Advantage India in Malé, But Will It Win The Long Race With China?

The irony is that the deal to complete building the port which is also called the Thilafushi port that was negotiated in 2021, comes within five months of Maldives forcing India to withdraw its token military presence in the strategically located archipelago.

Port And Defence Platforms 

The deal which has Maldives agreeing to buy Indian defence platforms (read ships) and train Maldivian defence personnel also comes a year after Muizzo launched a political campaign with the slogan ‘India out’, that helped him win an election to the island’s presidency last year.

After earlier alarms about Maldives drawing ever closer to India’s arch-rival China in the Indian Ocean, Modi and Muizzo also agreed to draw up a free trade pact where both sides will side-step the dollar and trade in their own currencies.

With Maldives agreeing to digital payments in rupees, the deal places the island nation firmly in the Rupee zone.

For India, Maldives is a strategic necessity. The critical sea lanes linking both South and East Asia to the Middle East pass by Maldives. As much as 80 per cent of the world’s sea-borne oil and trade transits through this region.

Shipping Lanes And Critical Minerals

Both India and China have vied with each other for influence over the archipelago to be able to protect and control vital shipping, including oil supplies to and from their respective countries.

This need to protect commerce from disruptions of the kind resultant from attacks in the Red Sea has seen both the Asian rivals turn pro-active in the area.

With China wielding a firm grip on lithium and cobalt mines in Africa, India is looking to scour the depths of the Indian Ocean for cobalt, lithium, nickel, copper and manganese  - key to green energy - in order to ensure its place in a brave new world of green mobility and energy.

At the heart of the race is the fight to corner minerals, which will be used in the next generation of electric vehicles, as well as solar and wind power plants. 

India has filed two applications with the UN-affiliated International Seabed Authority (ISA) for deep-sea exploration licences in the Afanasy-Nikitin Seamount and the Carlsberg Ridge in the Central Indian Ocean where the minerals may be mined from. 

India also has two exploration contracts with the ISA. The first in the Central Indian Ocean Basin covers a huge 75,000 square km sea bed, which is believed to have polymetallic nodules containing nickel, copper, cobalt and manganese. It was signed in 2002 and has been renewed thereafter. 

The second is a 15-year contract signed in 2016 to explore polymetallic sulphides in a 10,000 sq km area along the Central Indian Ridge (CIR) and Southwest Indian Ridge (SWIR) region of the Indian Ocean.

The race for the search of these critical minerals is bedevilled by Chinese research ships already present in the region. Further, Sri Lanka has laid claim to Nikitin Seamount, named after a 15th-century Russian explorer who visited India, Arabia and Africa. 

Though the area lies beyond the 200 nautical miles limit for a country’s Exclusive Economic Zone (EEZ), a different set of rules does allow countries to lay claim on extension of land below the ocean even if it is beyond their EEZ.   

Analysts believe a foothold in Maldives will help India to operate in the region in the manner it has planned.

Bail Out From Loan Default

Muizzo’s change of heart and the deals with Maldives was possibly brought about by two factors. Firstly, the need for Malé to urgently secure a bail-out after being snowed under Chinese debt.

Secondly, a recent swing in Maldivian civilian opinion which now disfavours a break with India that many in the island nation see as historically a “natural partner” for everything from trade, medical aid to tourism for more than a millennium.

On Monday, India unveiled a US$ 760 million bailout for the Maldives to stave off a sovereign default. The Reserve Bank of India agreed to give currency swap lines of US$ 400 million and Rs 3,000 crore (US$ 357 million) to the archipelago’s government.

The Maldives’ net or usable foreign exchange reserves had fallen to just US$ 36 million last month, underscoring the crisis its currency - dollar-pegged rufiyaa - faced.

The swaps would be “instrumental in tackling the ongoing financial challenges faced by the Maldives”.

India has already handed out a tad over US$ 100 million in short-term dollar loans to the Maldives this year, which helped it pay interest on its foreign debt obligations and saved it from being dubbed a defaulter nation in the league of countries like Argentina, Greece, Venezuela and Lebanon.

The moot question that now arises is - will Beijing that has the same interests in Maldives as India: control over shipping lanes, quest for critical minerals and influence, sit quietly as Raisina Hill attempts to wrest this “pearl of the Indian Ocean” for its crown?