Chinas Maritime Silk Road Strategic and Economic Implications for the Indo-Pacific Region MARCH 2018 EDITOR Nicholas Szechenyi FOREWORD Michael J. Green CONTRIBUTING AUTHORS Zack Cooper Matthew Funaiole Jesse Barker Gale Jonathan Hillman Gurmeet Kanwal Harsh V. Pant Gregory B. Poling Andrew Shearer Chinas Maritime Silk Road Strategic and Economic Implications for the Indo-Pacific Region MARCH 2018 EDITOR Nicholas Szechenyi FOREWORD Michael J. Green CONTRIBUTING AUTHORS Zack Cooper Matthew Funaiole Jesse Barker Gale Jonathan Hillman Gurmeet Kanwal Harsh V. Pant Gregory B. Poling Andrew Shearer CHINAS MARITIME SILK ROAD | II ABOUT CSIS For over 50 years, the Center for Strategic and International Studies (CSIS) has worked to develop solutions to the worlds greatest policy challenges. Today, CSIS scholars are providing strategic insights and bipartisan policy solutions to help decisionmakers chart a course toward a better world. CSIS is a nonprofit organization headquartered in Washington, D.C. The Centers 220 full-time staff and large network of affiliated scholars conduct research and analysis, and develop policy initiatives that look into the future and anticipate change. Founded at the height of the Cold War by David M. Abshire and Admiral Arleigh Burke, CSIS was dedicated to finding ways to sustain American prominence and prosperity as a force for good in the world. Since 1962, CSIS has become one of the worlds preeminent international institutions focused on defense and secu- rity; regional stability; and transnational challenges ranging from energy and cli- mate to global health and economic integration. Thomas J. Pritzker was named chairman of the CSIS Board of Trustees in Novem- ber 2015. Former U.S. deputy secretary of defense John J. Hamre has served as the Centers president and chief executive officer since 2000. CSIS does not take specific policy positions; accordingly, all views expressed herein should be understood to be solely those of the author(s). © 2018 by the Center for Strategic and International Studies. All rights reserved. Center for Strategic proximity to existing ports; and hinterland connectivity, or the degree to which port projects are connected to larger development strategies inland (though some ports can arguably serve meaningful economic purposes as hubs for cargo transshipment). In their view, all three of the © Mapbox, © OpenStreetMapCHINAS MARITIME SILK ROAD | 3 Chinese infrastructure projects examined in this volume are somewhat misaligned with economic objectives, particularly with respect to the third criterion of connectivity. o Military Implications: Zack Cooper posits that Chinas increased military presence in the Indian Ocean should not come as a surprise. China is following in the traditional path of other rising powers; it is expanding its military operations to match its interests abroad. The Chinese economy is highly reliant on trade routes that pass through the Indian Ocean, which serves as a vital pathway, particularly for energy supplies, and it is therefore natural for the Chinese government to seek to protect its interests along these sea lines of communication. In his view, the security implications of Chinas push into the Indian Ocean are mixed. In peacetime, these efforts will certainly expand Chinese influence in the region, possibly through access to port facilities to refuel or resupply naval vessels and in terms of anti-piracy operations and familiarization with other regional militaries. At the same time, however, Chinas Indian Ocean presence will likely create as many vulnerabilities as opportunities in terms of protecting trade routes, bases, and shipsparticularly in wartime. Nevertheless, Beijings political, economic, and military influence is likely to expand in future years and will remain a concern for strategists focused on the Indian Ocean, which has long been seen by the United States and Australia as a critical transit point from the Pacific to the Middle East and critical for maritime defense in depth to manage any threats to the critical chokepoints of the Gulf of Hormuz and the Strait of Malacca. These concerns are increasingly on Japans radar and India has also grown concerned that Chinas so-called “string of pearls” in the Indian Ocean would give Beijing new options to horizontally escalate beyond long-standing Sino-Indian competition in the Himalayas. The series concludes by examining how the maritime democracies of the United States, Japan, India, and Australia might respond to the uncertainties posed by the MSR through the newly reconstituted “Quad.” o Quad Response: Jesse Barker Gale and Andrew Shearer review the history of the Quadrilateral Security Dialogue, or “Quad,” which began when Australia, Japan, India, and the United States first came together to provide humanitarian assistance after the 2004 Indian Ocean tsunami. In subsequent years, the four governments failed to formalize the construct because of differences within each capital about Chinas possible reaction. Fast-forward a decade, and the four countries have now reestablished the Quad in what the authors consider a response to Chinas unexpected economic and military assertiveness in the region. They argue that with increasing convergence among the four maritime democracies on the need to coordinate on a broader strategy to ensure a free and open Indo-Pacific region, the “Quad 2.0” has potential to shape Chinas strategy in a more benign direction, but remains underutilized and under-operationalized. This study builds on prior work at CSIS on the geopolitics of the Indo-Pacific, including: the Asia Maritime Transparency Initiative; Reconnecting Asia; China Power; and Countering Coercion in Maritime Asia. The idea for a focused examination of Chinas Maritime Silk Road grew out of discussions with senior leadership on Japans National Security Council staff, who then provided some funding for a conference on the subject. As with our other research on maritime Asia, we have endeavored to integrate political, military, economic, and historical considerations. The analysis and prescriptions are entirely those of the authors and do not represent the official positions of any government in the region. The overall conclusion is mixed. Chinas MSR projects are neither purely military nor purely commercial. Moreover, Chinas overall approach is probably evolving. It is our hope that this study will help the United States and like-minded states refine their own response to MSR hedging or deterring where necessary, but also working to encourage a more transparent and economically viable approach from Beijing. I am grateful to the authors for their expertise and careful work and to Nick Szechenyi for leading the project and pulling together the essays for this study.CHINAS MARITIME SILK ROAD | 4 JULY 2017 CENTER FOR STRATEGIC & INTERNATIONAL STUDIES middle east program By Gregory B. Poling Kyaukpyu Connecting China to the Indian Ocean MARCH 2018 CSIS BRIEFS THE ISSUE Chinese state-owned firms have reached agreements with Myanmar to construct a $7.3 billion deep-water port and $2.7 billion industrial area in a special economic zone at Kyaukpyu along the coast of the Bay of Bengal. The strategic town is the terminus of a $1.5 billion oil pipeline and parallel natural gas pipeline running to Kunming in Chinas Yunnan Province. Despite fears that the project could eventually be used for Chinese military access, political and legal restrictions in Myanmar make this unlikely. The project is aimed mainly at helping China avoid the vulnerable Strait of Malacca and aid the development of its southwestern hinterland. Like many major projects under the Belt and Road Initiative, there are well-founded fears that the project could grant China a dangerous level of economic leverage over Myanmar, especially if the government in Naypyidaw is forced to turn to Chinese loans to fund its share of the port and SEZ, which combined could amount to 5 percent of national GDP.