Fears rise in India as China pushes plan for canal to reshape Indian Ocean

There's reason to worry about what Chinese involvement in this project will mean for the balance of power in the Indian Ocean, says Indian naval commander

Faced with a new push to build a 100-km canal cutting Thailand in two, and slashing 1,200 km off the route Chinese warships take to reach South Asian ports, Indian naval planners have begun warning the government that the proposed Kra Canal will dramatically enhance Beijing’s ability to intervene in the region. 

“In theory, the Kra Canal could benefit India and the region by taking pressure off the overcrowded Malacca Straits,” said a senior Indian naval commander. “In practice, there’s reason to worry about what Chinese involvement in this project will mean for the balance of power in the Indian Ocean”.

Led by former Thai army chief General Pongthep Thesprateep, and backed by several former military figures influential in the country’s ruling junta, the Thai Canal Association called late last month for the creation of a national committee to examine the $30 billion project.

Thailand’s government, wary of irking its Association of Southeast Asian Nations partners, or the United States, has so far declined to support the project. “There are still other problems in the area, therefore they must be prioritised,” said Thai government spokesperson Lieutenant-General Sansern Kaewkamnerd.

But, Indian diplomatic sources said Beijing’s envoy in Bangkok, Lyu Jian, has privately told the Thai government that his country sees the Kra Canal as part of its ambitious One Belt, One Road plan, which envisages pushing new networks of rail, road and maritime links from Asia to Europe and Africa.

Longhao, a Chinese construction company involved in the Chinese government’s controversial island-building work in the South China Seas, is among several firms diplomats say has been lobbying the Thai government to move forward on the Kra Canal.

The proposal put forward by Longhao, an Indian government source said, involved building two offshore islands to berths for ships, warehouses and even entertainment hubs. The company proposes bringing in over 30,000 Chinese workers to build the canal.

From China’s point of view, the Kra Canal offers a means to secure its expanding demand for West Asia’s hydrocarbons against overcrowding in the Malacca Straits — the world’s busiest maritime lane, through which an estimated 84,000 ships carrying around 30 per cent of global trade transit each year.

The World Bank estimates over 140,000 ships will seek to transit the Malacca Straits annually by the end of the decade, far in excess of its capacity of 122,000 ships.

Exiting the Kra Canal westwards, traffic would enter the Andaman Sea, transit past India’s Andaman and Nicobar Islands, and then head south towards the Chinese-owned port at Hambantota, in Sri Lanka.

Inevitably, Indian naval officials worry, the project will involve Chinese military involvement. The Kra Canal would offer an alternative to a route surrounded by the US allies — and thus vulnerable to a blockade in the event of a geopolitical crisis. Former Chinese President Hu Jintao had underlined China’s concerns about the straits, referring to the “Malacca Dilemma”.

Indeed, the geopolitics of the Kra Canal are one reason why Thailand remains divided on moving forward on China’s proposal.  Some in Thailand’s strategic establishment fear Chinese investment in the project will, inexorably, lead to an erosion of the country’s sovereignty — a fear founded on the experience of Egypt and Panama, where the canals led to decades of foreign control.

“The history of the Panama and Suez Canals shows despite the unquestionable economic advantages of a canal, one country’s funding of its construction on the territory of another country usually leads to the spread of significant influence by the first country,” scholar Ivica Kinder has pointed out.

Experts remain divided on the economic viability of the Kra Canal. Earlier this year, energy specialist Gary Norman estimated that the canal would need to generate $4.57 million each day to pay for itself. Based on the assumption that 40 ships would transit the canal each day, he noted, that would mean a user fee of $115,000 per transit.

But, Norman pointed out, the typical additional fuel costs for the longer routes through the Malacca, Sunda or Lombok straits range from $40,000 to $120,000 per trip — not enough to justify the canal-use fees.

The Suez Canal and the Panama Canal, bypassing entire continents, are able to charge large ships fees of around $250,000 and $125,000, respectively, because of the far larger savings in time they enable. But, advocates say the Kra Canal project would handle far larger numbers of ships, and also draw investments from businesses linked to shipping, which range from engineering, supplies and legal services. The Thai Canal Association’s plans also envisages building two large free trade zones and a new international airport.

“If we build the canal, we can become an Association of Southeast Asian Nations (Asean) leader,” Thai Canal Association vice-president,  General Thawatchai Samutsakorn, told an audience in Bangkok. 

Thailand’s tourism industry and fisheries could, however, face damage from the project, critics argue.  “The proposed canal route would run past tourist areas in the Andaman Sea that generate about 40 per cent of the total revenue from the tourism industry,” expert Thon Thamrongnawasawa noted at a recent academic conference. The idea of a canal cutting through Thailand has been around for centuries: In 1677, then Thai King Narai the Great asked the French engineer M de Lamar to explore the possibility, and in 1793 the idea was revived by Rama I, who thought a canal might help protect the country’s capital.  In 1858, Britain secured permission to dig the canal, but the funds ran out before the dig could be completed. Following decades of fears that Japan might build the canal and thus bypass Britain’s base at Singapore, Thailand signed a treaty in 1946 agreeing not to build the canal at all.

In the 20th Century the idea was revived several times — once, in the 1970s, with both Soviet and the United States experts suggesting using nuclear bombs to cut through intractable mountain ridges.