Djibouti Could Fall Into China’s Debt Trap, Heightening China-USA Rivalry

China's People's Liberation Army personnel attending the opening ceremony of China's new military base in Djibouti. (STR/AFP/Getty Images)

Djibouti Could Fall Into China’s Debt Trap, Heightening China-USA Rivalry

By Amy Cheng
Published August 2, 2018

From Camp Lemonnier, where about 4 000 US troops are stationed, the United States coordinates operations in “areas of active hostilities” in Somalia and Yemen. An eastern African country housing a key United States of America military base, has borrowed more money from China than it can pay back and faces the possibility of handing over some key assets to Beijing.

Djibouti is projected to take on public debt worth around 88 percent of the country’s overall US$1.72 billion GDP, with China owning the lion’s share of it, according to a report published in March 2018 by the Center for Global Development.

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.

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.

Djibouti partnered with China Merchants Ports Holdings Company, or CMPort—a state-owned corporation—to build the Doraleh Multipurpose Port that was completed in May 2017. 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.

Its vulnerability notwithstanding, Djibouti has been keen to work with Beijing. It partnered with China Merchants Ports Holdings Company, or CMPort—a state-owned corporation —to build the Doraleh Multipurpose Port that was completed in May 2017.

But the most noteworthy development in Djibouti is China’s first overseas military base, which is located 6 miles from the US military’s only permanent base in Africa. From Camp Lemonnier, where about 4 000 US troops are stationed, the United States coordinates operations in “areas of active hostilities” in Somalia and Yemen.

US 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.

China's People's Liberation Army personnel attending the opening ceremony of China's new military base in Djibouti. (STR/AFP/Getty Images) Gen Thomas Waldhauser, who commands the US Africa Command, said in a testimony before the House Armed Services Committee in March 2018 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.

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.

“There is nowhere else in the world where the US 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.”

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 2018, 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 US 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. “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.”

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.

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.
A Foreign Policy article.