1. Impacts, Prospects, Opportunities Client: U.S. Government, Office of South Asia Analysis Nathaniel Barber Kieran Coe Victoria Steffes Jennifer Winter Prepared by: China in the Indian Ocean Region:

2. Outline Impact Analysis ▪ Regional Security ▪ Energy Issues ▪ Non-Energy Economic Relations Trends and Prospects ▪ “Expansionist” China ▪ “Non-Expansionist” China Opportunity Analysis ▪ Trends to Obstruct or Encourage ▪ Opportunities for Future Action

4. New Chinese partnerships with South Asian states come at India’s expense ▪Construction of port facilities ▪Hambantota, Sri Lanka ▪Chittagong, Bangladesh ▪Sittwe, Burma ▪Gwadar, Pakistan ▪Economic and military aid Impact Analysis: Regional Security

6. Definition of energy security: ▪ Availability ▪ Reliability ▪ Affordability China and India face three primary energy security risks ▪ High proportion of oil imports ▪ Reliance on dominant oil exporting countries ▪ Dependence on vulnerable sea lanes Impact Analysis: Energy Security

8. Increasing Chinese Trade in the Indian Ocean region India’s Trade Deficit with China Foreign Direct Investment by China and India Impact Analysis: Non-Energy Economic Relations

10. Prospects and Trends: Assumptions “Expansionist” China “Non-Expansionist” China Likelihood Scale Very unlikely Unlikely Somewhat unlikely Plausible Somewhat likely Likely Very likely

11. Prospects and Trends: Regional Security

12. Prospects and Trends: Energy Security

13. Prospects and Trends: Non-Energy Economic Relations

14. Opportunity Analysis: Trends Trends to Obstruct ▪ Chinese FDI to regional states ▪ Chinese-financed and built ports Trends to Encourage ▪ U.S.-India relationship ▪ India’s relationship with regional states ▪ Indian and Chinese acquisition of energy resources ▪ Chinese-Indian trade ▪ Membership in international energy organizations

15. Opportunity Analysis: U.S. Action Strengthen U.S. relations with India Expand relations with Chinese-courted regional states Maintain naval superiority in the Indian Ocean Ensure energy security for South Asian states Pursue a less unequal trade balance with China

16. Questions?