MAY ISSUE 2020 Puradsi Media. Phoenix - the Next Generation China’s diplomacy: growing empire or geopolitical limbo? SENCHUDAR The rise of the Chinese empire has caused a significant shift in geopolitical stratagems where US-India relations have been fused to counter the political giant’s impending domination. Whilst China has sustainably expanded its economic footing within the global market, the power’s tactics to ascend the geopolitical ladder have adapted a wide expanse of alternatives. Two of such techniques in China’s diplomatic pursuits include their debt and petroleum diplomacy. With China’s “debt trap” viewed as a significant pressure point upon many key developing and highly influential countries, it is crucial to assess the state of the hegemon’s efficiency in countering a geopolitical stalemate – especially concerning foreign competition to establish a footing in Sri Lanka. China’s relations with the Rajapaksa family have proven to reflect the empire’s tactic of dependence through diplomacy to exert their geopolitical influence. The return of the nepotistic Rajapaksa regime combined with the effect of the COVID-19 outbreak have assisted in exposing a tendency for China’s empire to slide into a geopolitical stalemate within the region thus raising questions regarding how this would impact Tamil sovereignty. China and the Rajapaksas China’s top-down approach has enabled the power to exert a steady presence within the geopolitical domain. Furthermore, DeVotta accounts for the Mahindha regime’s approach to increase relations with China as a counter to India and the West. This allowed China to enter the region with a “preference multiplier” strategy. As a result, China was not required to pressure their ideals onto Sri Lanka as they had walked into the grasps of China willingly. As Mahindha’s short-term economic plans aligned with China’s long-term economic goals, the bilateral ties were coordinated. Whilst there was a growing distrust towards China as Chinese projects such as the Belt and Road Initiative (BIR) are often funded by Chinese-owned state banks, the election of the Sirisena government did not see the annulment of ties with China. This was evident through the regime’s tender balance of interactions with geopolitical powers thus continuing to allow China access to the region. The Hambantota port issue which has allowed China the avenue to establish a naval presence in Sri Lanka, has been criticised as an © All Rights Reserved Puradsi Media – Phoenix the Next Generation 1 MAY ISSUE 2020 Puradsi Media. Phoenix - the Next Generation engagement which has allowed China to exploit Sri Lanka. However, the return of the Rajapaksas with the commencement of the Gotabaya regime raises concerns regarding the stance that would be adapted by the nepotistic regime in terms of foreign relations – especially with China. Whilst we have witnessed Gotabaya’s tentative balancing act with China and India (especially through his relations with Modi), Sri Lanka’s heavy financial dependence upon China is a growing pressure point which affects the island’s national and regional politics. Debt trap As a lender larger than the World Bank and IMF, China’s approach to debt diplomacy is infamous for its strategic nature. China’s barter loan repayments system has allowed them to raise an empire through increasing the dependence of developing countries upon them. This provides them an avenue to exert geopolitical dominance within regions where they establish a presence. The trade of SL’s Hambantota port to China for 99 years in exchange for USD 1.1 billion of SL’s debt in 2017 was one such trade which allowed China extensive access to sea routes within the region. Despite their existing debt history with China, Sri Lanka continues to seek outrageous amounts of loans from the country especially with the outbreak of COVID-19. However, Sri Lanka is not alone in their desperate rush for China’s financial assistance. BIR countries are rapidly borrowing loans from China whilst unable to pay back interest or debt to the economic giant due to the economic pressures of COVID-19. Financial experts such as Kaho Yu (senior Asia analyst at Verisk Maplecroft) have forecasted SL and Pakistan to be impacted the most. In turn, this has the potential of strengthening the authority of China. Moreover, many developing countries have requested debt-relief from China through an extension of loans and reduced interest. However, China’s obligations as a signatory of the G-20’s “debt service suspension initiative” has struck a crossroad in China’s expansion. Despite loan suspension being in place from 01.05.2020 to the end of this year, China has been reported to be involved in the development of tactical conditions for debt-relief eligibility. An extension of loans and the development of conditions increase China’s leverage with debt diplomacy. However, according to a G-20 moratorium established in April 2020, China may also be obliged to write off their loans. Contrary to expectations that this may cause China to be at a loss of its power dynamics, this could provide China a window of opportunity to implement new loan and investment schemes within the region and thus continue their ascent. In this regard, it becomes essential to examine SL’s economic state. Having made large requests to multiple lenders, SL’s requests for loans from China have been out of proportion. Whilst requesting loans to ease the economic impacts of the COVID-19 outbreak including currency swaps with China worth around USD 1.5 billion alone, the island’s reckless borrowing to develop infrastructure has been condemned by financial experts and political critics. The SL cabinet’s approval to request additional loans of USD 80 million from China to develop SL roads in the midst of a financial crisis is one such © All Rights Reserved Puradsi Media – Phoenix the Next Generation 2 MAY ISSUE 2020 Puradsi Media. Phoenix - the Next Generation example. Whilst the IMF forecasts SL’s net borrowing to increase from 6.8% of SL’s GDP to 9.4%, global rating agencies such as Fitch and Moody’s have warned that SL’s debt burden may rise to 100% of their GDP. This may cause SL to default their debt. Despite SL’s claims that they would not default their loans, the Rajapaksas’ continued dependence upon the Chinese empire raises the question as to whether a default of their debt would be inevitable and how that could possibly increase China’s authority. Whilst the geopolitical dimensions of the debt sphere have a tendency to remain in China’s favour, it is crucial to examine China’s efficiency in exerting their geopolitical authority. Their presence within the domain of petroleum diplomacy, where the Tamils territorial integrity is at risk is also of concern. Petroleum limbo China has attempted to gain access to key sea routes where their implementation of the BIR initiative is known to be a tool for the empire to establish their presence within countries along the route. As espoused by Zhiqun Zhu, China’s petroleum diplomacy strategy includes their efforts to seek resources for gas and oil from the developing world to increase their geopolitical influence within the targeted region. In that regard, territorial waters play a crucial role in determining the leverage of geopolitical powers. Mannar Basin The Mannar oil Basin is situated along the coasts of the occupied Tamil homeland and is adjoined with the Cauvery basin which has yielded a significant amount of petroleum for India. Recent seismic studies have identified the basin as, “the largest and most prolific hydrocarbon province in Sri Lanka” and it is expected to be more abundant in petroleum than the Cauvery basin. As a result, the Mannar Basin has gained the attention of many foreign investors for oil exploration including China. Whilst oil exploration has predated many decades, a Norwegian company had cautiously resumed the exploration of the Mannar Basin in 2001 – a year prior to the 2002 peace process. It is notable that many foreign investors were reluctant to explore within the territorial waters of the Tamil homeland due to the existence of the LTTE who protected Tamil sovereignty – namely the Sea Tigers who protected the Tamil homeland’s waters. However, Sri Lanka had gradually started to open up the occupied Tamil homeland’s territorial waters to foreign investors by 2007. © All Rights Reserved Puradsi Media – Phoenix the Next Generation 3 MAY ISSUE 2020 Puradsi Media. Phoenix - the Next Generation As evident, competition to establish a presence in the Mannar Basin, has established the region as a hotspot with signs of petroleum found in the blocks allocated within occupied Tamil Eelam’s territorial waters. Whilst China and India have been allocated blocks, acceptance has not been expressed despite significant interest. The blocks explored by Cairn have identified sources of petroleum – which aligns with the block allocated to India. However, China’s block has been allocated closer to Colombo where no sources of petroleum have been found as of yet thus lowering their possibility for influence. Following a temporary halt in the matters, the basin was again open to foreign bidding in March 2019, with drilling expected to commence in 2020 and oil extraction by 2023-2025. In that regard, Gotabaya’s regime has extended the focus upon the Mannar Basin in a statement made in early January of this year. Whilst announcing the impending establishment of an oil refinery on the island at an undisclosed location, it was specified by SL’s Transport Management and Energy Minister, Mahindha Amaraweera, that drilling of the Mannar Basin would also commence for the extraction of natural gas. Stalemate for China With the current stance assumed by the Trump administration, the geopolitical climate demands the need for a confrontation between the US-China divide.