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This Tropical Paradise Is the Scene of a New Cold War · Trumponomics

• 0:00
  Speaker 1: The Maldives. It's a nation of twelve hundred islands in
• 0:03
  Speaker 1: the Indian notion, and it's known to most as a
• 0:06
  Speaker 1: luxury vacation destination. But at the same time that cocktails
• 0:10
  Speaker 1: are being served up to tourists, the Chinese government is
• 0:13
  Speaker 1: investing millions in the country to help pay for infrastructure.
• 0:18
  Speaker 1: China gets a port out of that deal, and for Beijing,
• 0:21
  Speaker 1: that trade is about more than just shipping. It's about
• 0:24
  Speaker 1: season control of the region from its natural leader, India.
• 0:37
  Speaker 1: Welcome to Benchmark, the show about the global economy. Pime
• 0:41
  Speaker 1: Scott Landman, economics editor for Bloomberg in Washington. I'm Daniel Moss,
• 0:45
  Speaker 1: economics writer and editor at Bloomberg View in New York.
• 0:50
  Speaker 1: The struggle for regional power between China and India goes
• 0:54
  Speaker 1: back to the sixties. So how did the Maldives become
• 0:59
  Speaker 1: a playground for great powers? And by the way, why
• 1:02
  Speaker 1: is it so important the game be played here? Isn't
• 1:06
  Speaker 1: the Maldives sinking and all its ways of being underwater
• 1:10
  Speaker 1: in a few decades? Let's find out from somebody who's
• 1:13
  Speaker 1: very familiar with the geopolitics of the region. Joining us
• 1:16
  Speaker 1: here in our DC studio is Shaleish Kumar, South Asia
• 1:20
  Speaker 1: analyst at Eurasia Group. He's a former India economist at
• 1:24
  Speaker 1: the U. S. Treasury and held various roles at HSBC,
• 1:27
  Speaker 1: Morgan Stanley and State Street. Shalish, welcome to Benchmark. Thanks
• 1:32
  Speaker 1: for having me. So too many people in the West.
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  Speaker 1: The idea of an economic and military cold war being
• 1:40
  Speaker 1: fought in the Maldives just seems kind of incredible. You
• 1:44
  Speaker 1: have vacationers and honeymooners who are going there mainly to
• 1:48
  Speaker 1: get away from it all. So what's going on here?
• 1:51
  Speaker 1: Are there effectively to Maltives? So I think the term
• 1:56
  Speaker 1: cold war is very appropriate, and I would I think
• 1:59
  Speaker 1: it maybe a little too strong, But we are in
• 2:01
  Speaker 1: the midst of what is effectively a new form of
• 2:04
  Speaker 1: a Cold War between India and China. Why Maldives is
• 2:07
  Speaker 1: it's because of its geography where it's position. It's just
• 2:11
  Speaker 1: miles off of the coast of India, which makes it
• 2:13
  Speaker 1: particularly sensitive and very valuable to China. If you take
• 2:16
  Speaker 1: a look at what China's bigger play in South Asia is,
• 2:20
  Speaker 1: They've been slowly picking off, one by one all of
• 2:23
  Speaker 1: India's neighbors with various means of influence over these countries.
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  Speaker 1: But the strategy is very clear. They want to encircle
• 2:30
  Speaker 1: India and they want to do so for a couple
• 2:32
  Speaker 1: of reasons. One, they want to contain India, they see
• 2:34
  Speaker 1: it as a threat too, they want access to the
• 2:37
  Speaker 1: Indian Ocean. And three, they want to have broader supremacy
• 2:40
  Speaker 1: in Asia and to do so you need to keep
• 2:42
  Speaker 1: India confined. And again, given where Maldives is located, it's
• 2:46
  Speaker 1: perfectly fits into the strategy. Now why would China feel
• 2:51
  Speaker 1: threatened by India or feel competition from India Its economy
• 2:56
  Speaker 1: is a fraction the size of China's. Well, there's a
• 3:00
  Speaker 1: couple of reasons. One Historically the two have had a
• 3:03
  Speaker 1: border dispute. So if you take a look at the
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  Speaker 1: map of Indian China, there's a state in the northeast
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  Speaker 1: Caldinurential British China claims it as its own, the whole state.
• 3:12
  Speaker 1: They say that it's part of Southern Tibet. Effectively, India
• 3:15
  Speaker 1: says it's its own states. So this is a big
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  Speaker 1: source of issues between the two countries. They can't even
• 3:20
  Speaker 1: agree on the border. But that you could say is
• 3:23
  Speaker 1: the India China specific events, So why not just figure
• 3:25
  Speaker 1: out the border, the broader concern or the broader problem
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  Speaker 1: China has with Indias. Yes, you're right right now India
• 3:31
  Speaker 1: is not a direct economic threat, but that may not
• 3:33
  Speaker 1: be the same case thirty years from today. As an
• 3:36
  Speaker 1: extension of that, we also need to consider who could
• 3:39
  Speaker 1: influence the global order in the next century. Our country
• 3:43
  Speaker 1: is gonna look and adopt quote unquote the Indian model
• 3:46
  Speaker 1: of democracy, its form of capitalism to the extent that
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  Speaker 1: they are a capitalist, or are they going to look
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  Speaker 1: more towards the Chinese model? And that's not just governance
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  Speaker 1: and economics and institutions, but also in terms of what
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  Speaker 1: type of ideology the rest of the world takes in,
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  Speaker 1: what kind of development model, what kind of uh kind
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  Speaker 1: of spheres of influence these countries want to project around
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  Speaker 1: the world. If in fact, you agree that Western powers
• 4:08
  Speaker 1: are in the firm of decline. So with that in mind,
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  Speaker 1: China really needs to go out of its way to
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  Speaker 1: take care of its one close proximate threat, which is India,
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  Speaker 1: because again it's right on its border. So is that
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  Speaker 1: more of a military threat or an economic threat? I mean,
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  Speaker 1: you talked a little bit about both, but which one
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  Speaker 1: would you say is taking more precedents in the Chinese
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  Speaker 1: political calculations. I'm gonna hedge a little and I would
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  Speaker 1: say it is a mix of both. And the reason
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  Speaker 1: I say that is the economic threat isn't yet as
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  Speaker 1: obvious because India is not stealing jobs away from China,
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  Speaker 1: and so from that perspective, the Chinese don't have to
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  Speaker 1: worry about anything on the military threat part. Again, the two,
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  Speaker 1: we don't see the two going to war. That's not
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  Speaker 1: the that's not where this is going to play out.
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  Speaker 1: But the strategic influence India can have over the region
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  Speaker 1: and over the world does then become an economic problem
• 5:00
  Speaker 1: for China. So what I mean by that is China
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  Speaker 1: has a lot of interest in Africa, for example, or
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  Speaker 1: in Pakistan or Southeast Asia. And to make sure all
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  Speaker 1: of this works the way the Chinese wanted to work,
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  Speaker 1: they need to make sure India doesn't become a spoiler
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  Speaker 1: in any of it or doesn't try to expand its
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  Speaker 1: influence or its ideology into these countries. So to make
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  Speaker 1: sure that doesn't happen, you then invoke the military option.
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  Speaker 1: And by option, and I'm not saying the war, but
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  Speaker 1: I'm saying you try to gain control strategically over countries
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  Speaker 1: around India so that it cannot assert its dominance through
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  Speaker 1: the military, and by doing so, you also then control
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  Speaker 1: the economic side of the equation. Now, how does this
• 5:35
  Speaker 1: breakdown on the ground in the Maldives. There's been a
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  Speaker 1: couple of changes of government and I believe a port
• 5:41
  Speaker 1: is also up for grabs, that's right. So for a
• 5:44
  Speaker 1: very long time, the Maldivian government was very pro India.
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  Speaker 1: There was a lot of proximity between the leadership. A
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  Speaker 1: lot of Indians would have vacation in the Maldives. Maldivians
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  Speaker 1: by ancestry are part Indian in some cases, so there
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  Speaker 1: was a lot of closeness between the two. What's changed
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  Speaker 1: in recent years is that the current president has taken
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  Speaker 1: the country in a decisively more Chinese stance. So part
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  Speaker 1: of this means he's accepted a lot of money from China.
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  Speaker 1: He has taken away a lot of the Indian influence.
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  Speaker 1: So for example, that one of the airports in the
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  Speaker 1: Maldives was being developed by an Indian company, that contract
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  Speaker 1: was rescinded when the new president came in. So you
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  Speaker 1: start to see that the country is pivoting towards China.
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  Speaker 1: I think in general India would be okay if other
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  Speaker 1: countries have some economic role, but when it starts to
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  Speaker 1: tilt too far. Again, given the closeness of how close
• 6:36
  Speaker 1: the Maldives are to India, it becomes a problem. What
• 6:39
  Speaker 1: India's concern is is some of this economic influence going
• 6:43
  Speaker 1: to be translated into hard military assets. And this is
• 6:46
  Speaker 1: where the port comes into play. The port that's under
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  Speaker 1: consideration for development right now, it's being marketed as simply
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  Speaker 1: a commercial port. But what happens if that's not the case.
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  Speaker 1: What happens if China starts to use this port as
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  Speaker 1: a as a port of entry or for its v
• 7:00
  Speaker 1: and starts to dock naval ships there and again giving
• 7:02
  Speaker 1: how close to mall that other to India, that's a
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  Speaker 1: direct threat. What happens if some of these assets are
• 7:07
  Speaker 1: used as listening stations on Indian communications? Because that's all
• 7:10
  Speaker 1: a lot of intelligence is gathered from a signals intelligence standpoint.
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  Speaker 1: So what is for now just proximity or an economic
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  Speaker 1: relationship could eventually translate into a very direct problem for India.
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  Speaker 1: What's India doing to fight back against China? So first,
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  Speaker 1: just to take a step back for a second how
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  Speaker 1: the current problem came to be. The current president of
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  Speaker 1: the Maldives, what he has done is he's declared a
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  Speaker 1: state of emergency. India is using this as an opportunity
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  Speaker 1: to paint him as a dictator who's subverting the democratic
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  Speaker 1: ideals of the country. That's really the only way India
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  Speaker 1: can get into this. For a while they had a
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  Speaker 1: problem with this president and what they were hoping for
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  Speaker 1: was that the domestic audience would finally come around to
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  Speaker 1: see that the way he's running the country is not right,
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  Speaker 1: and then the next elections, one of their one of
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  Speaker 1: the more pro Indian presidents, can come into power. With
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  Speaker 1: the current situation of the state of emergency, which has
• 8:01
  Speaker 1: sparked a constitutional crisis, India is using it to its advantage,
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  Speaker 1: which is how they're going to probably play the going forward.
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  Speaker 1: They've organized a global campaign of pressure. They've gotten the US,
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  Speaker 1: UK in Germany to put pressure on the current government
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  Speaker 1: to end the constitutional crisis. And along with that, what
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  Speaker 1: India is not officially saying is they actually want him
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  Speaker 1: to go. They want him to fall down from power.
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  Speaker 1: They want one of their people to comment. Obviously, China
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  Speaker 1: doesn't like this, So now you're hearing a lot more
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  Speaker 1: pressure from China asking India to stand down, asking India
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  Speaker 1: to respect the rights of the Maldivian government so that
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  Speaker 1: they don't get involved in an internal affair that India
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  Speaker 1: has no business being involved in. So it's not clear
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  Speaker 1: yet if India's posture is going to work. But this
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  Speaker 1: is India's game plan. They want this president out if
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  Speaker 1: it didn't like the way things were going in the Multives.
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  Speaker 1: Could China do what it's done in other countries and
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  Speaker 1: say we're not going to send tourists there, or we're
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  Speaker 1: not going to allow our country's tourists to go there anymore.
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  Speaker 1: Does it have that kind of economic leverage? Is that possibility?
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  Speaker 1: That is one option. It definitely has that economic leverage.
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  Speaker 1: But the more longer term or the more obvious tool
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  Speaker 1: that they'll probably use is no longer provide investments, or
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  Speaker 1: in the instance those investments in those loans aren't adequately
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  Speaker 1: financed to demand some form of retribution. So we look
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  Speaker 1: at Sri Lanka as a model for how this could
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  Speaker 1: end in the short term or how this could play
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  Speaker 1: out in the short term. In Sri Lanka, the Chinese
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  Speaker 1: invested heavily in the port of hem Bin Tata, which
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  Speaker 1: from the beginning everybody said didn't really make a lot
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  Speaker 1: of economic sense. There was not much value in this port.
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  Speaker 1: The Indians said this to the Sri Lankans, that you
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  Speaker 1: should not be taking this money. They went ahead, they
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  Speaker 1: built the port and to this day it's not capable
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  Speaker 1: of servicing its debt. So ultimately, what Sri Lanka did
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  Speaker 1: is they sold the port to China or to a
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  Speaker 1: Chinese owned company. In the process of the negotiation, one
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  Speaker 1: of the concerns Indian other countries had was that could
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  Speaker 1: this port, like I just mentioned with the Maldas, could
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  Speaker 1: this port be used by the Chinese navy? And the
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  Speaker 1: Sri Lankan said no, and they structured the deal in
• 10:06
  Speaker 1: a way that could prevent this. But it's still an
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  Speaker 1: outstanding question because China partially owns that port, and so
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  Speaker 1: this is where the Chinese could take it. They could,
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  Speaker 1: like I said, stop the investments, which is a pressure tactic.
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  Speaker 1: They could stop tourists as you noted, or they could
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  Speaker 1: devote over time, look to convert some of these assets
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  Speaker 1: over to it and hold these governments more beholden to
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  Speaker 1: their interests and how many people sprawled out on the
• 10:29
  Speaker 1: beach sipping champagne are aware of all this happening around them.
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  Speaker 1: Probably not one of them. It feels like there's a
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  Speaker 1: massive disconnect like this two moldis I would say, yeah,
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  Speaker 1: there is, absolutely And this is what makes this part
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  Speaker 1: of the world so fascinating and so critically important, which
• 10:45
  Speaker 1: is when most people look at geopolitics or geopolitical risk,
• 10:48
  Speaker 1: they're the obvious outstanding issues in North Korea, Iran, Russia,
• 10:52
  Speaker 1: et cetera. But what's happening in South Asia, specifically with
• 10:56
  Speaker 1: these small islands and more specifically with port development in
• 11:00
  Speaker 1: and around India is one of the most critical and
• 11:03
  Speaker 1: sensitive things that more people need to start paying attention
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  Speaker 1: to because it puts these two very large powers in
• 11:10
  Speaker 1: direct conflict with one another. So how direct is that
• 11:13
  Speaker 1: conflict going to get in the coming years. Well, if
• 11:16
  Speaker 1: you start to see if this starts to go out
• 11:18
  Speaker 1: the way it's currently happening, then you're likely going to
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  Speaker 1: see more and more port development. I mentioned Sri Lanka
• 11:23
  Speaker 1: and the port of Hambitata. We were talking about the
• 11:25
  Speaker 1: Mall Dives and the port that's under consideration there. In Pakistan,
• 11:29
  Speaker 1: there's already a port under construction in Guada. That's part
• 11:33
  Speaker 1: of a broader project called the China Pakistan Economic Corridor,
• 11:36
  Speaker 1: which is part of the even bigger belt Road initiative
• 11:39
  Speaker 1: that China or oh Bor as they now call it,
• 11:41
  Speaker 1: or interchangeably call it the belt Road project that China
• 11:44
  Speaker 1: is embarking on. If that port comes to fruition, and
• 11:47
  Speaker 1: you have a port and Maldives and in say Shells,
• 11:50
  Speaker 1: and even one in Bangladesh that's partially being built with
• 11:52
  Speaker 1: Indian assistance, and you have the artificial islands built out,
• 11:55
  Speaker 1: and you have one in East Africa which the Chinese
• 11:58
  Speaker 1: do already control, then you're looking at a scenario where
• 12:00
  Speaker 1: there's greater and greater Chinese control of the Indian Ocean
• 12:05
  Speaker 1: and of South Asia. And again this all feeds back
• 12:07
  Speaker 1: in the broader problem India has, is it being encircled
• 12:11
  Speaker 1: and right now it seems like they are and chilly
• 12:14
  Speaker 1: in the background, India has been cuddling up to Japan,
• 12:19
  Speaker 1: the US, Vietnam, Israel. Not coincidence, surely, no, not at all.
• 12:26
  Speaker 1: We are in the midst of a complete reorientation of
• 12:30
  Speaker 1: foreign policy and foreign relations in South Asia, just as
• 12:34
  Speaker 1: recently as thirty years ago, Indian and the U s
• 12:37
  Speaker 1: did not see eye to eye. Where now in an
• 12:40
  Speaker 1: environment where India is actively and very closely working with
• 12:44
  Speaker 1: the US on sensitive areas like defense cooperation. For example,
• 12:49
  Speaker 1: India is deepening its ties with Vietnam. They're reaching out
• 12:52
  Speaker 1: to Israel, a country that they didn't even have any
• 12:54
  Speaker 1: diplomatic relations with thirty years ago. Japan fits into this,
• 12:58
  Speaker 1: so you're seeing a string of relationships being developed that
• 13:02
  Speaker 1: are more for India's self interest and self preservation, which
• 13:06
  Speaker 1: was not always the case in the past. Just for context,
• 13:08
  Speaker 1: India had a very ideological approach towards foreign policy. It
• 13:12
  Speaker 1: now has it very much of a pragmatic or real
• 13:14
  Speaker 1: politic approach towards foreign policy. So let me ask one
• 13:18
  Speaker 1: more question related to that. If India is aligning with
• 13:22
  Speaker 1: the US and the US is taking a stance right now,
• 13:27
  Speaker 1: I mean, I'd say there's a lot of anti China
• 13:29
  Speaker 1: rhetoric coming from the Trump administration, but you know, in
• 13:32
  Speaker 1: terms of actual actions to contain China in the region,
• 13:36
  Speaker 1: you know, we haven't really seen a lot of concrete
• 13:39
  Speaker 1: moves in the past couple of years, am I, or
• 13:41
  Speaker 1: at least since the Trump administration came into office. Is
• 13:44
  Speaker 1: my impression of that correct that even a US India
• 13:48
  Speaker 1: alliance probably wouldn't be much to stop China from doing
• 13:52
  Speaker 1: what it wants to do. You are correct, and this
• 13:55
  Speaker 1: is kind of This is one of the challenges that
• 13:59
  Speaker 1: face is India and a lot of its foreign policy
• 14:02
  Speaker 1: and a lot of its engagements with the world. The
• 14:04
  Speaker 1: first is the word alliance in Indian domestic politics. Having
• 14:08
  Speaker 1: a formal alliance with America is for now not an option.
• 14:12
  Speaker 1: It's just it's just too politically challenging to become an
• 14:14
  Speaker 1: ally of America. It's not something India's looking at, which
• 14:18
  Speaker 1: is why you'll see the phrase strategic partnership used. It's
• 14:21
  Speaker 1: a proxy for the word alliance or ally. So that's
• 14:23
  Speaker 1: the first. The second is what is the give and
• 14:26
  Speaker 1: take in this partnership. Is India willing to send troops
• 14:30
  Speaker 1: to fight alongside US troops in places like Afghanistan? Probably not.
• 14:35
  Speaker 1: That also means in a future event or in a
• 14:38
  Speaker 1: future military engagement, will India partner along with America? Also
• 14:44
  Speaker 1: probably not. So it's not yet obvious what the two
• 14:48
  Speaker 1: can do together. Yes, India wants more defense cooperation. Yes,
• 14:51
  Speaker 1: they also want more cutting edge weapons, but they're very
• 14:54
  Speaker 1: slow in the weapon procurement process. They're not willing to
• 14:57
  Speaker 1: do certain things. They're not willing to fully join hands
• 15:00
  Speaker 1: with American sercenarios. So this makes the engagement a lot
• 15:04
  Speaker 1: more challenging, which also makes the how do you deal
• 15:07
  Speaker 1: with China part of it not very clear all for
• 15:10
  Speaker 1: a few coral reefs. So let's just close on the
• 15:14
  Speaker 1: issue the Maldives. Rising sea levels. Won't this country be
• 15:18
  Speaker 1: underwater in a few decades. Perhaps so, But between now
• 15:22
  Speaker 1: and then, a lot of damage can be inflicted on
• 15:25
  Speaker 1: India through the Maldives. As I noted, the port is one,
• 15:28
  Speaker 1: but also given the proximity an intelligence base in the
• 15:33
  Speaker 1: Maldives for the Chinese could be very destructive for India.
• 15:37
  Speaker 1: It could be a very strong position in terms of
• 15:40
  Speaker 1: listening in on Indian signals and communication networks. All right,
• 15:44
  Speaker 1: Chaleish Kumar from the Eurasia Group, thanks so much for
• 15:47
  Speaker 1: joining us. Thanks for having me well, Scott. There's a
• 16:03
  Speaker 1: perspective on the Maldives that you don't hear every day.
• 16:06
  Speaker 1: It's like there are two Maldives. There's the tourist brochure
• 16:10
  Speaker 1: honeymoon destination and then there's the great strategic game. That's right.
• 16:15
  Speaker 1: And I have to say, as somebody who lived in
• 16:17
  Speaker 1: Beijing for three years, I think when I was there
• 16:20
  Speaker 1: there was sort of increasing chatter about the Maldives as
• 16:24
  Speaker 1: a tourist destination. I might have even looked at myself
• 16:27
  Speaker 1: what kind of beaches and resorts they had there, And
• 16:32
  Speaker 1: little did I know even at that time that even
• 16:35
  Speaker 1: just a few years later, it would be the focus
• 16:37
  Speaker 1: of such a huge geopolitical tussle between China and India. Well,
• 16:42
  Speaker 1: I have been there, and as I sipped champagne on
• 16:45
  Speaker 1: the beach, not for a moment did I think that
• 16:48
  Speaker 1: the fate of the world might hinge on the sand
• 16:51
  Speaker 1: around me. Benchmark will be back next week. Until then,
• 16:58
  Speaker 1: you can find us on the Bloomberg term, Little, Bloomberg
• 17:00
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• 17:03
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• 17:10
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• 17:13
  Speaker 1: me at scott Landman Dan you are at moss under
• 17:17
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• 17:21
  Speaker 1: his employer, Eurasia Group at Eurasia group on Twitter. Benchmark
• 17:26
  Speaker 1: is produced by Toper Foreheads. The head of Bloomberg Podcasts
• 17:29
  Speaker 1: is Francesco Leavey. Thanks for listening, See you next time.