by the Ministry of Foreign Affairs, and its role in economic diplomacy, invites comparison with the merger of AusAID into the Department of Foreign Affairs and Trade which, in much the same way, is intended to present a more whole-of-government approach to the promotion of Australia’s overall strategic interests.

As the world’s fourth-largest armaments exporter, accounting for 7.2% of the global weapons trade in 2013, the defence industry plays an important role in the French economy. The value of the country’s armaments exports is tipped to exceed €7 billion ($10.1 billion) in 2014, a 42 per cent increase on the previous year (itself a 30 per cent increase on the 2012 figure, at a value of €6.3 billion). That the sector can generate such earnings in a very poor economic climate – the French economy recorded another period without growth in the second quarter of 2014 – only highlights its importance. As the Ministry of Defence confirmed in its July 2013 report to parliament, defence exports are not only a key component of national security, but also of the national economy.3 The main companies that make up the French defence industry – Dassault Aviation, DCNS, EADS, MBDA, Nexter, Safran and Thales – are recognised as world-leaders and are present around the globe.

1 Valls, M., ‘L’économie française et ses objectifs’ [‘France’s economic and business goals’]; speech to the French Business Confederation, 27 August 2014. <http://www.ambafrance-au.org/L-economie-francaise-et-ses>. 2 Ibid. 3 ‘Rapport au Parlement 2013 sur les exportations d’armement de la France’, [Report to Parliament on French Armaments Exports 2013], Ministère de la Défense, Paris, July 2013, p. 8.


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Among the most high-profile future defence deals are those being negotiated with India, Qatar and Saudi Arabia.

In convening, and jointly chairing with Iraqi President Fouad Massoum, the International Conference on Peace and Security in Iraq, held in Paris on 15 September 2014, President François Hollande signalled the willingness of France to play an active role in countering the Islamic State militia. In a precursor to air strikes, France had begun surveillance flights over Iraq to identify IS targets and to arm the Kurdish Peshmerga forces. In actively combatting the IS in Iraq, Paris will also be hoping to avoid the possibility of French jihadists returning from Iraq (and Syria) to launch attacks in Europe. Even despite the common ground established at the Iraq conference, France can still be expected to have differences of opinion with key partners, such as the United States. The spirit of French exceptionalism and long-standing attachment to strategic autonomy will continue, even if it may have been lessened by the return to NATO and the new enthusiasm for international action. France will be, in the words of Foreign Minister Fabius, ‘allied with, but not aligned to’ its partners.

France is a founding contributor to Operation Atalanta, the European Union military operation to help prevent piracy and armed robbery off the coast of Somalia and protect vessels carrying World Food Programme deliveries to that country. Atalanta began in December 2008 and, since that time, one of the French frigates based at La Réunion is always assigned to the operation. A Djibouti-based maritime patrol aircraft is frequently also deployed. Just as important, however, is tackling the root causes of piracy on the ground. To that end, France works under the umbrellas of the European Union and the United Nations in aid delivery, supports EU training programmes for the Somali armed forces and trains African Union forces deployed to Somalia.

*****

The following briefly summarises aspects of French involvement with key countries and areas in the Indian Ocean Region.

Australia

The January 2012 Australia-France Joint Statement of Strategic Partnership formalised existing Franco-Australian co-operative efforts and identified future areas of co-operation across the relationship with a priority on the economic, energy and transport sectors. While the main focus is on Europe and the Pacific, the agreement nonetheless makes special mention of the French Indian Ocean territories. Natural emphases for enhanced bilateral relations in an Indian Ocean context are improved defence and security co-operation, and resource and disaster response management. Such engagement should also be supplemented by increased people-to-people, scientific, educational and cultural linkages.

For Australia, working in concert with France also offers great potential as a springboard for deeper relations with South Africa and other regional states, particularly mineral-rich, French-speaking,



Madagascar. The ability to draw on French experience and expertise may also offer a useful platform for closer co-operation in largely Francophone western and central Africa that may be of value to Australian diplomats, NGOs and companies active in those areas. Indeed, closer consular co-operation was discussed by Foreign Ministers Laurent Fabius and Julie Bishop at their 23 April 2014 meeting in Paris. In the context of the Indian Ocean Region, such a pooling of resources and expertise would be of particular benefit to Australian mining companies operating in Madagascar and could complement the work of the Australian High Commission in Mauritius, which is also accredited to Madagascar.

One avenue for future Franco-Australian co-operation in the Indian Ocean Region is the establishment of a co-ordinated regional framework to prepare for, and respond to, natural disasters. As two of the leading states in the region, and with a wide range of capabilities at their disposal, Australia and France are well-placed to take the lead in establishing an Indian Ocean Region Humanitarian and Disaster Response Agreement (IORHADR). The Indian Ocean Region has a great susceptibility to natural disasters but its ability to prepare for, and respond to such events, is significantly underdeveloped. Although there are some nascent frameworks already in place, the region would benefit greatly from a regional disaster relief co-ordination mechanism. A version of the FRANZ (France, Australia, New Zealand) Agreement, which has been operating in the South Pacific for over twenty years, could be adapted to an Indian Ocean Region context to substantially aid humanitarian and disaster relief operations in the area. Such an IORHADR could be co-ordinated through the Indian Ocean Rim Association (IORA) and headed by Australia and France, using their appropriate military and civil capacities to aid regional states experiencing severe natural disasters. (India, too, ought to be included at the earliest opportunity). The IORHADR would benefit greatly by being able to draw upon Australian and French experience gained in FRANZ. Other regional states could also be brought in and key extra-regional stakeholders, such as the United States, Japan, China and South Korea, could be included on an ad hoc basis, as appropriate, in a truly Indian Ocean regional initiative.

On the French side, Australia is a longstanding partner with a diplomatic history dating back to 1842, and a shared history on the battlefields of the two world wars, including at sea in the 1942 Battle of Madagascar. Paris and Canberra share similar perspectives across a wide range of issues and that closeness is enhanced by Australia’s current seat on the United Nations Security Council and position as Chair of both the G-20 and IORA.

France shares a healthy trade relationship with Australia and one that is very much in France’s favour. France enjoys its fifth-largest trade surplus with Australia, which stood at €1.72 billion ($2.5 billion) in 2013. While only the thirtieth-largest destination for French exports, Australia is, as the Department of Foreign Affairs and Trade notes, still a valuable market for such high-value French products as pharmaceuticals, aircraft, perfumes and cosmetics, and civil engineering equipment and parts. Australia is, for instance, the sixth-largest market for champagne, importing over six million bottles in 2013.

France is Australia’s eighth-largest overseas investor and such leading French companies as Total, Veolia, GDF Suez, Thales, Accor, BNP-Paribas, Airbus, Bouygues and EADS, are all present in this country.


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The already close relationship that is underscored by the 2012 Strategic Partnership, shared membership of leading global and regional bodies and the French Government’s policy of economic diplomacy, will only continue to grow, helped along in the next few years by the centenary commemorations of shared First World War experiences. Perhaps the greatest challenge, therefore, will be finding ways to translate the success and depth of the relationship to shared interests in the Indian Ocean Region.

Indian Ocean Island States

The island states of the south-west Indian Ocean – Mauritius, Madagascar, Seychelles and Comoros – in addition to the French overseas départments of La Réunion and Mayotte, occupy a unique placein France’s Indian Ocean foreign policy. This French-speaking sub-region is the home of the Commission de l’Océan Indien (COI, or Indian Ocean Commission), that brings together Mauritius, the Seychelles, Comoros and Madagascar with “l’Hexagone” (representing La Réunion but not, officially, Mayotte), under the structure of a permanent secretariat and a rotating presidency, currently held by the Comoros. As President Hollande noted when addressing the COI Heads of State and Government Summit in the Comorian capital, Moroni, on 23 August 2014, ‘What brings us together is not just history or geography, it is culture, it is a desire for development and co-operation. What unites us is an ocean, the Indian Ocean.’4

In the COI, France is in the enjoyable position of participating in a fully Francophone multinational organisation. Later in his Summit address, President Hollande highlighted the importance of language, underscoring the notion that communication, the promotion of one’s point of view and the securing of influence are always easier when speaking in one’s native language:

I participate in many summits, but the ones I like the most are those where French is spoken. The French language does not belong to France [alone] ... by learning and speaking French, one contributes to diversity and plurality while promoting the belief that human dignity, freedom and equality can be shared.’5

Despite the many differences between its members, not least in terms of their development levels and national incomes, the COI plays a leading role in promoting and addressing the concerns of island states.

Among the COI members, France quite deliberately plays the role of partner, rather than leader; a first among equals, as it were. In addition to the provision of expertise, Paris also contributes funding to COI programmes, both in its own right and through the European Union. The overriding objective of the COI is to ensure that the south-west Indian Ocean Region – l’Indianocéanie – is ‘an area of development, culture [and] prosperity.’6

4 Hollande, F., ‘Discours au Sommet de la Commission de l’Océan Indien’ [‘Address to the Summit of the Indian Ocean Commission’], 23 August 2014. <http://www.elysee.fr/declarations/article/discours-au-sommet-de-la-commission-de-l-ocean-indien/>. 5 Ibid. 6 Ibid.



Key focus areas of the COI are: regional stability; economic growth; the development of the blue economy (to be linked with the “green economy”); the fisheries and aquaculture industries and the sustainable management of marine ecosystems and marine resources; food security; health; regional transport and infrastructure development; maritime security; and the development of an “Indianocéanique” identity.

In all of those areas, France brings considerable expertise and resources to bear, without which the ability of the COI to meet its mandate would be severely reduced. It also goes a long way towards ensuring that territorial claims by Madagascar and Mauritius, as well as Comorian irredentist claims over Mayotte – the residents of which have repeatedly, and by increasing margins, voted for closer integration with France – can be put to one side without compromising the COI.

Territorial disputes aside, the advantage to the island states of French membership of the COI is that it provides an influential partner that is aware of the challenges that they face and which has a seat at the top tables of all the leading global bodies. The COI gives France a very useful avenue for the maintenance of its status and influence in l’Indianocéanie. The COI is an asset to France’s long-term regional influence.

Cementing the importance of France to the Indian Ocean island states is its position as a trading partner: France is among the top three trading partners of all the Indianocéanique countries.

France maintains an active defence presence in the south-west Indian Ocean. The Forces Armées en zone sud de l’Océan Indien (FAZSOI, or Armed Forces in the Southern Indian Ocean) comprise 1,900 personnel from the three services. Primarily based at La Réunion, the FAZSOI is charged with protecting the security and territorial sovereignty of La Réunion, Mayotte, the Îles Éparses located in the Mozambique Channel and disputed by Madagascar, Île Tromelin claimed by Mauritius, and the Terres Australes et Antarctiques Françaises of the Southern Ocean. In addition, the remit of the FAZSOI includes contributing to stability and the development of local communities, monitoring of France’s exclusive economic zones, and, in the event of a crisis situation or natural disaster, to undertake emergency operations. To that end, the FAZSOI maintains a regional rapid response capability.

As part of France’s commitment to the anti-piracy operation conducted by the European Union in the western Indian Ocean, one of the two frigates stationed at the Port de la Pointe des Galets naval base in La Réunion – Nivôse and Floréal – is always assigned to Operation Atalanta. In that context, the French Marine Nationale and the Royal Australian Navy will continue to work closely together. Similarly, the ready response capability and ability to undertake humanitarian and disaster relief operations of the FAZSOI certainly makes it a natural partner for Australia in any future joint Indian Ocean Region Humanitarian and Disaster Response Agreement (IORHADR).


The sub-region of eastern and southern Africa is another area of importance to French foreign policy. In this area, the focus is very much on security, supplemented by development assistance. In addition to the contribution to the Operation Atalanta anti-piracy mission in the waters off the coast of Somalia, French involvement in Djibouti and South Africa is particularly noteworthy.


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Under the December 2011 bilateral defence co-operation treaty, France supports and guarantees the independence and territorial integrity of Djibouti, an important consideration given its highly-strategic location, pro-French (and pro-Western) outlook and status as an oasis of relative stability in a troubled region. Located on the African side of the Bab el-Mandeb chokepoint, where the Red Sea joins the Gulf of Aden, it not surprising that Djibouti is a major node in French foreign and security policy. Since independence in 1977, the one-time French Somaliland has maintained close ties with the former colonial power and France remains the pre-eminent foreign influence. Until its transfer to the newly-opened Abu Dhabi base in 2009, the 13th Demi-Brigade of the Foreign Legion was based at Camp Lemonnier, in Djibouti City. Even after the departure of the Foreign Legion, France continues to maintain a substantial military presence in Djibouti. Some 2,000 personnel are based at Camp Lemonnier, making it France’s largest foreign base. Since 2001, United States personnel assigned to the Combined Joint Task Force-Horn of Africa have also been based at Camp Lemonnier, the only permanent US base on African soil. Djibouti is also home to the Japanese Self-Defence Force’s first, and only, overseas base, established in 2011 as the Japanese Facility for Counter-Piracy Mission in Djibouti. The permanent presence of US and Japanese forces presents an excellent opportunity to boost interoperability between the three countries’ forces.

The remit of the Forces Françaises stationnées à Djibouti (FFDj: French Forces Stationed in Djibouti) also includes co-operation and training with the Djiboutian and other regional armed forces, and the provision of civil-military assistance and search and rescue operations to the Djiboutian Government. France also bases some of its fighter aircraft at Ambouli International Airport, in Djibouti City. Its military presence in Djibouti gives France a permanent strategic presence in the Horn of Africa, enabling it to play a major role in international efforts to secure the crucial sea lines of communication between the Persian Gulf and the Mediterranean Sea.

It is, however, worth sounding a note of caution. Djibouti has all the ingredients for Arab Spring-style unrest: a long-serving, authoritarian president who is well-regarded by the West; a rubber stamp parliament; banned opposition parties, high unemployment with few economic opportunities on the horizon; and a high – and rising – rising cost of living. In the future, France may find itself grappling with the consequences of a “Djibouti Spring” which, in a worst-case scenario, could see a descent into unrest and the end of Djibouti as a forward base. The consequences of that for regional stability and maritime security would be bleak indeed.

South Africa is a fellow member of the G-20 and the bilateral relationship is warm and close. South Africa is France’s main trading partner in sub-Saharan Africa, and is the destination for 20 per cent of French exports to that area. In turn, France is South Africa’s ninth-largest source of imports. French firms have a three per cent share of the South African market. There are now 235 French companies operating in South Africa, employing a workforce of 30,000 South Africans, primarily in the industrial, mining and services sectors. French investment in South Africa amounts to €1.6 billion ($2.3 billion). Despite the constraints on the business community resulting from the South African Government’s 65 per cent local content and Black Economic Empowerment requirements, France continues to be a major investor in the South African economy.

Since 2009, the Agence Française de Développement (AFD, the French Development Agency) has become a leading source of foreign assistance to South Africa. The AFD allocated €1 billion to South



Africa in the 2011-13 period, with a priority on the provision of water, transport and energy infrastructure to combat the legacy of apartheid.

As neighbours, France and South Africa co-operate closely on security matters, including joint exercises and training, anti-piracy operations, training and capacity building with regional navies, the co-ordination of maritime search and rescue efforts, regular high-level strategic dialogues and the exchange of classified material. Indeed, according the French Embassy in Pretoria, a growing number of South African military personnel are learning French to facilitate communication with their French counterparts. The two countries undertake a biennial naval exercise, Operation Oxide, next due to be held in 2015. In the 2013 iteration of Oxide, officers of the Mozambican Navy joined their French and South African counterparts to promote co-operation and improved interoperability. Both countries have undertaken anti-piracy patrols in the Mozambique Channel and capacity building with Mozambique. In a deal worth €200 million, signed in September 2013, the Mozambican Navy, whose few vessels were all donated by other countries, will receive 30 new vessels – three patrol vessels, three interceptors and 24 fishing trawlers – to be built by French shipbuilder, Constructions Mécaniques de Normandie.

The French-South African liaison with Mozambique recognises the two countries’ common interest in securing the sea lines of communication in the area and, at its peak, preventing the southwards expansion of Somali piracy. As the leading naval power in the region, France is viewed by the other regional states as a positive presence and a source of stability, mirroring the view held of it in the Pacific by Australia, New Zealand and the United States.

India

French foreign policy sees India as a partner in its own efforts to build capacity in such fields as natural resource management, sustainable development and maritime security in the island and littoral states of the Indian Ocean.

To that end, France actively supports India’s emergence as an important strategic, diplomatic and economic actor. Paris backs New Delhi’s bid for a permanent seat on the United Nations Security Council, a greater role for India in the decision-making processes of international institutions (including the G-20 and an expanded G8) and co-operation in civilian nuclear energy.

The 1998 Strategic Partnership formalised the Franco-Indian links built up since the 1980s and set out the key pillars for future co-operation: defence, civil nuclear, space, internal security/anti-terrorism, political, economic, cultural and scientific.

Despite the slowing of the Indian economy, with a growing middle class and a worldly élite, India is still a natural market for French consumer products and education. India’s need for infrastructure and energy – including nuclear – will also continue to attract French companies. Although complex and drawn-out, the Medium Multirole Combat Aircraft (MMRCA) programme, under which India is to acquire 126 Dassault Rafale fighter aircraft, will provide a significant monetary boost for the French defence industry, as well as showcasing the aircraft to other potential purchasers.


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On the economic front more generally, France has almost invariably had a trade deficit with India. Despite the possibility of high-value aircraft sales, it is a situation that is unlikely to change in the near future. In 2013, for instance, the trade deficit grew by almost 18 per cent on the previous year to reach €1.7 billion ($2.4 billion), after a drop in French exports to India. In the first quarter of 2014 alone, the situation worsened further. French exports in that period fell by 18.8%, while imports from India rose by 13.3%, resulting in a 77 per cent increase in France’s trade deficit.

Although exports across all sectors fell in 2013, the pharmaceuticals, chemicals, perfumes and cosmetics sectors perhaps offer a little more hope for French exporters, as they recorded less steep falls than other sectors. Exports of agricultural, forestry, fisheries and aquaculture products, for example, fell by 68.6 per cent. Looking ahead, though, they are all sectors that France may yet be able to benefit from if Prime Minister Modi succeeds in re-energising the Indian economy. Even though slowing Indian demand also affected their competitors, with a market share of just 0.8%, French exporters are clearly underrepresented in India in comparison with those from the UK (1.4% market share), Japan (2.2%), Germany (2.7%) and the United States (4.8%). France, like its European competitors, welcomes a successful conclusion to negotiations for an EU-India Free Trade Agreement.

The prolonged negotiations for the acquisition by the Indian Air Force of the Rafale fighters to replace its stock of ageing MiG-21s continue to weigh against French trade statistics with India. Sticking points in the MMRCA programme – potentially worth as much as US$20 billion – centre on such issues as the transfer of technology and the ability of Indian contractor Hindustan Aeronautics to assemble 108 of the aircraft to the necessary standard, and the insistence of India that Dassault guarantee the Indian-assembled aircraft regardless.

The cost of the aircraft has increased markedly in the two years since New Delhi first anointed the Rafale as its preferred option. During that time, the Indian economy has slowed, potentially making such large expenditure more difficult, and other foreign orders for the Rafale have failed to come to fruition, despite the aircraft’s positive showing in Operation Serval, conducted by the French armed forces in Mali. A satisfactory conclusion of the Rafale deal, therefore, would be of considerable value to France; not just in a financial sense, but also in the sense of boosting international confidence in the successor to the Mirage 2000. It would offer Dassault a very welcome opportunity to showcase the Rafale’s capabilities to other prospective purchasers on the basis of its service with another air force besides the French Armée de l’Air.

Regular joint exercises between the French and Indian armies (Shakti), navies (Varuna) and air forces (Garuda), serve to boost defence co-operation and aid the interoperability of French and Indian forces, which can be deployed on the same peacekeeping missions. In what is no doubt a reflection of Indian concern at Chinese claims on its territory and the possibility of future conflict with Pakistan in Kashmir, the biannual Shakti exercise is conducted in mountainous terrain. First held in Uttarakhand in 2011, the venue for the 2013 iteration was the French Alps. In 2015, Shakti can be expected to return to India. The Varuna naval exercises, held since 2001, contribute to improved interoperability between the two navies and have particular relevance to anti-piracy operations and possible humanitarian assistance and disaster relief deployments in the western Indian Ocean and Arabian Sea.



France is the sixth-largest source of foreign direct investment in India, to the tune of US$547 million in 2012-13. Despite the recent slowing of the Indian economy and the parlous state of its French counterpart, French technology, the global nature of the leading French firms, and their involvement in the construction of important transport, energy and water infrastructure projects, should ensure that that standing continues.

Given the falls in French exports and the longstanding trade deficit, it is understandable that France has looked to the growing number of Indian tourists travelling overseas as a valuable source of foreign exchange earnings. Under the economic diplomacy rubric, the intention is to increase the number of Indian passport holders who visit France each year – currently just over 300,000 – by issuing them with tourist visas within 48 hours, instead of the current timeframe of 15 days, with effect from 1 January 2015.

As part of that same initiative, Indian nationals now have visa-free access to the Indian Ocean départment of La Réunion, if holidaying on the island for 15 days or less. Almost 20 per cent of Réunionnais are of Indian origin, primarily from Tamil Nadu and Gujarat. The thrice-weekly Air Austral flights linking Chennai and St-Denis de la Réunion were introduced in June 2013 with the added intention of complementing the French business and cultural presence in Tamil Nadu and nearby Pondicherry. Indeed, there is still a strong French cultural presence in Pondicherry (a French territory until 1954) and French is a language with official status in the Pondicherry Union Territory. Albeit highly localised, it nonetheless provides a continuing Indo-French cultural link that could be drawn upon further.

Like Australia and other countries, France promotes its education sector in India. In the case of France, the benefits cited include the high quality of the education (which includes classes taught in English), and the ability for students to study and immerse themselves in a foreign language, while experiencing the culture of France. Such benefits have resonated with a growing number of Indian students: In 2012, some 2,600 students from India studied in France; a number that has almost doubled in five years. Education can be an especially valuable form of soft power and, to that end, the French Government has granted scholarships totalling €1.1 million to over 300 Indian students, enabling them to study for a Master of Science degree in France.

Nuclear energy is at the heart of the French energy mix and offers a significant source of expertise and experience for India to draw upon. Three-quarters of the electricity in France is generated from nuclear energy and the country operates 58 reactors, second only in number to the United States. In September 2008, France was the first country to sign a civil nuclear agreement with India, after the Nuclear Suppliers Group gave its approval. French energy major Areva, the world’s largest nuclear company, has the contract to construct two European Pressurised Reactors (EPRs), each with a capacity of 1,650 megawatts at Jaitapur, in Maharashtra state. The Jaitapur site is intended to eventually house up to six reactors with an installed capacity of 10,000 MW.

Franco-Indian co-operation in this field extends to the application of nuclear energy to other, non-military and non-energy uses, such as desalination, and research into reactor safety and the management of radioactive waste.

Since its first beginnings in 1964, when India sought French assistance in the construction of the Satish Dhawan Space Centre in Sriharikota, Andhra Pradesh, Franco-Indian space co-operation has


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continued to evolve. It has been strengthened by a formal co-operation agreement in 1977 and the 1998 India-France Strategic Partnership. A 2008 agreement covering joint space research and satellites paved the way for the October 2011 launch of the first Franco-Indian satellite, Megha-Tropiques. Charged with studying the water cycle in tropical environments and the life cycles of tropical storm systems, data from Megha-Tropiques are also applied to studies of energy needs. A second satellite, Saral, to measure the impact of precipitation and cloud masses on satellite telecommunications systems, was launched in February 2013. That same month also saw the signing of an agreement for long-term space co-operation between the Indian Space Research Organisation and the French Centre National d’Études Spatiales. Expertise gained from the longstanding space programme at the Centre Spatial Guyanais, in Kourou, French Guiana, the application of data to real-world situations and the formal agreements underpinning the relationship, will stand France in good stead as a partner as the Indian space programme continues to expand.

Middle East

A peaceful and stable region is the first objective of French foreign policy in the region. To achieve that objective, France engages in regular dialogue with countries in the region to facilitate positive contributions to peace and stability. In terms of defence, France is now an important partner and supplier of the Gulf States and maintains an active military presence in the region.

As it is still not yet certain that the Iranian nuclear programme does not run counter to the French objective of the non-proliferation of nuclear weapons, Iran figures strongly in French foreign policy efforts in the Middle East. Paris recognises Iran’s right to operate a civilian nuclear energy programme, but does not want a nuclear-armed Iran and remains very concerned that Tehran continues to maintain a stockpile of low-enriched uranium that can be easily turned into highly-enriched weapons-grade material. Of equal and related concern is the number of centrifuges that Iran claims it will need for its nuclear energy programme. Used to enrich uranium, Iran maintains that it will need to keep all of the roughly 19,000 centrifuges that are already in the country. France, however, wants that number reduced to the absolute minimum needed for energy production, as that quantity of centrifuges can greatly speed up the enrichment process and the production of a nuclear weapon. While France does not want Iran to acquire a nuclear weapons capability, neither would it unilaterally scupper the P5+1 talks if some form of otherwise workable arrangement were made. In the meantime, however, France can be expected to maintain its position on these issues and may even be used a scapegoat by Iranian negotiators playing a nationalist card for their domestic audience.

On the other side of the Persian Gulf, French policy is focussed on maximising the economic opportunities available in the United Arab Emirates, Saudi Arabia and Qatar.

Since 2009, and at the request of the UAE Government as it sought to counter Iran, France has maintained a military presence at Abu Dhabi. The Camp de la Paix (Peace Camp) houses 750 personnel from all three services at three sites, including the 13th Demi-Brigade of the Foreign Legion, previously based in Djibouti. The Abu Dhabi base confirms the importance placed on the UAE by France which, in addition to seeking to play a more active international role while contributing to



the security of vital energy routes to Europe, also sees opportunities for its defence industry in the Emirates.

The July 2013 Falcon Eye project, for instance, is a US$1 billion purchase of two advanced military satellites by the UAE from French companies Astrium Satellites and Thales Alenia Space. Under the deal, French high technology and ongoing intelligence analysis and support will provide the UAE Government – ever mindful of Iran – with geospatial intelligence capabilities enabling it to detect troop movements and monitor installations in key strategic locations around the Middle East. With the introduction of Falcon Eye in 2018, the UAE military will have with one of the most potent and competent geospatial intelligence capabilities in the region.

At €2.7 billion ($3.9 billion), France enjoys its third-largest trade surplus and the UAE is France’s eighth-largest supplier of oil. In the other direction, Airbus aircraft are the largest component of French exports to the UAE, accounting for 26.5% of total exports, despite having slowed of late as Gulf airlines await deliveries of the A350. French motor vehicles are capturing a growing slice of the UAE market and agricultural and food products exported to the UAE grew by over 18 per cent, bringing in €349 million in 2013. The opening of Abu Dhabi branches of Paris-Sorbonne University in 2006 and the Musée du Louvre in 2015 will boost France’s cultural profile in the UAE, potentially heightening interest among Emiratis in visiting France.

In a similar manner to the UAE, French exports to Qatar have slowed in recent years, but are expected to pick up again as Qatar Airways takes delivery of its order of Airbus A350 aircraft. The launch customer for the A350-900, Qatar Airways has 80 of that model on order. Meanwhile, the Qatar Emiri Air Force is a possible customer for the Rafale fighter, although no firm decision has yet been reached.

France has strong business and development links with Saudi Arabia. French efforts in such fields as health, higher and vocational education, justice and governance, mesh with steps being taken in those areas by the Saudi authorities. France is held in high regard in the Kingdom and efforts such as the latter serve to augment French influence.

France is playing a leading role in the proposed Saudi civil nuclear programme, having signed a co-operation agreement with the Kingdom in 2011. Under the proposed programme, 16 reactors will be constructed in Saudi Arabia by 2019, freeing up more oil for export. Areva can be expected to feature prominently if the plans come to fruition.

Further opportunities could open up for the French defence sector if the Royal Saudi Navy goes ahead with its modernisation plans, under which the joint French and Italian-built FREMM (Frégate européenne multi-mission, or European Multi-purpose Frigate) is reportedly a strong contender. At the most recent Saudi-French Foreign Ministers’ meeting on 4 September 2014, French Defence Minister Jean-Yves Le Drian reiterated France’s interest in progressing the FREMM project, continuing the joint co-operation on air defences and, in what could be the shape of things to come, the possibility of developing a Saudi satellite capability.


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Indonesia

The main objective of France for its relationship with Indonesia is to strengthen its political, economic, educational and cultural ties with a strategically-located emerging regional power and fellow member of the G-20.

Economically, Indonesia is a priority for France, accounting as it does for 35 per cent of the total gross domestic product of the Association of South-East Asian Nations (ASEAN),7 but, in thirty-seventh place in 2013 – up from forty-first the previous year – Indonesia’s booming market is certainly well down the list of French trading partners. Regardless, bilateral trade grew by 2.8% in 2013, to a total of €3.2 billion ($4.6 billion); an increase of 20.2% on the 2010 figure. A 10.5% drop in French imports will not have aided the Indonesian economy, but it did allow France to record a €51.1 million ($74.3 million) trade surplus with Indonesia, the first in over a decade.

Around one hundred French companies are present in Indonesia with operations in the energy, food, chemicals, tourism and financial services sectors. Large, well-known French corporations such as Total, Accor, Danone, Air Liquide, AXA, Carrefour and L’Oréal are all represented in Indonesia. Key French exports to Indonesia are aircraft, spacecraft, chemicals, pharmaceuticals, cosmetics and perfumes, agricultural, industrial and food-processing equipment, and food and beverages.

A February 2014 Memorandum of Understanding on the Development of Fisheries Product Processing and Marketing, signed by the Indonesian Ministry of Marine Affairs and Fisheries and the Indonesian-French Chamber of Commerce and Industry, aims to boost Indonesian fisheries exports to the European Union via France while promoting sustainable harvests in keeping with the notion of the “blue economy” and easing foreign investment in the sector. Already a good source of export earnings, Indonesian fisheries exports to France stand to benefit further from French expertise imparted under the MoU and the promotion of Indonesian fisheries in France.

In a very similar manner, Indonesia has been a recipient of French overseas development assistance that is centred on aiding development through the provision of educational, scientific and technical assistance. Reflecting the importance attached to it in France, sustainable development has been at the forefront of those efforts and has included research and co-operation in rural development, aquaculture, vulcanology and geophysics.

Capacity building in higher education, (with an emphasis on technology and biological sciences), teacher training and counter-terrorism are also important components of French development assistance to Indonesia. So, too, are governance programmes dealing with the legislative process, anti-corruption and decentralisation (despite France itself being a highly centralised unitary state).

In all cases, the aim is to aid the continuing development of Indonesia while strengthening the partnership and promoting shared views on such matters as enhanced trade relations, security and climate change; the latter with a view towards the “COP21” United Nations Climate Change Conference, to be held in Paris in 2015.

7 ‘Selected Basic ASEAN Indicators’, ASEAN Secretariat, Jakarta, 15 August 2014. <http://www.asean.org/images/resources/Statistics/2014/SelectedKeyIndicatorAsOfApril/UpdatedAug/table1_as%20of%20August%2014_R.pdf>.



Deeping the relationship with Indonesia has been a relatively recent priority for France. Nevertheless, the relationship has advanced and the 2009 visit to Paris of President Yudhoyono was followed by the signing of a strategic partnership agreement during the visit to Jakarta of then Prime Minister François Fillon in 2011.

Under the strategic partnership, France and Indonesia pledged to deepen their political, economic, security, educational, cultural and technical co-operation. To give immediate effect to the partnership, four accords were signed at that time detailing new co-operative efforts in the energy and mineral resources sectors, as well as for higher education, tourism and museums.

From the perspective of France, such efforts mesh neatly with the subsequently announced overall foreign policy objective of using economic diplomacy to revive the national economy. Higher education, for instance, serves a two-fold purpose. First, it benefits Indonesia by improving educational standards and outcomes. Second, it benefits France by helping to forge more, and closer, personal and professional international links. If not directly helping to further French influence, those links can at least contribute to increased goodwill towards France.

Similarly, in leveraging France’s position as the country with the highest number of international visitor arrivals, the tourism co-operation agreement has the potential to be of significant economic benefit. Exactly how much has been accomplished in the three years since the agreement was signed, however, is unclear but the potential certainly exists for additional foreign exchange earnings generated by increased tourist arrivals from Indonesia. Though still small in absolute numbers, a growing Indonesian middle class, a wealthy élite and the ability to fly from Jakarta and Denpasar to France with only one stop nonetheless has the ability to provide a welcome boost to the French economy, especially given that the total contribution of tourism to gross domestic product in 2013 stood at €194.6 billion ($282.9 billion), or 9.5% of GDP.8

Strategically, France is aiming to use an enhanced relationship with Indonesia as a gateway to a deeper relationship with ASEAN, both for itself and the European Union. Although it does not always have an ASEAN perspective to its foreign or economic policy in the way that France might have of the EU, Indonesia is nonetheless one of the key drivers of the organisation, and Jakarta is the seat of the ASEAN Secretariat. For France, having signed the Treaty of Amity and Co-operation in South-East Asia, a closer relationship with ASEAN offers an opportunity to build upon its relations with the member states. It is not by coincidence that, among the 47 countries identified by France in 2013 as priority export destinations, six were members of ASEAN: Indonesia, Singapore, Malaysia, the Philippines, Thailand and Vietnam. French exports to ASEAN are comparable to those to China and, if economic growth in ASEAN countries continues apace, the potential of the bloc as a market for French products is obvious.

*****

8 Travel & Tourism, Economic Impact 2014: France, World Travel and Tourism Council, 2014, p. 3.


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French foreign policy objectives in the Indian Ocean Region are centred on the stability and development of the region, supported by increased export earnings as a means of reviving a weak economy at home. Accomplishing those objectives in the Indian Ocean Region will contribute in no small measure to the achievement of the paramount national objective of preserving the position of France as an influential global power. With its territorial holdings, significant associated exclusive economic zones, a number of Francophone partners, cultural cachet, high-tech industries, and the quality nature of its leading exports, France has a number of undeniable assets in its dealings with the region.

France is also able to draw upon its membership of such groupings as the UN Security Council, the G-20, IORA and the COI to help secure influence and to act as a voice for its partners in the region. The uniqueness of its position as a notionally extra-regional state that is simultaneously very much a part of the Indian Ocean Region also serves to give Paris a perspective of the region that is at once both broader and more immediate than what might be found in other capitals. When coupled with its considerable diplomatic and military experience and presence in the region, it makes France an ideal partner for likeminded states such as Australia.

Together with the fact that the French presence in the region is viewed very much as a positive, including by those governments with claims on French territory, the involvement of France in the Indian Ocean Region can only be expected to deepen and the region will play an ever greater role in an increasingly active French foreign policy in the years ahead.

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