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Friday, April 19, 2019

Thank providence: India has gotten away relatively lightly from the scourge of real war

On February 25, Prime Minister Narendra Modi inaugurated the National War Memorial, homage to nearly 26,000 military personnel who have laid down their lives for the country since Independence. This occasion of solemn commemoration was somewhat marred by the PM introducing a note of dissonance by launching a very political attack on the Congress party.
What is striking to this writer about the memorial is not its design or even purpose. But the fact that India has been uniquely privileged among the major nations of the world to have gotten away relatively lightly from the scourge of real war. This is especially important to understand in a period where on social media and TV channels people are baying for war against Pakistan. Neither they, nor the generation of their parents, have even approached the horrors of war.
In the last 70 or so years, the US lost 36,000 soldiers in the Korean war, 58,000 in Vietnam on a population base of just 175 million. Iranians lost anywhere up to 1,50,000 in their war with Iraq in the 1980s. China, which lost 1,14,000 in the Korean war, lost another estimated 26,000 in its brief punitive expedition to Vietnam.
Civilian casualties of these wars were multiples of the military dead. Neither will the numbers capture the scale and intensity of destruction that often meant the obliteration of entire cities, towns and villages. In our own living memory countries like Iraq, Libya, Syria have degenerated from functioning, well-off societies, to living hells, people killed and maimed, cities destroyed and millions made refugees.
Indian has fought three, and two half wars, against Pakistan, and one against China in the past 70 years. The halves are the limited Kargil war and the longer Pakistani covert war that continues. Two of them in 1965 and 1971 lasted less than a month, the Kargil war went on for three months in a very small unpopulated part of the country. The first Kashmir war began in October 1947 and ended a year and more later on December 31, 1948. The Sino-Indian war of 1962, too, was a month-long affair. Acutely aware of their own vulnerability, India and Pakistan have generally avoided the deliberate targeting of economic and civilian areas even during their wars.
We have, however, seen major inter-religious violence and displacement in north-west India following Partition. And we have an ongoing insurgency in Jammu & Kashmir which has led to tens of thousands of civilian deaths as well.
We can therefore thank providence India has not really experienced war which can be about sacrifice and heroism, but always brings in its wake death, injury and destruction. The last time the Four Horsemen of Apocalypse rode across our land was in the First War of Independence, the so-called Great Rebellion of 1857-59. Though limited to a region of northern India, British retribution – villages depopulated, men strung up on trees along the roads and vultures picking off the dead – can never be forgotten. Hundreds of thousands killed and forced to abandon their villages, the cities of Lucknow, Kanpur and Delhi devastated.
Efforts have often been made to make war humane, an oxymoron if ever there was one. There are Geneva Conventions, guidelines of the Red Cross and so on. The UN was created because of the catastrophic destruction of World War II. It created a Security Council of the big powers to deal with threats to peace. It also accepted the notion of the right to self-defence and just war.
In the real world, the best guarantor of our security remain powerful and capable military forces. In this endeavour, soldiers may have to sometimes lay down their lives. We cannot bring them back, but we should ever remember them and hence the Memorial. And even as they blow the conch shells of war, our chicken hawks should not forget those who our heroes left behind – wives, children, parents – for whom their passing brought unmitigated catastrophe.
Times of India March 2, 2019

China’s Careful Response to IAF Air Strikes Signals a New Stance

The Chinese know a thing or two about face. Therefore they clearly understood the message put out by India in the aftermath of the air strike on Balakot in Pakistan on Tuesday, 26 February. This was aimed at making it easy for Islamabad to walk away from confrontation.
The official statement put out by South Block invoked the doctrine of self-defence, enshrined in Article 51 of the UN Charter. It described its strikes on one of the “biggest training camps of JeM in Balakot” as “non-military pre-emptive action” provoked by the imminent danger that India believed it confronted.


It deliberately introduced a degree of ambiguity by not stating that this was in the Khyber Pakhtunkhwa province of Pakistan. In other words, it acknowledged that the target was not any Pakistani state entity or organisation, but “fidayeen jihadis” who were being trained as suicide bombers.

China Chooses Neutrality Over Pakistan?

Put in these words, the Chinese have not quibbled, more importantly, they have taken an even-handed stance. Addressing the Chinese Ministry of Foreign Affairs regular briefing on Tuesday, the official spokesman Lu Kang called on “the two sides to exercise restraint and take actions that will help stabilise the situation in the region.”
Both were important countries in South Asia and would benefit from harmonious relations. Islamabad could not be particularly happy that its closest ally has chosen neutrality in its time of need.
Asked about the phone call that the Chinese foreign minister Wang Yi had received from his counterpart Shah Mahmood Qureshi of Pakistan, Lu said that Wang “had listened carefully” to Qureshi’s briefing on the situation and the Pakistani propositions, but “he also reiterated that China supports the Pakistani and Indian sides in properly resolving the issue through dialogue as soon as possible.”
The Chinese stand was helped by Pakistan’s somewhat confused response. Earlier in the day, the Pakistani military spokesman Major General Asif Ghafoor claimed that some Indian aircraft had intruded into the Muzaffarabad sector and were forced to return because of the timely Pakistan Air Force response.
In the process “the aircraft released payload which had free fall in open area.” No infrastructure was hit and there were no casualties, he added.
Later in the day, the Pakistani National Security Committee met under the chairmanship of Prime Minister Imran Khan. It criticised India’s “uncalled for aggression” and vowed retaliation, but it also said that India’s claims of targeting a militant camp in Balakot were “self serving, reckless and fictitious.”
So if nothing substantive happened, China did not really have to exert itself on its “iron brother’s” behalf as yet.
Does China’s Language Give Room for Pak to De-escalate?
An important reason for this is tactical. In the wake of the strikes, one of the countries that External Affairs Minister Sushma Swaraj called in the wake of the strikes was China, and the MEA said that all of them, presumably including Beijing, showed an understanding of India’s position.
More important Swaraj flew to China later in the day to attend a meeting of the Russia-India-China (RIC) grouping at Wuzhen in China. On Wednesday morning, she met the Chinese foreign minister Wang Yi and presumably discussed the issue with him. Later, the RIC foreign ministers’ meeting got underway and provided Swaraj an invaluable opportunity to brief her colleagues.
None of this should be taken to assume that China has abandoned Pakistan. All it has done is to have taken a neutral stand in an issue which would have been hard to defend in any case.
It could not have expected New Delhi to stand by and do nothing after one of the most devastating attacks on its paramilitary personnel in Jammu & Kashmir, one that was readily claimed by a group proscribed by the United Nations.
The Chinese policy responses are always cautious in nature. This time around they cannot but be unaware that an entirely new situation has been created.
For the first time, India has invoked the right of pre-emption and struck terrorist targets in Pakistan. It has backed its action with its air power. Yet, the language it has used to do this has been low key and provides sufficient room for its ally, Islamabad, to de-escalate.
However, Pakistani jets violated the Indian airspace on Wednesday, 27 February, and dropped bombs on the way out, a day after the Indian Air Force carried out air strikes across the Line of Control (LoC).
Choosing Between a Stable India and Scorpion-Like Pak
Pakistan operates on its own calculus. Being hit by India is viewed as an existential dilemma and there must be voices in Rawalpindi (the HQ of the Pakistan Army) calling for retaliation.
In doing so, it needs to factor in the larger perspective of its relations with South Asia. It has been using Pakistan as a foil against India since the 1960s. In recent years, through the China Pakistan Economic Corridor, it has upped its commitment to Islamabad which now seems to include the assurance of Pakistani economic well-being as well. But it cannot be oblivious to Islamabad’s scorpion-like behaviour of devouring itself.
Just as the doctrine of deterrence can only be given life if it is invoked each time a threat occurs, the counter-doctrine that Rawalpindi may want to follow calls for retaliation every time it is struck. Beijing needs to square this circle and it may feel compelled to re-evaluate its position in the coming days.
On the other hand, a much more stable India is providing opportunities for Chinese companies to expand themselves. The reset in Sino-Indian ties following the Wuhan Summit of 2018 has created conditions which can be of great benefit to Beijing in an era when it is facing a fundamental challenge from the United States. Who knows, New Delhi may even consider supporting the Belt & Road Initiative in some indirect fashion as the Japanese are doing.
Quint February27, 2019 

Why the Saudi Crown Prince's Visit to India Was a Diplomatic Success

For a moment leave, aside the immediate context that has overshadowed Crown Prince Mohammed bin Salman’s (MBS’s) visit to New Delhi – the Pulwama attack and its Pakistan connection. The visit has actually been very fruitful and is yet another indicator that Prime Minister Narendra Modi’s West Asia policy remains the one area of achievement in an otherwise indifferent record of foreign policy.
That said, it is important to acknowledge that Modi is building on the legacy of his predecessors – Atal Bihari Vajpayee and Manmohan Singh. Balancing relations with Saudi Arabia, Iran, Israel or Qatar is never easy, but New Delhi has managed to do it with considerable success. Instead of torpedoing legacy, as it did in its relationships with China, Pakistan, or for that matter Nepal, the Modi government has built on it.
In some ways this is brought out by the chief guests that India has had for the Republic Day. In 2003 it was President Mohammed Khatami of Iran, in 2006 it was King Abdullah bin Abdul Aziz al-Saud, and in 2017 it was Crown Prince Mohammed bin Zayed al Nahyan.

The reasons for this are not too far to seek. West Asia or the Middle East is the most important external region for India from the point of view of its security and its economy. It is the closest source of hydrocarbons for a country which needs to import them in considerable amounts. Sixty-three percent of India’s oil imports are from the region, but equally important is that some seven million Indian nationals work in the Saudi peninsula sending back remittances worth $40 billion to the country.
A history of building relations
The strategy of balancing relations in the region were evident in the Vajpayee period, and the UPA government continued the process. In a remarkable interview, one of the first by an Indian prime minister to a Saudi newspaper, Vajpayee described his policy in this way:
“In a country like India, there cannot be any radical shaping of policies in a short time. This is especially true about India’s foreign policy, which has, right from the time of our Independence in 1947, stood on the strong foundation of consensus and continuity.”
He referred to India’s establishment of formal relations with Israel in 1992 by Prime Minister Narasimha Rao, as well as his own government’s strong support for the “Palestinian struggle”. Then, as now, he referred to India’s quest for a Comprehensive Convention against International Terrorism (CCIT).

Over the years, the relationship with the UAE has gathered strength. Modi has made two visits to the country in August 2015 and February 2018, while the Crown Prince of Abu Dhabi Mohammed bin Zayed al Nahyan (the de facto ruler of UAE) has visited India in February 2016 and as chief guest of the Republic Day in January 2017.
India’s ties with Israel have taken off in the tenure of the Modi government, but this is not an unusual development. If Modi was the first Indian prime minister to visit Israel, it was Vajpayee who invited the first Israeli prime miniser, Ariel Sharon, to visit India. Defence ties, too, go back to the Vajpayee years when India acquired Israeli UAVs, Barak SAMs and the Phalcon AWACS systems. What may have changed somewhat is the tenor of the relationship between the two hard-line rightwing leaders – Benjamin Netanyahu and Narendra Modi.
Yet, though Modi signalled proximity to Israel by refusing to combine a visit to Israel with one to Palestine, he did make an Indian prime minister’s first-ever visit to the West Bank next year and spoke of the Indian commitment to Palestinian interests. In December 2017, India was one of 128 countries who voted for a resolution calling on the US to withdraw its move to recognise Jerusalem as the capital of Israel.
Shortly after his Gulf tour that took him to Abu Dhabi, Dubai, Muscat and Ramallah, and the Israeli prime minister’s visit to New Delhi, Modi received President Hasan Rouhani of Iran in New Delhi in early 2018. Modi’s visit to Iran in 2016 had set the stage for the development of India-Iran ties when the two countries finally put up money to  build and operate Chah Bahar and committed itself to develop a rail link from there to Zahedan.
All this happened despite the well-known antipathy of US President Donald Trump to the Iran nuclear deal and the American decision to not just pull out of the deal, but impose stringent sanctions on Iran. India made it clear it would not stop importing oil from Iran, though several Indian companies began complying with US demands. Subsequently, in November 2018, the US gave India and six other countries a waiver to temporarily continue the purchase of Iranian oil.
Working towards a stable region
Energy and expatriate labour are the obvious leit motifs of Indian policy towards the region.
But both India and the Gulf states want to move beyond this. They are keen to diversify their economies, and they see the growing Indian economy as a good place to invest in. At the same time, Indian companies and professionals seek good prospects in the opportunities that are being opened up by GCC countries. Both MBS and the crown prince of Abu Dhabi see themselves as leaders who will herald a new era in their respective countries.
Modi’s visits have led to a flurry of investments in India. In 2018, the Abu Dhabi National Oil Company and the Saudi giant Aramco agreed to take a 50% stake in the $44 billion refinery that India was building in Ratnagiri district of Maharashtra. Both have also expressed an interest in investing in India’s natural gas sector as well as the second phase of the Indian strategic crude oil reserve.
Earlier, the Abu Dhabi Investment Authority put $1 billion into a special HDFC affordable housing scheme and $1 billion into the National Infrastructure Investment Fund. Now the Saudis have indicated that they will put money into the NIIF as well.

New Delhi cannot be oblivious to the task of the security of its oil sea lanes and its expatriate population in the region. Very obviously, stability is the most important goal of Indian policy in this volatile region.
Right now, that stability is being undermined by our good friend the United States which, in association with the Saudis, appears bent on bringing about a regime change in Iran. Moves in this direction could bring the already fragile peace in the region crashing down. No matter how you look at it, this will have consequences for India, none of them good.
Crunch time could come when the American waiver period expires in May 2019. American officials say there will be no extensions. As it gets squeezed, Iran could walk out of the nuclear agreement, triggering an American-Israeli response. India will be in the midst of general elections at the time and will find it hard to come up with an adequate policy response.
The Wire February 24, 2019

IAF Is Relying On Junkyards & Warehouses To Keep Its Fleet Afloat

Given its precipitously declining numbers, the Indian Air Force’s plan to acquire a squadron plus (21 aircraft) of MiG-29s that were lying unassembled and moth-balled in a Russian facility, is actually a smart move. Earlier the IAF acquired 35 old airframes and spares of the Anglo-French Jaguar strike aircraft, 31 from France, and two each from UK and Oman, so as to cannibalise them for spares to keep their existing fleet, of some 118 or so Jaguars, flying.
Clearly, beggars cannot be choosers, and the IAF, which, in the past, had a propinquity for buying the best and most expensive aircraft, has been forced by circumstances to look at various options to maintain their combat profile and numbers

Acquiring the MiG-29 Fighters

The IAF will get the MiG-29 fighters upgraded to the latest standards by Russia, and get them at virtually throwaway prices, reportedly Rs 200 crore per piece. They will augment the 62 MiG-29 fighters that are in the IAF’s fleet which are also being upgraded to give them an all-weather multi-role capability. In fact, there are reportedly 15 more such aircraft, so, the IAF would be well advised to get all of them.
They are already equipped with more powerful engines, fly-by-wire flight control systems, as well as the same radar as those of the MiG-29UPG standard, and will only need to install some India-specific avionics. They could well join squadron service in India within a year.
The Jaguar air frames from France, Oman and UK are essentially for harvesting spares of the aircraft which is no longer in production, or even in service in the countries of its origin—UK and France.
India is currently holding some 118 of these aircraft, and the IAF has determined that their air frames will be flight worthy till the 2030s, and so they are also being upgraded with better engines, a new cockpit and mission electronic suite, as well as some India-specific defensive avionics.
As a result, the upgraded Jaguar would be a formidable all-weather strike aircraft that can carry precision-guided munitions (PGMs) and be effective in providing close support to the Indian Army.

IAF Plagued By Poor Decision-Making

The IAF had also ordered 43 Tejas jet fighters with another 83 planned for the Mark 1A version. However, though there is a value in procuring them to encourage domestic R&D, these aircraft are simply not capable of combat flying. The present version of the Tejas is an excellent aircraft as a Lead-in fighter trainer (LIFT), but the IAF doesn’t set much store by this concept, unlike most advanced air forces. It remains to be seen just what the Mark 1A will be capable off, once it is actually developed.
The Indian Air Force’s problems with numbers is no secret, It has been plagued by poor decision-making, poor acquisition strategy and shoddy quality control and contract delivery.
For example it has yet to get 25 Su-30MKI that were to be delivered by 2017 by HAL. Upgrades, such as that of 47 Mirage 2000s have also been delayed. Likewise none of the 61 Jaguars which were to have been upgraded have yet joined service. The LCA, is, of course, a story of its own marked by delays and performance problems. In addition, in the last 10 years, the Air Force has 90 combat aircraft have crashed.

Govt Yet to Give Formal Approval for Acquisition of New Fighters

All this comes on top of issues relating to the acquisition of new fighters. The IAF’s travails with the Medium Multi-role Aircraft (MMRCA) are well known, as well as the fact that instead of buying 126 of the Rafale’s decided-upon, the government suddenly decided to get just 36. Yet, a year later, it put out a Request for Information (RFI) for the acquisition of 114 fighters.
But the government is yet to give a formal approval for the acquisition, but it could well end up in the farcical situation where the same five fighters – MiG 29/35, Rafale, Eurofighter, Gripen, FA-18 and the F-16 compete, and if the requirement is for a fighter similar to the MMRCA, the Rafale could again emerge as the winner, as it would ease the IAF’s logistical nightmares relating to the operation of seven different types of fighters.
But the government probably has no intention of hurrying up at this stage. That is why the formal approval of the Acceptance of Necessity (AON) is yet to be given. And now we are in an election year.

Interim Defence Budget Gives Little Hope

The Interim Defence Budget provides little hope that money will be forthcoming for any new acquisitions. This year, the IAF wanted Rs 75,000 crore for capital acquisitions, but it was only allotted Rs 39,347 crore which cannot even take care of its committed liabilities. The payments it has to make for past acquisitions amount to Rs 47,413 crore. The IAF will have to make do with combing junkyards and warehouses in the hope of getting spares to keep its fleet going.
The Air Force has only itself to blame for this state of affairs. Its philosophy has been to go for the best, instead of the most economical solution. So now we are stuck with a situation that it may have priced itself out, in the reckoning of the government.
The Indian defence system needs to have a deep look at the projected requirements of 42 squadrons which arise out of the government’s political directive of taking on China and Pakistan simultaneously.
While there may be the so-called “collusive threat” the idea of an all out war with Pakistan and China is far-fetched. But instead of planning to fight the kind of limited informationised war it may confront in the future, the Air Force is planning to fight a modern version of WWII.
Quint February 20, 2019

It’s not a win-win option

The dilemma over military responses to the Jaish-e-Mohammed (JeM) attack in Pulwama that took the lives of 40 CRPF jawans is not new. India has been there and done that. Following the attack on Parliament House on December 13, 2001, India mobilised its entire army and threatened war for an entire year, but finally called it off.
After the Mumbai strike of November 26, 2008, PM Manmohan Singh sought military options, but was told that they were not quite prepared for the possibility of a larger war that may be triggered by a retaliatory strike.
And now, PM Modi has declared that the security forces have been given a free hand to decide the time, place and the mode of the future course of action, adding that this was an India with a new policy and practice.
What is new, in many ways, is the extent of public anger and the somewhat blatant efforts to make political use of the event.  Modi’s statements indicate that a strike is a question of when, not if.
An important factor that restrained India in 1992 (following the Bombay blasts) or in 2001 and 2008 is absent. The US played a major role in preventing an Indian retaliation, in the main out of concerns over Pakistan. Now, to go by the message being conveyed by the incendiary US national security adviser John Bolton is ‘go ahead’.
So, what will the new policy and action be?
First, the Prime Minister needs to understand that such things cannot be left to the security forces. Military action is, as Clausewitz put it, a continuation of politics by other means. In today’s post-nuclear era, when all-out war is not desirable, it is important to use the military instrument with great care, along with ‘a mix of diplomatic, economic and informational implements’.
More than ever, the present situation demands a careful mix of various means and strong political guidance and control. Just how this works was evident in the Indian response to the Kargil incursions. PM Vajpayee ordered the Army and later the Air Force in, but kept a tight control on them, ensuring a major Indian military and diplomatic victory. Not only were the Pakistani intruders pushed back, but also the international community internalised the notion of the sanctity of the Line of Control that divides the Indian and Pakistani forces in J&K. 
A lesser-known fact is that the Indian Navy took up aggressive positions in the Arabian Sea and threatened to blockade Karachi in the event of a larger war.
In the long term, many options are there, including a stepped-up covert war and even an economic one. India could up the ante in Afghanistan, or for that matter in the UN Security Council. But Modi also has electoral compulsions for quick and kinetic action.
Air strikes are the easiest. An IAF aircraft can launch a Popeye air-to-surface missile with a 340-kg warhead from Indian airspace and it can travel 70 km or so to a target across the LoC. India has longer range options with the air-launched version of the Brahmos missile that can travel 400 km with a 200-kg warhead.
The second option is an overland ‘surgical strike’. Again, to be effective, it must be sufficiently violent. The so-called surgical strikes of September 26, 2016, were not, because Pakistan was able to pretend they never occurred. More important, Rawalpindi was clearly not deterred because its cross-border attacks on India did not stop. Indeed, one took place two months later on Nagrota, the HQ of 16 Corps.
The problem is targets. In the surgical strikes, India took out a couple of huts being used as launchpads and killed their occupants. But using a 200-300 kg warhead for that would be overkill. It is not clear whether we have exact coordinates of larger facilities used by the Jaish. If we do target them, we would have to be sure that they are, indeed, Jaish targets, and then the IAF would have to ensure accuracy, because in the crowded South Asian terrain, a small error could lead to hundreds of non-combatants being killed.
Since the terrorists operate in small groups and stay in scattered facilities, identifying and targeting larger facilities inland and retrieving a commando group without getting entangled with the dense Pakistan army positions would be a daunting task.
Both these options are made with the presumption that India would seek to differentiate between the Pakistan army and the terrorists. Were India be willing to strike at Pakistani military facilities, we would be into an entirely different ball game. Make no mistake, the Pakistan army will retaliate against any deliberate targeting of its facilities.
If New Delhi decides to play that game it could well also order a blockade of Pakistani air and maritime space. India does not have to be able to enforce this directly, but the threat of being sunk or shot down would be sufficient for air and maritime traffic to be severely disrupted. But this would unleash a different dynamic and affect third countries, thus complicating the outcome.
Whatever the choices are, it is imperative that the Modi government ensure that they are tightly controlled and managed by the political authorities. The Army may have the freedom to decide the nature, time and place of the action, but the responsibility for the outcome will rest on the shoulders of those who wield the instrumentality.
Tribune February 19, 2019

China plays heavy metal tunes, world faces music

On the morning of 7 September, 2010, a Chinese trawler collided with two Japanese coastguard ships near uninhabited islands in the East China Sea that are claimed by both countries. When Tokyo decided to detain the fishing boat’s captain, Beijing hit back with a vengeance. It placed an informal trade embargo on all exports of rare earth elements to Japan, its main buyer. China controls 93 percent of this group of 17 minerals, and more than 99 percent of the world’s supply. They are used in making everything from cell phones to electric motors, batteries, aircraft, wind turbines, MRI machines, as well as advanced avionics and control systems of fighter jets.
The Chinese denied the move and lifted the ban within a week. Subsequently, Beijing reduced the export quota of these minerals by 40 percent, resulting in a skyrocketing of their prices. The US, EU and Japan took the case to the WTO which ruled in their favour.
China’s high-powered economic growth has made it a leading producer and consumer of minerals and metals found around the world. As China moves towards a consumption economy powered by a growing middle class, its demand for these elements, especially the rare earths, becomes even more voracious. And Beijing has not hesitated to use strategic minerals as an instrument of foreign policyThe world confronts two inter-related issues — first, Chinese demand could lead to a global shortfall of certain key minerals. Second, China could restrict the availability of minerals, particularly rare earths, of which it is a dominant producer or of which it has acquired control overseas.
The key player from the Chinese point of view is the National Development and Reform Commission (NDRC), their version of our Niti Aayog. But the similarity doesn’t extend far. Unlike the late unlamented Indian Planning Commission or its successor Niti Aayog, the NDRC has real teeth. Its major task is to formulate and implement strategies of economic and social development, to develop targets and policies, regulate financial structures and monitor the health of the economy.  It is also tasked with maintaining the overall control of important commodities, and formulate plans for the overall imports in relation to agricultural and industrial products and raw materials. It has to work out the utilisation strategies of these materials in relation to national plans, as well as manage the strategic reserves of the country.
While the NDRC provides tactical guidance and supervision, the everyday work is done through the newly established Ministry of Natural Resources and their instruments are the huge State Owned Enterprises (SOE) of the country.
In the last two decades, China established large scale refining and production facilities of aluminium, tantalum, and cobalt. Exploration for minerals within the country has intensified, though not at the level of Australia and Canada. Beijing has also encouraged its companies, especially the SOEs to expand into international markets and invest in strategic resources globally. The biggest investments are in oil, featuring the Chinese giants, the Sinopec, Sinochem, CNOOC and CNPC.
But Chinese companies have also invested heavily in other areas in companies in Australia, Canada, sub-Saharan Africa, Mongolia, Brazil, Peru, Chile, Laos, Zambia, Zimbabwe, Democratic Republic of Congo, Papua New Guinea, Myanmar, etc. According to one estimate, the accumulated stock of Chinese overseas direct investment (ODI) in 2013 was $106 billion, making mining the number two destination for Chinese ODI.
Last year, Tianqi Lithium acquired 24 percent shares in Chile’s SQM company, making it the second largest shareholder in a major producer of a metal that is used in electric vehicle batteries. China sold more than 750,000 electric cars, some 3 percent of the total, in 2017. Beijing wants to up this to 20 percent in 2025 and position China as the dominant player in the electric car market.
The Chinese ascendancy has alarmed the United States which, though, has an abundance of such minerals but has yet become 100 per cent import dependent. This is an outcome of the restrictive US policies in permitting the mining of these minerals.
As China and the US move into a phase of political and economic competition, the world could see an intensification of the battle for strategic minerals. We could see a disruption of the current markets, or temporary shortages or, for that matter, artificial escalation of prices affecting the other parties in the game.
Countries like the US and China plan for such eventualities and maintain specialised reserves to be used in times of crisis. The US has a strategic petroleum reserve and a strategic minerals reserve. China’s State Bureau of Material Reserve is part of the NDRC and has been around for decades. India now has started building a petroleum reserve, but in the strategic minerals game it will have to dig much deeper.
Firstpost February 14, 2019