The Point of No Return: Why India may not be given a second chance at the AIIB

Haneul Na’avi
23 May 2017

“Victorious warriors win first and then go to war, while defeated warriors go to war first and then seek to win.” —Sun Tsu, “The Art of War”

Last week’s Belt and Road Summit in Beijing revealed a startling discrepancy in its key alliances.

Approximately 29 countries attended, including delegates from the World Bank, the International Monetary Fund, and the United Nations; even the US. However, Indian Prime Minister Narendra Modi, the One Belt, One Road (OBOR) Initiative’s second-largest investor, boycotted the event.

His absence was a mum protest against People’s Republic of China President Xi Jinping’s shrewd decision to deepen ties with Pakistani President Nawaz Sharif on the China-Pakistan Economic Corridor (CPEC); a vital trade route into the Middle East for the OBOR.

Reuters elaborates:

Among the 3.4 billion yuan ($492.95 million) [agreements] signed on Saturday were [two] worth 2.3 billion yuan for an airport in the southwestern town of Gwadar, [the] establishment of the Havelian Dry Port in Pakistan [and] economic and technical cooperation worth 1.1 billion yuan for the East Bay Expressway linking Gwadar to Pakistan’s existing highway system.

Despite India’s snub, Sharif voiced his appreciation to China. ”Such a broad sweep and scale of interlocking economic partnerships and investments is unprecedented in history,” he stated.

Modi’s presence, however, was felt amongst pro-independence demonstrations that erupted across Pakistan’s semi-autonomous Gilgit-Baltistan region to protest the summit, reminiscent of Hong Kong’s Umbrella Revolution and Ukraine’s coup-inspired Euromaidan.

The Times of India reported:

Various students and political organisations including Karakoram Students Organisation, Balawaristan National Students Organisation, Gilgit Baltistan United Movement and Balawaristan National Front […] described the project as an illegal attempt to grab Gilgit and see it as a “Road of Gulami or Slavery for Gilgit-Baltistan” [for] China to take over their territory.

Their accusations and timing are questionable, if not subversive. Gilgit-Baltistan has sought integration into Pakistani territory since the 1949 Karachi Agreement, disproving the ‘movements’ as politically irrelevant. Conversely, their actions directly correlate to recent events on the CPEC.

On 15 March, Pakistan’s Minister for Interprovincial Coordination Riaz Hussain Pirzada revealed that his government “recommended that Gilgit-Baltistan should be made a province of Pakistan”.

He also noted that “a constitutional amendment would be made to change the status of the region, through which the USD 46 billion [CPEC] passes,” the Hindustan Times reported.

Historically, Pakistan had shelved development projects in Gilgit-Baltistan for decades to abide by UN Resolution 47 and the Karachi Agreement with India over the Jammu and Kashmir conflict.

However, that changed after Pakistani President Pervez Musharraf assumed office in 2001. Chirayu Thakkar of South Asian Voices explains further:

With the manifestation of Gwadar Port, conceived through substantial Chinese investment in 2001, and subsequent rumination upon the [CPEC], it became increasingly inevitable for Pakistan to stabilize the region […] Pakistan’s waning enchantment with the United States and […] hostile neighbor like India makes it geo-strategically imperative for Pakistan to scale up its partnership with China by ensuring the smooth execution of CPEC.

Intimidated by this, India has fought to derail Sino-Pakistani ties, with tensions finally peaking at the May OBOR summit after Beijing and Lahore materialised groundbreaking deals.

India’s anxiety at the OBOR summit is inextricably tied to its frustration to suppress Kashmiri independence—a region long opposed Indian imperialism and potentially liberated by the CPEC.

A PressTV article palpably illustrates how India routinely jeopardises security in Jammu-Kashmir:

Tensions between Kashmiri students and government forces have intensified since April 15, when Indian forces raided a college in Pulwama […] to scare anti-India activists.

It continues:

The Muslim-majority region has witnessed an increase in mass protests and violent attacks since early July 2016, when Burhan Wani, a top figure in a pro-independence group, was killed in a shootout with Indian troops.

This is not the first time Pakistan has raised concerns about Indian-backed insurgents in Balochistan; Pakistan’s largest and westernmost province.

Pakistani Ambassador to the Republic of Korea Zahid Nasrullah Khan expressed this in a passionate rebuttal to the Korea Times:

Balochistan has been victim of subversive activities by India. On 3rd March 2016 Commander Kulbushan Yadav the RAW operative (Indian intelligence agency) was apprehended by our authorities when he was trying to enter in Pakistan illegally [whose] objective was to instigate Baloch insurgents and finance [the] Baloch Liberation Movement in order for them to carry out subversive activities in Balochistan resulting in the killing of Pakistani citizens.

In addition to causing security headaches, Modi also selfishly declined invitations to join the CPEC, after Pakistani Lieutenant General Aamir Riaz offered to deepen cooperation between them.

“India should ‘shun enmity’ with Pakistan and join the [CPEC] along with Iran, Afghanistan and other Central Asian countries and enjoy its benefits,” he continued.

Following the summit, Ding Gang of the People’s Daily concurred with Riaz:

If New Delhi joins […] this will help alleviate tensions and confrontations between India and Pakistan. More importantly, the initiative can enhance local people’s living standards […] Civilians in the Kashmiri area have suffered from poverty and armed conflicts for decades. A responsible government has no reason to keep these innocent civilians enduring such ordeals.

As India chastises the OBOR over potential debt burdens, citing the mantra of “Chinese debt slavery” in Sri Lanka; however, two discrepancies emerge.

Firstly, Sri Lanka still attended the May OBOR summit, along with Nepal and Pakistan. Additionally, China’s “debt burden” hasn’t deterred others from submitting their applications to join the bank.

The bank, which began with 57 ratifiers, has increased its membership to 77 countries, spanning from Europe, Eurasia, Latin America, and East Asia’s most powerful and influential economies.

“More and more countries are signing up to be members of AIIB because they see how internationalism can promote development in Asia, with far reaching benefits for the global economy.” AIIB President Jin Liqun highlighted.

Modi even received the AIIB’s first loan approval to begin the Andhra Pradesh – 24×7 Power for All project, which was launched in 2014 to provide electricity to participating states throughout India. This was, of course, done with Chinese approval and co-financed by the World Bank.

“I am delighted that AIIB is working closely with India, who is our second largest shareholder, in energy and other infrastructure sectors, and we expect the [project] to be the first of many projects AIIB invests in India,” President Jin expressed.

The project was approved on 2 May, 2017 by the AIIB Board of Governors— two weeks before India’s diplomatic gaffe.

Thankfully, India still has six proposed projects waiting in the approval queue, ranging from the Madhya Pradesh Rural Connectivity Project, Mumbai Metro Line 4 and India Infrastructure Fund, which will face the judgment of the very people Modi has snubbed.

Consequently, China can simply summon all shareholders to vote on downgrading India’s 8.36 bln USD in contributions and 8% voting power, and recapitalise with several members—Iran, Afghanistan, Pakistan, and later Turkey—all whom are infinitely more conducive, necessary, and enthusiastic to complete the Silk Road pathway into Europe, rendering India obsolete.

Re-elected Iranian President Hassan Rouhani, eager to initiate the Iran-Pakistan Gas Pipeline, has already extended his hand in friendship to his regional ally.

“We hope that the Pakistani side would also more seriously pursue the necessary measures to complete the project,” Rouhani asserted in a Geo TV article.

[Speaker of the National Assembly Sardar Ayaz Sadiq] assured Rouhani that Pakistan would never take any step that could go against the interests of the brotherly country of Iran,” it continued.

Turkey and Iran have also begun a diplomatic entente cordiale, where the two figureheads alluded to increased bilateral trade.

“Over the past four years, big steps have been taken to develop and deepen Iran-Turkey ties, but a leap must be made … toward reaching an annual trade volume of $30 billion,” Rouhani told Turkish President Recip Tayyip Erdogan in a phone call.

By entrusting Iran and Pakistan, the AIIB gains more pragmatic members who can secure future investments for all shareholders.

Furthermore, these shareholders could also cite Article 31 of the AIIB Banking Charter, which reiterates the organisation’s international character:

The Bank, its President, officers and staff shall not interfere in the political affairs of any member, nor shall they be influenced in their decisions by the political character of the member concerned. Only economic considerations shall be relevant to their decisions. Such considerations shall be weighed impartially in order to achieve and carry out the purpose and functions of the Bank.

As Modi’s political affairs jeopardise the ‘international character’ of the Bank, President Jin and AIIB shareholders can vote to limit or exclude India from future projects—including pending ones.

Outlined in the AIIB 2017 Business Plan and Budget Summary, one institutional goal—Continuing Institution Building—was noted as follows:

[In] its second year of operation, the Bank will continue to refine, deepen and enhance its institutional and policy frameworks and ensure their effective implementation […] A key priority will be preparing a mechanism for independent investigation of complaints regarding AIIB non-compliance with its policies [and] institutional arrangements to give effect to the newly enhanced Policy on Prohibited Practices (PPP), helping to keep its operations corruption free.

Finally, assuming that India follows through with its promise to develop itself outside the context of the OBOR initiative, it would need to overcome critical shortcomings to do so.

Manoj Joshi of the New Delhi Observer Research Foundation explains why:

New Delhi has two problems — first, India’s own hopeless internal infrastructure [and second] it lacks the structure of capable state-owned enterprises which can execute projects in quick time. The 19.2-km Kamchiq tunnel in Uzbekistan built by the China Railway Tunnel Group was completed in 2016 in exactly three years, the 756-km Addis Ababa-Djibouti railway in five years by the China Railway Group […] random examples of the accomplishments of Chinese companies.

India’s chauvinist aspirations in Gilgit-Baltistan, as well as Jammu and Kashmir, have no place in the AIIB and will endanger its future operations. Modi’s refusal to participate in the CPEC will turn his country into a regional pariah whilst Pakistan paves the way for Asia to the Middle East.

India’s double-dealing between the East and the American military has come to an end, and it must decide its own fate. Meanwhile, the OBOR will look after the collective welfare of its member states under a mutually beneficial partnership—a party India may no longer be invited to join.

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