Djibouti
lies more than 2,500 miles from Sri Lanka but the East African country
faces a predicament similar to what its peer across the sea confronted
last year: It has borrowed more money from China than it can pay back.
In both countries, the money went to infrastructure projects under the aegis of China’s Belt and Road Initiative.
Sri Lanka
racked up more than $8 billion worth of debt to Chinese sovereign-backed
banks at interest rates as high as 7 percent, reaching a level too high
to service. With nearly all its revenue going toward debt repayment,
last year Sri Lanka resorted to signing over a 70 percent stake and a
99-year lease to the new Chinese-built port at Hambantota.
racked up more than $8 billion worth of debt to Chinese sovereign-backed
banks at interest rates as high as 7 percent, reaching a level too high
to service. With nearly all its revenue going toward debt repayment,
last year Sri Lanka resorted to signing over a 70 percent stake and a
99-year lease to the new Chinese-built port at Hambantota.
Djibouti is
projected to take on public debt worth around 88 percent of the
country’s overall $1.72 billion GDP, with China owning the lion’s share
of it, according to a report published in March by the Center for Global
Development.
projected to take on public debt worth around 88 percent of the
country’s overall $1.72 billion GDP, with China owning the lion’s share
of it, according to a report published in March by the Center for Global
Development.
It, too, may face the possibility of handing over some key assets to China.
As Chinese
President Xi Jinping continues to push lending to developing countries,
policy analysts are sounding alarm bells about the fate of smaller
nations biting off more than they can chew—and the strategic
possibilities opening to China as a result.
President Xi Jinping continues to push lending to developing countries,
policy analysts are sounding alarm bells about the fate of smaller
nations biting off more than they can chew—and the strategic
possibilities opening to China as a result.
Xi’s Belt and
Road Initiative, which aims to revive and expand the ancient Silk Road
trade routes on land and at sea, has become the crown jewel of his
foreign policy since 2013, shortly after coming to power. Government
officials regularly talk up the initiative and state media outlets give
it broad coverage.
Road Initiative, which aims to revive and expand the ancient Silk Road
trade routes on land and at sea, has become the crown jewel of his
foreign policy since 2013, shortly after coming to power. Government
officials regularly talk up the initiative and state media outlets give
it broad coverage.
But many of the projects have stalled in the early stages of planning, and the dollar amount attached is left vague.
More
importantly, the countries involved are often seduced by the appeal of
large infrastructure projects that are financially destabilizing. Eight
of the 68 countries involved in the Belt and Road Initiative currently
face unsustainable debt levels, including Pakistan and the Maldives,
according the Center for Global Development’s report.
importantly, the countries involved are often seduced by the appeal of
large infrastructure projects that are financially destabilizing. Eight
of the 68 countries involved in the Belt and Road Initiative currently
face unsustainable debt levels, including Pakistan and the Maldives,
according the Center for Global Development’s report.
Its
vulnerability notwithstanding, Djibouti has been keen to work with
Beijing. It partnered with China Merchants Ports Holdings Company, or
CMPort—the same state-owned corporation that gained control of the
Hambantota port in Sri Lanka—to build the Doraleh Multipurpose Port.
That project was completed in May 2017.
vulnerability notwithstanding, Djibouti has been keen to work with
Beijing. It partnered with China Merchants Ports Holdings Company, or
CMPort—the same state-owned corporation that gained control of the
Hambantota port in Sri Lanka—to build the Doraleh Multipurpose Port.
That project was completed in May 2017.
Earlier this
month, Djiboutian President Ismail Omar Guelleh described the new
Djibouti International Free Trade Zone, a $3.5-billion venture with
China, as a “hope for thousands of young jobseekers.”
month, Djiboutian President Ismail Omar Guelleh described the new
Djibouti International Free Trade Zone, a $3.5-billion venture with
China, as a “hope for thousands of young jobseekers.”
But the most
noteworthy development in Djibouti—and the most worrying for the United
States—is China’s first overseas military base, which is located 6 miles
from the U.S. military’s only permanent base in Africa. From Camp
Lemonnier, where about 4,000 U.S. troops are stationed, the United
States coordinates operations in “areas of active hostilities” in
Somalia and Yemen.
noteworthy development in Djibouti—and the most worrying for the United
States—is China’s first overseas military base, which is located 6 miles
from the U.S. military’s only permanent base in Africa. From Camp
Lemonnier, where about 4,000 U.S. troops are stationed, the United
States coordinates operations in “areas of active hostilities” in
Somalia and Yemen.
In the past
year, U.S. diplomats and generals have grown increasingly concerned that
the base will provide China a foothold at the Bab el-Mandeb Strait, a
strategic chokepoint in international maritime trade. About 4 percent of
the global oil supply passes through this waterway connecting the Gulf
of Aden with the Red Sea each year.
year, U.S. diplomats and generals have grown increasingly concerned that
the base will provide China a foothold at the Bab el-Mandeb Strait, a
strategic chokepoint in international maritime trade. About 4 percent of
the global oil supply passes through this waterway connecting the Gulf
of Aden with the Red Sea each year.
Gen. Thomas
Waldhauser, who commands the U.S. Africa Command, said in a testimony
before the House Armed Services Committee in March that the United
States was “carefully monitoring Chinese encroachment and emergent
military presence” in Djibouti. Local relations between the two
great-power rivals have become especially strained in 2018, with each
lodging grievances against the other.
Waldhauser, who commands the U.S. Africa Command, said in a testimony
before the House Armed Services Committee in March that the United
States was “carefully monitoring Chinese encroachment and emergent
military presence” in Djibouti. Local relations between the two
great-power rivals have become especially strained in 2018, with each
lodging grievances against the other.
China, for
its part, maintains that the naval facility will serve as a logistics
hub for its anti-piracy, humanitarian, and emergency evacuation
missions. The live-ammunition drills conducted at the base should be
interpreted as “legitimate and reasonable” exercises for
counterterrorism operations, a commentator told the state-owned Global
Times.
its part, maintains that the naval facility will serve as a logistics
hub for its anti-piracy, humanitarian, and emergency evacuation
missions. The live-ammunition drills conducted at the base should be
interpreted as “legitimate and reasonable” exercises for
counterterrorism operations, a commentator told the state-owned Global
Times.
But satellite
images of the People’s Liberation Army base may reveal its true
purpose. A retired Indian Army intelligence officer noted last September
that the 200-acre facility includes at least 10 barracks, an ammunition
depot, and a heliport. Four layers of protective fences surround the
perimeter; the two inner fences are eight to 10 meters tall and studded
with guard posts. The purported logistical support base is rather a
fortress that may accommodate thousands of soldiers. More than 2,500
Chinese peacekeeping personnel are already stationed in countries such
as South Sudan, Liberia, and Mali.
images of the People’s Liberation Army base may reveal its true
purpose. A retired Indian Army intelligence officer noted last September
that the 200-acre facility includes at least 10 barracks, an ammunition
depot, and a heliport. Four layers of protective fences surround the
perimeter; the two inner fences are eight to 10 meters tall and studded
with guard posts. The purported logistical support base is rather a
fortress that may accommodate thousands of soldiers. More than 2,500
Chinese peacekeeping personnel are already stationed in countries such
as South Sudan, Liberia, and Mali.
“There is
nowhere else in the world where the U.S. military is essentially
co-located in close proximity to a country it considers a strategic
competitor,” said Kate Almquist Knopf, the director of the Defense
Department’s Africa Center for Strategic Studies.
nowhere else in the world where the U.S. military is essentially
co-located in close proximity to a country it considers a strategic
competitor,” said Kate Almquist Knopf, the director of the Defense
Department’s Africa Center for Strategic Studies.
“This is not something the Pentagon is used to,” she said.
One concern
is that the Djibouti government, facing mounting debt and increasing
dependence on extracting rents, would be pressured to hand over control
of Camp Lemonnier to China.
is that the Djibouti government, facing mounting debt and increasing
dependence on extracting rents, would be pressured to hand over control
of Camp Lemonnier to China.
In a letter
to National Security Advisor John Bolton in May, Sen. James Inhofe
(R-Okla.) and Sen. Martin Heinrich (D-N.M.), two members of the Senate
Armed Service Committee, wrote that President Guelleh seems willing to
“sell his country to the highest bidder,” undermining U.S. military
interests.
to National Security Advisor John Bolton in May, Sen. James Inhofe
(R-Okla.) and Sen. Martin Heinrich (D-N.M.), two members of the Senate
Armed Service Committee, wrote that President Guelleh seems willing to
“sell his country to the highest bidder,” undermining U.S. military
interests.
“Djibouti’s
now identified as one of those countries that are at high risk of debt
distress. So, that should be sending off all sorts of alarm bells for
Djiboutians as well as for the countries that really rely on Djibouti,
such as the United States,” said Joshua Meservey, a senior policy
analyst at the Heritage Foundation.
now identified as one of those countries that are at high risk of debt
distress. So, that should be sending off all sorts of alarm bells for
Djiboutians as well as for the countries that really rely on Djibouti,
such as the United States,” said Joshua Meservey, a senior policy
analyst at the Heritage Foundation.
“Policymakers
are becoming more and more aware of this. The challenge is that there
isn’t a strong sense of how to effectively push back or compete with
China on some of these issues.”
are becoming more and more aware of this. The challenge is that there
isn’t a strong sense of how to effectively push back or compete with
China on some of these issues.”
Meservey says
there are simple steps the United States could take to start balancing
out China’s expanding influence, including institutionalizing the
U.S.-Africa Leaders Summit—a one-off event in 2014 hosted by President
Barack Obama. The U.S. government should also incentivize private sector
investment in Africa, he said, thus creating competition with Chinese
state-backed dollars on the continent.
there are simple steps the United States could take to start balancing
out China’s expanding influence, including institutionalizing the
U.S.-Africa Leaders Summit—a one-off event in 2014 hosted by President
Barack Obama. The U.S. government should also incentivize private sector
investment in Africa, he said, thus creating competition with Chinese
state-backed dollars on the continent.
Other
analysts believe China’s debt-driven expansion could backfire on
Beijing. Jonathan Hillman, a fellow at the Center for Strategic and
International Studies, said one “underappreciated dimension” of China’s
predatory lending projects in Africa was the uncertainty that Beijing
takes on by doling out trillions of dollars abroad.
analysts believe China’s debt-driven expansion could backfire on
Beijing. Jonathan Hillman, a fellow at the Center for Strategic and
International Studies, said one “underappreciated dimension” of China’s
predatory lending projects in Africa was the uncertainty that Beijing
takes on by doling out trillions of dollars abroad.
“If these projects do not go well, there is a financial and reputational risk to China,” Hillman said.
“The port in
Sri Lanka gets a lot of attention, but not too far from the port is an
airport that now no plane flies into. That’s not a good advertisement
for Chinese soft power or China’s strength or reliability as a partner.”
Sri Lanka gets a lot of attention, but not too far from the port is an
airport that now no plane flies into. That’s not a good advertisement
for Chinese soft power or China’s strength or reliability as a partner.”
