In August 2020 India extended USD $500 million in aid to buttress a connectivity project in the Maldives. The package consisted of a USD $100 million grant and a USD $400 million line of credit. The loan is intended to build bridges and causeways connecting the mainland capital with the country’s many islets. The project is touted as being bigger than any Chinese funded project in the Maldives. The loans are an effort to normalize ties with the Maldives, which has habitually oscillated between support from India and China. Currently the pendulum has swung towards India, but this proximity does not necessarily portend dissipating Chinese influence in the Maldives. India will have to manage China’s growing economic and maritime interests in the Indian Ocean Region, which are perceived as threats to its national security.
A Background on the Maldives, India, China Ties
India will have to manage China’s growing economic and maritime interests in the Indian Ocean Region which are perceived as threats to its national security.
Between 1978-2008, under President Gayoom, India enjoyed favorable ties with the Maldives without significant interference from China. Such an exclusive relationship ended when regimes under Mohammed Waheed and Mohammed Yameen welcomed Chinese investments and activities in its economy and beyond. In 2012, China loaned the Waheed government USD $500 million. The extent of the proximity between China and the Maldives became especially clear when they inked a military aid agreement in the same year.
As the Maldives inched closer to China, it simultaneously moved further from India’s sphere of influence. The governments during that period sometimes acted in antagonistic ways towards India. For instance the Yameen government in 2018 decided to return two Dhruv helicopters that were gifted by India to the coast guard. The government also criticized India’s proclivity for military intervention as an affront to its sovereignty. It noted its ambition to engulf the island when domestic politics became unstable and former president Mohammed Nasheed requested India to intervene.
From late 2018 onwards, a change in power brought reprieve to strained diplomatic ties between the two countries. The present democratically elected regime led by Mohammed Solih backtracked on deals such as a free trade agreement made with China by the previous government.
However, India’s inroads in the Maldives have not necessarily resulted in China’s influence receding. China maintains several ongoing projects in the Maldives which will keep the economy buoyant as the tourism industry struggles. It is likely that China will continue to work with the new leader unfazed as it has with Sri Lanka’s president. China’s largesse for developing countries transcends domestic politics.
India and China: Two Disparate Loan Models
The governments in the Maldives and Sri Lanka are worth a comparison with respect to rising Chinese influence: both were elected on the promise of eradicating corruption by government officials and reducing debt accrued from Chinese loans; both also resumed the Chinese projects after briefly halting them, fearing the economic costs of such actions. President Solih has also maintained interests in China’s Belt and Road Initiative to balance the Maldives’ foreign policy interests. Wary of facing similar consequences as Sri Lanka—from Chinese “debt-trap diplomacy”—the Male government has begun to diversify its foreign investments. As a result, it is now more inclined towards Indian aid. In December 2018, when Yameen’s government exited, India gave USD $1.4 billion to the Maldives to offset Chinese loans. The news of low-cost loans naturally drew ire from China.
Unlike Chinese loans—which lack transparency and debt sustainability—India’s loans are more transparent and provide favorable terms to the Maldives. The loans are typically aimed at nurturing local jobs and accepting local partnerships at personal and national levels. These “super low-cost development assistance” allow the Maldives to make independent decisions regarding the projects it wishes to undertake. The aid comes at a critical moment when the Maldives’ biggest industry—tourism—is suffering as a result of the COVID-19 pandemic. The financial package, together with several deals either in the pipeline or waiting to be finalized, could jumpstart the tourism industry.
Financial aid in civic infrastructure projects aside, India has also affirmed its commitment to its “neighborhood first” policy by providing aid to the Maldives in times of crisis. During the 2004 Tsunami that severely affected the Maldives, India rushed its relief personal and aid to the country. Most recently, India demonstrated similar dedication during the Maldives’ fallback from COVID-19, delivering goods, such as medical items, immediately. Strained bilateral ties did not prevent India from heeding its aid responsibility. In 2014, when Yameen’s government tilted to China, India provided large quantities of drinking water to the capital Male when their desalination plants were burnt. India has a robust track record in providing necessities and aid to its partners in the Indian Ocean.
It is important to note that an over-reliance on Indian aid might present an opportunity for India to take a crisis as a hostage of sorts, a bargaining chip to negotiate security terms with the Maldives. So far, however, this has not happened.
Implications from closer India-Maldives relations
Maldivian anxiety over an Indian military intervention has waned now that the country is experiencing political stability once again. The Maldives has reciprocated India’s “neighborhood first” policy with an “India first” policy. Beyond bolstering Maldivian economy from the pandemic, the financial assistance also secures India’s strategic position in the Indian Ocean. The recent standoff at the Line of Actual Control (LAC) in Ladakh has dampened relations between India and China. Although an Indian-Maldivian bonhomie is ineffective at deterring Chinese aggression at the LAC, it is potent against Chinese advances in the Indian Ocean. The Maldives offers a strategic location in the Indian Ocean to work around choke points identified by China in the Malacca and Hormuz Straits.
Although an Indian-Maldivian bonhomie is ineffective at deterring Chinese aggression at the LAC, it is potent against Chinese advances in the Indian Ocean. The Maldives offers a strategic location in the Indian Ocean to work around choke points identified by China in the Malacca and Hormuz Straits.
India, through its diplomatic and development assistance, can help maintain security interests in the Indian Ocean, a region it has long regarded as its sphere of influence. It can monitor ostensible Chinese projects and investments in the region, which have presupposed military intentions. In June 2019, India resumed building coastal surveillance radar in the Maldives, which had been halted under the previous government. Current Maldivian domestic politics might lean towards India, but Chinese debt accrued from erstwhile regimes have allowed China to be a major player in Maldivian economy. China has also found an opportunity in the pandemic to prolong its influence, in part by partially suspending its loan repayments for four years. The loans constitute 45 percent of the Maldives’ national debt.
India should accept that China’s influence in the Maldives will remain immutable, and work to guarantee that its inroads into the Maldives do not trigger a zero-sum game with China. Within the context of great-power dynamics in the region, it is clear that the two major powers are competing for relative gains in the Maldives. For the Maldives, alienating either power is not an option as its economy is still recuperating from the pandemic. India’s financial aid and humanitarian assistance go a long way to restore ties with the Maldives, but are not in and of themselves enough to prompt China to exit.
Image 1: Easa Shamih via Flickr
Image 2: Ahmed Shurau/AFP via Getty Images