In January of this year, General Secretary Xi Jinping of the Chinese Communist Party (CCP) visited Myanmar, where he laid the foundations of the China-Myanmar Economic Corridor. Xi signed dozens of bilateral agreements while lauding the Burmese leadership for its efforts to combat terrorism while bypassing entirely the internationally condemned treatment of Myanmar’s Rohingya ethnic minority.

Beijing has been steadily encircling India since 2013 when General Secretary Xi announced the start of the Belt and Road Initiative (BRI) and its constituent projects like the China-Pakistan Economic Corridor (CPEC), the CMEC (China-Malaysia Economic Corridor), or the China-Sri Lanka Economic Corridor, to name a few.

India Encircled by a String of Pearls

Thus far, India has followed a sheepish approach to Beijing’s voracious appetite for geopolitical influence, as exhibited by its much-publicized “String of Pearls” strategy to exercise geo-economic and military domination across the globe by making massive infrastructure and trade investments.

Strategic Chinese acquisitions in its “String of Pearls” include the purchase of a port in the West African state of Djibouti, the Hambantota Port of Sri Lanka, the Gwadar port in Pakistan, and more recently, a deep-sea port at Kyaukpyu, Myanmar. Bejing is already on track to exert the regional dominance reminiscent of Chinese hegemony in the 5^th century AD.

India is involved a geopolitical quagmire with China, an adversarial power, yet an important strategic partner. While China is India’s second-largest bilateral trade partner, it is also rapidly consolidating its influence throughout South Asia. India, therefore, is at risk of encirclement, restricting its ability to exert its still-considerable influence in the world, particularly in Africa, and, to an extent, in South Asia.

How Should India Respond?

India has consistently rejected the idea of participating in the Belt and Road Initiative, citing concerns over sovereignty. The China-Pakistan Economic Corridor, which passes through Baluchistan in Pakistan-occupied Kashmir, has been a point of contention for New Delhi, albeit one that has been mildly expressed. Despite economic and strategic conditions that are seemingly in Beijing’s favor, there are several steps that New Delhi can take to counter China’s expanding influence in India’s backyard.

First, it’s clear that India cannot match China in terms of economic strength, at least not in bilateral terms. However, India can use its regional influence to strengthen multilateral geo-economic organizations of which it is a member, such as the South Asian Association for Regional Cooperation (SAARC) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) by embarking on multilateral economic projects in the iron and steel, oil and petroleum, and textile sectors, as well as leveraging its considerable expertise in the information technology sector.

Second, New Delhi must double-down on a carrot-and-stick approach to managing geo-economic competition with China. India has massive market potential, with a population of over 1.3 billion people. The country is one of the world’s largest markets for electronics, IT, logistics, and, more recently, defense. At the same time, India must intensify scrutiny of Chinese goods by strengthening the Harmonized System Nomenclature (HSN) and by cracking down on imported products of substandard quality—a critical step to take considering that 45% of India’s imported goods are of Chinese origin.

Third, India must take further steps to bolster its exports to countries increasingly wary of China’s growing influence, particularly as global scrutiny of the sustainability of China’s Belt and Road Initiative gains traction. At the same time, New Delhi should facilitate Transfer of Technology (ToT) agreements with other countries in sectors where India is traditionally strong, such as logistics, defense, agriculture, and dairy. India must increase its use of its soft power by undertaking proactive cultural, economic, and political diplomacy in key BRI participant-countries, including Myanmar, Malaysia, Indonesia, Cambodia, and Brunei, while simultaneously bolstering defense ties through bilateral and multilateral military exercises and training programs.

Finally, India must strengthen its economic relations with ASEAN member-states, particularly with the Vietnam-South Korea-Japan trilateral grouping. More robust economic ties between the ASEAN group and India will be an essential component in countering China’s hegemonic trade practices. Thus, India’s withdrawal from the Regional Comprehensive Economic Partnership (RCEP) was an unfortunate setback in the efforts to build a healthier and more equitable multilateral economic partnership.

New Delhi must move rapidly to boost India-ASEAN trade and investment levels. The slower India is in responding to China’s aggressive economic moves; the more India will end up losing in the era of great power competition.

A study conducted by the Research Bureau of the PHD Chamber of Commerce and Industry has predicted that Indian trade with ASEAN economies will double by 2025, from the current level of $142 billion (2018) to $300 billion. Measures the Indian government can take include enhancing incentives for Indian exporters, implementing policies to significantly boost the international presence of India’s service sector, undertaking a continuous review of the ASEAN-India Trade in Goods Agreement, simplifying customs procedures, bolstering private sector engagement, and improving access to financial and banking services.

Is India at Risk of Losing the Game of Great Power Competition? was originally published on Global Security Review.

Recently, however, the ground has been shifting. As we point out in a recent article, Ethiopia has attempted to take advantage of the recent involvement of various Arab Gulf States in the Horn of Africa’s coastal zone to reduce its dependency on Djibouti’s port. The port currently accounts for 95% of Ethiopia’s imports and exports. It has done so by actively trying to interest partners in the refurbishment and development of other ports in the region: Port Sudan in Sudan, Berbera in the Somaliland region of Somalia, and Mombasa in Kenya.

But it is Berbera, in particular, that will prove the most radical in terms of challenging regional power dynamics as well as international law. This is because a port deal involving Somaliland will challenge Djibouti’s virtual monopoly over maritime trade. In addition, it may entrench the de-facto Balkanization of Somalia and increase the prospects of Ethiopia becoming the regional hegemon.

Ethiopia’s regional policy

Ethiopia’s interest in Berbera certainly makes sense from a strategic perspective. It is closest to Ethiopia and will connect the eastern, primarily Somali region of Ethiopia to Addis Ababa. It will also provide a much needed outlet for trade, particularly the export of livestock and agriculture.

The development and expansion of the port at Berbera supports two primary pillars of Ethiopia’s regional policy. The first is maintaining Eritrea’s isolation. The aim would be to weaken it to the point that it implodes and is formally reunited to Ethiopia. Or it becomes a pliant, client state.

The second pillar rests on maintaining the status quo in post-civil war Somalia. Simply put, a weak and fractured Somalia enables Ethiopia to focus on quelling persistent internal security difficulties. It also keeps up pressure on Eritrea.

Ethiopia’s ambitions for Berbera have been hampered by two problems. Firstly the Republic of Somaliland – a de-facto independent state since 1991 – still isn’t recognised internationally. This makes engagement a political and legal headache. Secondly, Ethiopia, doesn’t have the critical resources needed to invest and build a port.

Ethiopia had been trying to get Abu Dhabi and Dubai interested in the Berbera Port for years. It’s latest push was assisted by a number of factors. These included a shift in the UAE’s military focus in Yemen and Ethiopian assurances of more trade and some financing to upgrade the port.

Ethiopia’s diplomatic push – which coincided with developments across the Gulf of Aden – finally got it the result it craved. In May 2016, DP World, a global mega-ports operator, signed an agreement to develop and manage Berbera Port for 30 years.

The Berbera Port deal

It is unlikely that DP World would have signed the deal if it didn’t see some long-term commercial benefit. The deal also includes economic, military and political dimensions.

Economically, for example, there will be investments in Somaliland’s fisheries, transportation and hospitality industry. The UAE will also establish a military installation in Berbera. The base is intended to help the UAE tighten its blockade against Yemen and stop weapons being smuggled from Iran.

Politically, the Berbera Port deal has provoked mixed reactions in Somaliland. There has been some popular anger aimed at Somaliland’s former president, Ahmed Mohamed Mohamoud aka “Silanyo”, and his family who reportedly benefited personally from it. Anger also stems from inter-clan and sub-clan rivalry over land, particularly in the Berbera area.

But the anger in Somaliland pales in comparison to the reaction in Mogadishu. This is because the Somaliland government has remained largely isolated internationally – until the port deal.

Somalia Federal Government ministers have publicly challenged the right of Somaliland to enter into official agreements with any country. The Ethiopian-driven deal means that Mogadishu’s claims over the breakaway territory have weakened substantially. The deal means that Somaliland has partially broken the glass ceiling of international recognition by entering into substantive deals with viable business partners and states operating on the global stage. Mogadishu can no longer pretend it controls the government in Somaliland’s capital Hargeisa.

Ethiopia’s wins

The bottom line is that Ethiopia has engineered access to another port and enhanced its security and strategic economic interests. With the growth in annual volumes of transit cargo, Ethiopia has, for a long time, needed alternative routes from Djibouti.

In addition, Ethiopia has ensured its presence in the running of the port by acquiring a 19% share in the deal.

And by wangling a legally binding agreement between Somaliland and another state, Ethiopia has potentially paved the way for eventual international recognition of Hargeisa.

Ethiopia has also further cemented its hold over Somaliland through a combination of pressure and material incentives. By bringing significant outside investment and recognition, Ethiopia can also increasingly meddle in its internal affairs. This is a conundrum for Hargeisa. It finds itself increasingly emboldened to act independently. Yet it remains constrained by the need to get Addis Ababa’s approval.

As Ethiopia begins to move increasing amounts of goods and services on Somaliland’s new highway to the refurbished port of Berbera, Hargeisa may begin to question key aspects of the port deal.

But one aspect will not be in question: Ethiopia’s rising power and influence over the entire region.

How an Ethiopia-backed port is changing power dynamics in the Horn of Africa was originally published on Global Security Review.