Indian Defence Review

Although embroiled in disputes with Japan and ASEAN over islands in the South China Sea, China has just announced a ‘Look West’ policy which includes steps to deal with India. As per Kissinger, China’s ‘String of Pearls’ strategy to surround India with friendly ports in the Indian Ocean Region (IOR) is based on the game of Weiqi; India’s ‘Iron Curtain’ for influence in the IOR is based on chess. India’s MEA and PMO who direct India’s foreign policy are adept at ‘chess-like reactive moves’ in the absence of stated national interests and strategy directions. Earlier, Indian diplomats practiced the status quo policy of ‘Non Alignment’ which is now giving way to pursuance of national and economic interests, and a ‘Look East’ policy, though shades of Non-alignment still breathe. China looks to thwart India’s moves in the IOR and India’s ‘Look East’ moves, which now extend to Vietnam.

Two years ago at a China-US Naval War College Conference at Newport in USA, the delegates discussed the Chinese board game called ‘weiqi’ (pronounced ‘weychee’) known as ‘Go’ in Japan. ‘Weiqi’ is based on long drawn strategic moves, with white and black stones on a 19X19 gridded board and the game ends when the opponent’s stones are surrounded signifying victory. Former US Secretary of State, Henry Kissinger in his latest 586-page tome On China (Allen Lane 2011) has analysed Weiqi, and its lasting influence on China’s geo-political strategy and compared it with chess, a comparatively shorter game of reactive moves that terminates with ‘checkmate’ or a ‘draw’. It is a game at which Indians excel.

Although embroiled in disputes with Japan and ASEAN over islands in the South China Sea, China has just announced a ‘Look West’ policy which includes steps to deal with India. As per Kissinger, China’s ‘String of Pearls’ strategy to surround India with friendly ports in the Indian Ocean Region (IOR) is based on the game of Weiqi; India’s ‘Iron Curtain’ for influence in the IOR is based on chess. India’s MEA and PMO who direct India’s foreign policy are adept at ‘chess-like reactive moves’ in the absence of stated national interests and strategy directions. Earlier, Indian diplomats practiced the status quo policy of ‘Non Alignment’ which is now giving way to pursuance of national and economic interests, and a ‘Look East’ policy, though shades of Non-alignment still breathe. China looks to thwart India’s moves in the IOR and India’s ‘Look East’ moves, which now extend to Vietnam.

How ‘Look East’ Began

The beginnings of India’s ‘Look East’ policy took shape in Singapore in October 1991, as an economic necessity to avert Free Foreign Exchange (FFE) default when India was obliged to hawk gold to UBS to pay for its import bills. India has a record of not defaulting on its dues. It was a reactive strategy to garner Foreign Direct Investment (FDI) from the ASEAN Tiger economies. Finance Minister Manmohan Singh and Finance Secretary Montek Ahluwalia proceeded to Bangkok to request an urgent loan of $2.8 billion at the World Bank-IMF Board of Governors meeting held in mid-October. The duo flew in to Singapore around October 18 and was joined by a large team of Government officials and industrialists from India led by the then Commerce Minister P Chidambaram from New Delhi. On the IMF meet, Montek Ahluwalia had this to say, “We were able to project India’s exceptional balance of payment difficulties and the consequent loss of confidence in India’s economy, which had led to a freeze on new lending by commercial banks, and continuing outflow of NRI deposits.

The withdrawal of these normal flows meant that India faced a substantial ‘unfilled gap’ in its external payments requirements. Even on the assumption of substantial important restraint unless these gaps could be filled, India would have to resort to drastic import restrictions beyond the present levels which would precipitate serious decline of industrial production, severe shortages of essential products such as diesel and kerosene and unavoidable pressure on prices”.

The task in Singapore was to aggressively canvass for investment. A large forum of potential investors was invited by High Commissioner Yogesh Mohan Tiwari at Hotel Imperial in Singapore to witness presentations by the Indian delegation. India’s emissaries from Philippines, Myanmar, Malaysia and Thailand were also present there. Economic Adviser Deepak Nayyar, NK Singh, Ambassador Preet Malik and Power Secretary Geeta Krishnan were in the team from India. They had also canvassed for investments and for the Enron power project that the World Bank had declined, and for other Independent Power Projects (IPPs). Incidentally, Shri and Shrimati Khullar who rose to the rank of Secretary were the respective Private Secretaries to Dr Manmohan Singh and P Chidambaram for that historic meet.

Whilst the meet was on in Singapore, news arrived that IMF-World Bank had granted the stand-by loan requests to India for the next two years on the condition that India liberalise her economy. Dr Montek Singh Ahluwalia’s message to PM Narasimha Rao was, “India can be out of the woods.” Investors in Singapore also took steps to invest in India.

This decision to garner investments made Prime Minister Rao give his Principal Private Secretary AN Verma, the powers for the Foreign Investment Promotion Board (FIPB) to sanction FDI requests and a new chapter in India’s economy was scripted. This economic policy later converted itself into a security strategy euphemistically called the ‘Look East’ policy, and was strongly welcomed and supported by Singapore and the ASEAN. The Indian Navy, DRDO and Coast Guard took full advantage to strengthen bonds with Singapore and the Navy has four serving officers in Singapore in various capacities while the Singapore Armed Forces have stationed military assets for training and a few personnel in India. The Indian Navy has annually exercised in 16 unbroken SIMBEX naval exercises in the Bay of Bengal and in the South China Sea, and Exercise Milan is held bi-annually in the Andamans for neighbouring navies.

India’s Strategic Initiatives in The Indian Ocean Region (IOR) Losing Steam?

India has executed many successful chess-like moves to cultivate the island states in the IOR. After the withdrawal of the Royal Navy from the East, India assumed responsibility for the security of Mauritius under an agreement in 1974. In effect, Mauritius swapped one security guarantor for another. India transferred patrol boats and a helicopter to Mauritius and the Navy took responsibility for the Mauritian Coast Guard. A majority of Mauritian population comprises immigrants from Bihar, who look to India as their ‘Mother Country’ with sympathy and bonding. Mauritius has no Army or Air Force.

In 1983, the Government under Indira Gandhi crafted a treaty to allow investments without capital gains tax through Mauritius called Double Taxation Avoidance Agreement (DTAA), which has garnered some $41 billion FDI, much through round tripping of Indian money in cases. Mauritius became an offshore financial centre and an attractive route for foreign investments into India. However, ideological differences among the leaders in Mauritius surfaced.

Due to the friction between Prime Minister Anurud Jugnauth and Finance Minister Paul Berenger, coup attempts by the latter were thwarted in a timely intervention by India. The Indian Army and Navy were ordered to plan an amphibious operation, codenamed Operation Lal Dora, to Port Louis with warships and units of 54 ready Army Division from Hyderabad. Forces were assembled at Bombay, and the threat worked. Since 1984, the National Security Adviser to the PM of Mauritius has been deputed from India’s R&AW.

The DTAA is currently floundering after Vodafone was ordered to pay $2 billion in capital gains tax for its investment to purchase Hutchinson Whampoa from Essar via Mauritius through retrospective taxation legislation. This, despite Vodafone’s success in the Supreme Court, where the Tax authorities demand was not upheld. Chief Justice Kapadia apparently decided in favour of Vodafone on form, though in substance Vodafone had lost its case in the Mumbai High Court earlier and was asked to pay.

The DTAA has benefited Mauritius and India immensely since the 1980s and FDI has been routed from offices in Port Louis. The DTAA is being re-negotiated and Admiral DK Joshi, Chief of the Naval Staff, recently visited Mauritius and handed over an Inshore Survey Vessel (ISV) ‘Pathfinder’ to the Minister of Housing and Land in Port Louis and stressed the need for strong maritime ties between the two nations. The Indian Navy has worked hard at co-operation with the Island states, which China seeks to disrupt in ‘Weiqi’ style as its economy can afford largesse and aid to smaller nations. President Pranab Mukherjee was the Chief Guest at the Mauritius Independence Day celebrations this year.