Category : Business Affairs



Praveen Jaiswal assesses the significance of the Maritime Silk Route

The Indian Ocean Rim (IOR) and states on its littoral have been of great significance for ages. The region is home to a third of the world’s population, 25 percent of its landmass, and 40 percent of global oil and gas reserves. It is also home to India and China, the world’s rising superpowers.

But the regional environment is volatile. Apart from piracy and recent developments in Iran, Iraq and Afghanistan now pose additional challenges of violence, terrorism and instability across the region.

The IOR stretches eastward from the Horn of Africa, the Arabian peninsula, the Iranian plateau and the Indian subcontinent, all the way to Indonesia. The Indian Ocean’s geography encompasses the Red Sea, Arabian Sea and Bay of Bengal, as well as Java and the South China Sea.

Here too lie the principal oil-shipping lanes, as well as the main navigational choke points of world commerce. This includes the straits of Bab-el-Mandeb, Hormuz, Malacca and Singapore. Forty percent of seaborne crude oil passes through the Strait of Hormuz at one end of the Indian Ocean. Half of the world’s merchant fleet capacity crosses the Strait of Malacca at the other end. This makes the Indian Ocean the busiest sea route on the planet. Any disruption to these sea lanes can lead to substantial increases in the cost of energy.

The politics of energy dominates global maritime debates. Energy security is a major national concern for many developed and developing nations. This is particularly so for the Indian subcontinent and China, whose competition for energy influences IOR geopolitics. The Indian Ocean, which is sometimes called the Maritime Silk Route, represents the deep links between the Middle East and an increasingly powerful Asia.

China, Japan and India rely heavily on oil from the Persian Gulf states, while a new economic interdependence has developed on the basis of manufactured goods, energy refining capacity, food security and the migration of labour.

According to estimates, 90 percent of intercontinental trade and two-thirds of all petroleum supplies travel by sea. Moreover, the IOR from the Middle East to the Pacific accounts for 70 percent of the supply of global petroleum products. But Indian Ocean tanker routes between the Persian Gulf and South and East Asia are becoming clogged, because millions of Indians and Chinese citizens are entering the global middle class and consuming large quantities of oil.

The world’s energy needs are expected to rise by 50 percent by 2030, and almost half of this consumption will come from India and China. India is soon to become the world’s fourth-largest energy consumer after the US, China and Japan. All these nations are dependent on oil for more than 90 percent of their energy needs. And most of this oil will be sourced from the Persian Gulf, via the Arabian Sea.

India is expected to overtake Japan as the world’s third-largest net importer of oil by 2025. India’s coal imports from Mozambique, in the south-western Indian Ocean, are also set to increase dramatically. This will be in addition to the coal that India already imports from Indian Ocean countries such as South Africa, Indonesia and Australia.

In future, India-bound ships will also be carrying enormous quantities of LNG across the western section of the Indian Ocean from Southern Africa. This is apart from existing imports from Qatar, Malaysia and Indonesia.

Then there is China, whose demand for crude oil doubled between 1995 and 2005, and will double again in the coming decade or two. It already imports 7.3 million barrels of crude oil a day, which is almost half of Saudi Arabia’s output. More than 85 percent of China-bound oil is transported across the Indian Ocean through the Strait of Malacca.

The appetite of China, Japan and South Korea for oil from the Gulf has already made the Strait of Malacca home to half the world’s oil flows. Such aspirations are compelling, especially for China to redirect its gaze from land to the seas. China’s long-term quest for a presence in the Indian Ocean to protect its energy fleets has led to the emergence of its String of Pearls strategy. Making inroads to Pakistan’s Gwadar and Pasni ports, Hambantota in Sri Lanka, Chittagong in the Bay of Bengal and so on will thus become critical.

Against this background, the effort of the United States to maintain and strengthen its command of the sea in the Indian Ocean is a major maritime security development in the Indian Ocean Region – the US presence in the IOR has grown significantly in the last 20 years.

However, all countries in the IOR – including India, China and the US – want to ensure that the Indian Ocean remains a vital transmission belt for global commerce. All are concerned, and they want to address transnational problems such as trafficking, terrorism and piracy.

These nations desperately need the countries of the Middle East – those that are undergoing major transitions – to find political and economic stability. The Maritime Silk Route is precious indeed.