INDEX (e-Scan 16-31 Jan 2021) S No Rank & Name Country Page(s) 1. Brig RK Bhutani (Retd) CHINA (Geo-Strat, Geo-Politics 2-6 & Geo-Economics) 2. Capt (IN) KK Agnihotri IOR, ANC AND INDO-PACIFIC 6-9 3. Gp Capt Rajesh Bhandari JAPAN AND KOREA 9-10 4. Col Siddhartha Sharma WEST ASIA 11-13 5. Gp Capt GD Sharma, VSM (Retd) UNITED STATES 13-14 6. Brig Rajat Upreti MALDIVES, PAKISTAN & SRI 14-17 LANKA 7. Col Siddhartha Sharma IRAN 17 8. Col Siddhartha Sharma AFGHANISTAN 18 9. Air Cmde T Chand (Retd) STRATEGIC TECHNOLOGIES 18-20 10. Gp Capt GD Sharma, VSM (Retd) NUCLEAR 20-21 11. Gp Capt GD Sharma, VSM (Retd) SPACE 22 2 ENVIRONMENT SCAN: 16-31 JAN 2021 CHINA (Geo-Strat, Geo-Politics & Geo-Economics) Brig RK Bhutani (Retd) Why China-Pakistan Ties are 'Unraveling' over CPEC. The multi-billion dollar Belt and Road Initiative (BRI) appears to have driven a wedge between all-weather allies China and Pakistan. Sharp differences have emerged between the two countries over a $6.8 billion railway line project, which is part of the ambitious China- Pakistan Economic Corridor (CPEC). The impasse has even led to an indefinite delay in the annual bilateral CPEC summit. This is not the first that CPEC has triggered a strain in the long-standing friendship between the two countries. China-Pakistan ties are in troubled waters these days because of following issues:- (a) Fallout Over Rail Project Pakistan has been expecting China to lend $6 billion at a concessional interest rate of less than 3 percent for the Main Line-1 project. The Imran Khan government had even hoped to finalize the lending at an interest rate of just 1%. But to Islamabad’s chagrin, China has shown increasing reluctance over lending money for the project. The project includes doubling and upgrading of the 1,872- km railway track from Peshawar to Karachi and is a major milestone for the second phase of CPEC. Reportedly, China is not happy about lending the money since Pakistan has already sought debt relief to meet the G20 lending conditions and is not in a position to give sovereign guarantees. In December last year, China had even sought additional guarantees before sanctioning the loan in view of Islamabad's weakening financial position. A Pakistani Official had said that China raised the additional guarantees issue to get clarity over Pakistan financial condition after Islamabad applied for debt relief from the G-20 countries, which is only meant for the world’s poorest nations. The journalist said that China's appetite for investments in large infrastructure projects has diminished because these projects are vulnerable to local politics that delay returns on investment for Beijing. It had proposed a mix of commercial and concessional loans to fund the rail project going against Islamabad’s wishes of "cheapest lending". Pakistan is currently renegotiating its $6 million extended fund facility at the International Monetary Fund (IMF), which was suspended in April 2020. 3 The IMF will reportedly resume the program if Pakistan does not take out any new commercial loans, and that is one of the reason it is looking for concessions on loans for the ML-1 project. (b) CPEC Summit Delayed The Joint Cooperation Committee (JCC) is the primary decision- making body of CPEC. Its first meeting was held in August 2013 and the latest one in November 2019.The report said that the 10th JCC was originally scheduled for early 2020, but has not taken so far. It said that Covid-19 pandemic was initially cited as the reason behind the postponement but sources later revealed that delay has been caused due to disagreements over the railway project and special economic zones. As a result, Pakistan's desire to start work on the package-1 from January 2021 would remain unfulfilled due to delay in finalization of financial details. (c) Spate of Concerns Discontentment between the two allies had been brewing ever since China decided to tighten its purse strings amid concerns over its investments in Pakistan. China is slowly backing away from CPEC due to Islamabad's spiraling debt, series of corruption scandals and rising security costs. Reportedly, only 32 out of 122, projects under CPEC had been completed till the third quarter of the fiscal year. (d) Corruption Scandals Besides concerns over Pakistan's ballooning debt, Beijing is also believed to be unhappy about reports of corruption involving Chinese companies that are part of the CPEC projects. A probe by the Security and Exchange Commission of Pakistan (SCEP) found irregularities worth over $1.8 billion in the power sector, with many Chinese firms receiving undue subsidies. China's "illegal profiteering" from the power sector was in fact the reason behind the nationwide blackout in Pakistan earlier this month. Startling revelations about widespread malpractice in the power sector traced 100 billion Pakistani rupees ($625 million) in annual over- payment to the Independent Power Producers (IPPs) and discussed the magnitude of illegal "profiteering" of Chinese energy companies. China has earmarked $30 billion for Pakistan's energy sector through 4 CPEC funds. Several Chinese IPPs have been involved in the construction of as many as 27 power plants in Pakistan with a total installed capacity of 12,000 MW under the CPEC program. Analysts, however, have questioned the viability of these energy projects primarily because most of the Chinese investments focused on generation and ignored the distribution of power, which is clearly in a shambles judging by the recent blackout. (e) Opposition Heat Adding another layer of controversy is the role of the CPEC Authority chairman Lt General Asim Saleem Bajwa (retd). The CPEC Authority ordinance is largely seen as an attempt by the Pakistan government to allow the military greater control over the CPEC projects. Last week, the opposition parties staged a walkout from the Senate session over the Pakistan government’s "inadequate" response to their queries on the CPEC Authority ordinance. The proposed law will allow Bajwa to replace the planning minister as co-chair of a Pakistan-China Joint Committee and eliminate the role of the planning ministry as an administrative division. Bajwa is already a controversial figure in Pakistan who is said to have amassed millions of dollars of late. The opposition had even questioned the meeting of Bajwa with the Chinese ambassador when the CPEC authority had no chairman and the CPEC Authority's ordinance had lapsed. Local media had exposed Bajwa's several offshore businesses, including more than 100 companies and franchises in the US, UAE and Canada in which his families were involved. Comments. Chinese loans are given with extremely high interest rates. For example, for the Hambantota port project, Sri Lanka borrowed US$ 301 million from China with an interest rate of 6.3 percent, while the interest rates on soft loans from the World Bank and Asian Development Bank are only 0.25-3 percent. Interest rates of India’s line of credit to the neighboring countries are as low as 1 percent, or even less in some cases. Taking in to account, the US-China trade war's impact on China’s economy in the future and the economic distress caused due to COVID-19, China may not be able to generate sufficient foreign exchange surpluses to finance BRI on the same scale as it had originally planned. Imran Khan’s government to get the loan at interest rate of 1 percent is a wishful thinking. China will draw every ounce of political and economic benefit from Pakistan. For instance, Pakistan moved its troops to Gilgit-Baltistan along the Line of Control (LoC) and allowed the PLA to use its airbase at Skardu in June at the height of the face-off. In April only the Imran Khan Government had sought an extension on a debt repayment of $30 billion that Islamabad had taken to build the CPEC. Behind the troop movement lies the cold calculations of easing the repayment process. https://timesofindia.indiatimes.com/world/pakistan/why-china-pakistan-ties-are-unraveling- over-cpec/articleshow/80450316.cms 5 China Sharpens Language, Warns Taiwan that Independence 'Means War'. China toughened its language towards Taiwan on 28th January, warning after recent stepped up military activities near the island that “independence means war” and that its armed forces were acting in response to provocation and foreign interference. Taiwan’s Defense Ministry reported six Chinese air force aircraft, including four J-10 fighter jets, flew into its air defense zone on 28th January, close to the Taiwan- controlled Pratas Islands at the top end of the South China Sea. It prompted Washington to urge Beijing to stop pressuring Taiwan. China believes that Taiwan’s democratically elected government is moving the island towards a declaration of formal independence, though Taiwan President Tsai Ing- wen has repeatedly said it is already an independent country called the Republic of China, its formal name. Chinese Defense Ministry spokesman Wu Qian said “The military activities carried out by the Chinese People’s Liberation Army in the Taiwan Strait are necessary actions to address the current security situation in the Taiwan Strait and to safeguard national sovereignty and security”. He added, “They are a solemn response to external interference and provocations by ‘Taiwan independence’ forces”. Wu said a “handful” of people in Taiwan were seeking the island’s independence. He said, “We warn those ‘Taiwan independence’ elements: those who play with fire will burn themselves, and ‘Taiwan independence’ means war”. Pentagon spokesman John Kirby reaffirmed longstanding U.S. military support to Taiwan’s self-defense.“We have obligations to assist Taiwan with their self-defense and I think you’re going to see that continue,” said Kirby, a retired admiral, in the first Pentagon briefing of the Biden administration.