29.09.2017 Author: Dmitry Bokarev

India in Search of Alternatives to OBOR


As is well known, India is the main competitor of China in Asia. This has recently been most evident in the way India has related to the Chinese One Belt and One Road Initiative. Realizing the importance of international transport corridors for economic development and maintaining stability in the world, India nevertheless rejected the invitation of the PRC to join OBOR. The country intends to establish its own international transport system, free of Chinese influence.

It is felt that such a task for India is daunting. China has already invested and continues to invest huge amounts of money in OBOR. Only in May 2017, at the international OBOR forum in Beijing, President of the PRC Xi Jinping noted that the project will receive USD 124 billion in state funding. In addition to direct financial assistance to the project, the Chinese government is actively encouraging entrepreneurs of the Celestial Empire to invest their funds in OBOR.

India is still lagging far behind China in terms of economic development. The GDP of India is about five times smaller than the Chinese GDP. Nevertheless, India is one of the largest and fastest-growing economies in Asia. In addition, it would not be the sole party to the project of creating an alternative to OBOR, but in collaboration with various partners. In a number of projects, India may cooperate with Japan, which is also interested in developing trade with other countries without the participation of China. It should be recalled that Japan, too, refused to participate in the above-mentioned OBOR May Forum, despite the persistent invitations from the Chinese side.

One of the important objectives of OBOR is Africa. Like Eurasia, Africa is planned to be covered by a network of railroads and highways connected to ports on its eastern and western coasts. This will significantly enhance the maritime traffic not only between Asia and Africa, but also between Asia and the two Americas, making Africa a transit point.

China has long been cooperating with African countries, rapidly and steadily increasing its influence in them. The extent of the economic expansion of China is evidenced by the fact that the PRC is engaging not only each and every state, but also the community of African nations as a whole. At the end of 2015, the South African capital Johannesburg hosted the Forum on China–Africa Cooperation, at which the Chinese side pledged to invest USD 60 billion in the social and economic development of Africa and implement a number of infrastructure projects within the framework of the Action Plan 2016-2018.

In early 2017, Minister of Foreign Affairs of China, Wang Yi, embarked on an extensive African tour, during which he enlisted support for the OBOR project from the leaders of Zambia, the Congo, Mauritius, Madagascar, Nigeria and Tanzania. A number of other countries in Africa also promised their support for OBOR.

To some extent, for China, the development of Africa may even be more important than Eurasian projects. It is no coincidence that the first Chinese foreign military base, which was officially commissioned into operation on August 1, 2017, was opened in Djibouti. The inappropriately-named “Black Continent” possesses large reserves of various resources, and is an extensive market for various products. At the same time, the African states, due to their weak economic development and political instability, need the help of foreign partners.

Africa is a vast field of activity for rich countries willing to make big investments. Therefore, the most powerful states of the world are now competing, trying to cope with maximizing their spheres of influence there.

In deciding to create an alternative to OBOR, India and Japan also chose Africa as their main focus. The joint Indian-Japanese project was named “Asia-Africa Growth Corridor”. The idea of this project has been known since the end of 2016. The “Corridor” should facilitate the economic integration of the countries of East, South-East and South Asia, as well as the countries of Africa and Oceania. The main role of the project is maritime intercommunication. According to Indian Prime Minister Narendra Modi and his Japanese counterpart Shinzo Abe, the main goal of the “Corridor” is to create a free, open Indo-Pacific space.

It is hard to tell whether the Indian-Japanese Corridor will be able to take on OBOR. India is closer to Africa and has a long-standing trade relationship with the continent. Japan, in turn, has great financial capabilities and advanced technology. Nevertheless, China has long maintained a huge influence on the African continent. The country has long started implementing its infrastructure projects, while the “Asia-Africa Growth Corridor” is still only in the discussion stage.

Much closer to being an alternative to OBOR is another similar project in which India is a participant – the “North-South” international transport corridor (ITC). Russia, India and Iran signed an agreement on the establishment of the ITC in 2000 (later being joined by Azerbaijan). However, the project has only in recent years started gaining momentum thanks to the joint efforts of the countries in the development of infrastructure. “North-South” is designed to link India with the Baltic Sea countries through Iran, Azerbaijan and Russia. The delivery of goods along such a route is noticeably faster than the traditional maritime traffic through the Suez Canal. The route includes sea, road and railway sections. As with OBOR, the ITC does not consist of one route, but of several branches having a common direction. From the Iranian port of Bandar-Abbas, to which the goods will be transported via the Arabian Sea from the largest Indian port of Mumbai, they can go further overland through Azerbaijan, Kazakhstan, Turkmenistan, or across the Caspian Sea. Branches to Armenia and Georgia are also being considered. Rail transport is considered the most advantageous from the point of view of the ratio of cost and speed (this also combines “North-South” with OBOR). Iran and Azerbaijan are now actively building new railways that will connect their railway networks to those of the Russian Federation. The “North-South” ITC will then enter into full force.

However, the ITC will begin to work full-time and bring in revenue even earlier, since rail transportation can be temporarily replaced by road transport.

In August 2016, the prospects for the North-South project were discussed at a meeting of the presidents of Russia, Azerbaijan and Iran. As a result, the parties stated that they would develop their transport and communications infrastructures in every possible way to increase freight traffic.

In September 2016, a trial delivery of cargo was carried out along the route across the Mumbai-Kaluga region. Transport companies from Russia, India, Iran and Azerbaijan participated. All participants acknowledged the high speed and relatively small cost of transporting goods in this way.

In October 2016, Russian President Vladimir Putin visited India, and the North-South ITC was also among the most important issues that the Russian leader discussed with the Indian leadership. It was stated that Russia and India attached great importance to the implementation of the ITC project, which could become a key factor for economic integration in the region.

In September 2017, the media reported the upcoming start of regular cargo transportation via the “North-South” ITC. All countries participating in the project are now working on simplifying customs procedures, which will make the delivery of goods even faster.

It is thus clear that the North-South ITC is much closer to implementation than the “Asia-Africa Growth Corridor”. If India intends to compete with the Chinese OBOR, it is more reasonable for it to focus on this project and the development of relations with Russia, Iran and their partners. Since the Indian leadership is steadily strengthening economic relations with these countries, it could be said that it is indeed aware of this fact. The negotiations on the creation of a free trade zone (FTZ), which India and Iran are conducting with the Eurasian Economic Union, which includes Russia, Belarus, Armenia, Kyrgyzstan and Kazakhstan, attach special importance to the relations linking India, Russia and Iran, as well as the North-South project. If these negotiations are to succeed, such an FTZ, backed by a fully-operational North-South ITC, will be able to deal with OBOR on an equal footing, and none of its participants will have the feeling of being under the “soft power” of China.

Dmitry Bokarev, political observer, exclusively for the online magazine “New Eastern Outlook.” 

Please select digest to download: