Djibouti the latest to fall victim to China’s ‘debt trap diplomacy’

The US has nothing to fear – that’s the message broadcast loud and clear by Djibouti’s government after its annexation of a key container port in Djibouti City last month.

But Djibouti’s veteran dictator, Ismail Omar Guelleh, gives Washington every reason to worry. Under Guelleh’s loan-thirsty leadership, Djibouti is succumbing to Beijing’s global influence policy of “debt trap diplomacy.” As a result, the recently nationalized Doraleh Container Terminal may very well end up in Beijing’s hands.

Even if Guelleh assured the international community he has no intentions of so doing, it certainly wouldn’t be the first time a foreign partner had to give up a strategic asset to write off debt to Beijing. But by handing such a prized asset off to China, Djibouti may well deal a blow not only to the United States’ strategic interests but also to the international order.

In purely economic and historical terms, Djibouti is not an obvious choice of “strategic partner” for any state. It’s a tiny, poor, apocalyptically dry East African country with little to speak of in terms of human capital or natural resources. Djibouti’s global importance only makes sense once you look at a map. Overlooking a strategic chokepoint traversed by one of the world’s busiest shipping lanes and providing a convenient launchpad for naval missions to the Gulf of Aden, Djibouti is perfect naval-base material.

Camp Lemonnier is the forward operating base of US Africa Command, and America’s only full-fledged naval base on the continent – officially, at least. With the nearest friendly port – in Mombasa, Kenya – 2,700 kilometers away, the US, the North Atlantic Treaty Organization, and the European Union are dependent on Djibouti as a base for counterterrorism and anti-piracy operations. The same goes for the French, who also have a base in Djibouti City, as well as for the Japanese and Italians, who lease land around Camp Lemonnier.

China joined the crowd last year when Beijing opened its first permanent overseas naval base only a few kilometers from Camp Lemonnier. At the time, the new base prompted security concerns about having Beijing as a neighbor. Now, with Djibouti deepening its dependence on Beijing and China’s global strategy of “debt trap diplomacy” coming into sharper focus, US fears are becoming more profound.

China and Djibouti, despite one having a population 1,500 times as great as the other, are officially “strategic partners.” A constant shower of concessionary Chinese loans are enabling Guelleh to realize his professed mission to turn Djibouti into the “gateway to Africa.” The Doraleh Multipurpose Port projectand the Hassan Gouled Aptidon international airport are two of the big-ticket items to be funded and built by Beijing. Cumulatively, they are worth a cool billion in US dollars, or well more than half of Djibouti’s gross domestic product in 2015.

But Beijing’s largesse is not prompted entirely by altruism toward the poverty-stricken country. With the launch of the Belt and Road Initiative it is increasingly obvious that China is intent on transforming its economic power into strategic might. And increasingly, it has been wielding this power by employing debt-trap diplomacy to lure poorer nations into giving up strategically important concessions.

This has been taking place not only in Djibouti, but in other strategic points along China’s Belt and Road as well. Last year, after struggling to pay its onerous Chinese-held debts, Sri Lanka was forced to sell offthe Hambantota port. The US$1.3 billion asset, which was opened eight years ago using Chinese loans, was handed over to Beijing on a 99-year lease, providing China with critical access to Indian Ocean sea lanes and causing alarm in New Delhi.

Even when China isn’t dramatically acquiring strategic assets, it still uses debt as leverage – in 2016, for instance, Beijing canceled $90 million of Cambodian debt in order to secure new projects funded by yet more debt.

Not only that, but while banks operating by international standards opt for “sustainable financing,” Beijing isn’t squeamish about saddling tiny countries with huge debts and demanding natural resources or assets like Hambantota as collateral. The Center for Global Development recently analyzed this practice and found that eight countries along the Belt and Road are particularly vulnerable to debt traps laid by Beijing.

Not surprisingly, Djibouti is counted among those eight countries. With its ratio of public debt to GDP fast approaching 100%, and many more projects in the pipeline, Djibouti will soon owe far more than it’s worth. For Beijing, that means free rein in one of the most strategically important countries on Earth.

For Washington, it means America’s only naval base in Africa being hosted by a Chinese dependency. Considering that the most recent National Security Strategy describes China as America’s main strategic rival, the US AFRICOM commander is probably justified in voicing his concerns.

What’s more, China’s growing presence in Djibouti affects not only the US, but also its allies and the international order it has overseen since the end of World War II.

For decades, Western-brokered international standards and practices have governed how infrastructure can be financed and built. The Chinese like to point out that unlike their Western counterparts, their loans don’t come with unpopular conditions – such as adherence to democratic norms and respect for human rights. But while Beijing can afford to undercut Western governments in Africa by being prepared to bribe officials and evict locals, its loans come with their own strings attached.

Instead of sustainable finance and responsible government, Beijing demands fealty and conditions that privilege China. The coming debt crunch in places like Djibouti presents problems for the US Navy – but it also promotes the idea that a tinpot dictators like Guelleh are free to pursue their unsustainable dreams in exchange for pledging allegiance to Beijing.

By JON CONNARS, Independent Risk Analyst and Researcher

AsiaTimes