FDI Strategic Analysis Paper (SAP). Examination of the Chinese so-called "String of Pearls" (SOP) Concept, (Booz, Allen Hamilton, DOD classified submission in 2005), as it applies to the Indian Ocean. Geopolitical, strategic, logistic, economic and military implications are discussed.

1. 5 July 2010
China in the Indian Ocean: A Case of Uncharted Waters
CAPT David L. O. Hayward (Rtd)
FDI Associate
Summary
Some Western and Indian observers and officials remain concerned over what Beijing
perceives as potentially vulnerable sea lines of communication through the Indian Ocean.
This has led to the suggestion that China will ultimately develop a strategy that will lead to
strategic relationships with a number of island and littoral states. In time, China may go on
to develop bases from which it can project power and further expand its influence in the
region. This thinking has resulted in the so-called “String of Pearls” concept.
This SAP seeks to examine the strategic importance of the Indian Ocean from a Chinese
perspective and to make some judgement over various bases, which China is helping to
construct. It also examines the attitudes of the United States and a number of other
countries in the region.
Analysis
One paradigm for a Chinese geopolitical, economic and military stratagem in the Indian
Ocean has been called the “String of Pearls” (SOP) concept.
It was first advanced to the US Department of Defence by consulting firm Booz Allen
Hamilton in a classified report in 2005. According to the report:
‘China is building strategic relationships along the sea lanes from the Middle
East to the Nan Hai (South China Sea) in a way that suggests defensive and
offensive positioning to protect China’s energy interests.’
In the SOP concept, a “pearl” entails infrastructure such as the construction of new ports,
airports, logistical facilities, and improvement of those that might already exist. These
developments are to serve dual trade and military interests, including supply, refuelling and
electronic listening stations. As port facilities are attained, the People’s Liberation Army
Navy (PLAN) could press its maritime presence forward from the Nan Hai and Strait of
Malacca to Africa and the Strait of Hormuz.
It is pertinent to further qualify this cursory assessment of Chinese intentions.

2. Page 2 of 9
China faces a
“Malacca
dilemma” – the
vulnerability to
disruption of its oil
supply lines from the
Middle East and
Africa.
Oil Supply Route to China
Stretching from the Arabian Gulf and the coast of East Africa on one side to the Malay
Archipelago and the shores of Australia on the other, the vastness of the Indian Ocean
consists of an area of over 45 million square kilometres. The thirty-odd nations that
constitute the ocean’s littoral region contain one third of the world’s population. Rich in
natural resources, this geographical space contains more than half the world’s proven oil
reserves. In addition, a plethora of vital minerals such as iron ore, titanium, chromate,
bauxite, manganese and uranium, as well as such raw materials as rubber and tin, are found
in abundance in various parts of the littoral region.
If the world map is inverted, taking the example from Professor Geoffrey Kemp’s Pentagon
Limited Contingency Study of 1977, and now viewing the Southern Seas through the eyes of
Chinese military strategists, then the vital sea-lanes for
the transport of crude oil to China are seen as follows:
Upon exit from the Strait of Hormuz, the oil supply
route traverses through the Arabian Sea, rounds
Dondra Head (Sri Lanka), crosses the Indian Ocean,
enters the Strait of Malacca, bypasses Singapore,
enters the Nan Hai (South China Sea) and the disputed
waters claimed by China as part of its “Sacred
Territory”; threads its way past the Spratly Islands,
Johnson Reef, Macclesfield Bank, and Paracel Islands,
to Zhanjiang (opposite Hainan Island), to Zhuhai and Guangzhou (Canton); to Xiamen and
continues on through the Taiwan Haixia (Taiwan Straits) to the Dong Hai (East China Sea),
calling at Hangzhou and Shanghai; then northwards to the Huang Hai (Yellow Sea), to
ultimately deliver the crude oil to Qingdao, Dalian and Tianjin.1
The greatest geographical impediment to expedient oil supply to China is the Strait of
Malacca. An estimated 50,000 cargo vessels transit the region each year. In fact, the US
Energy Information Administration (EIA) describes it as a “World Oil Chokepoint” moving
approximately 15 million barrels of oil through the strait each day.
Some Chinese military specialists have the view that the US has the military capability to cut
off Chinese oil imports and could severely cripple China by blocking its energy supplies.
Chinese President Hu Jintao stated in November 2003 that China faces a “Malacca dilemma”
– the vulnerability to disruption of its oil supply lines from the Middle East and Africa.
China’s Oil Thirst
It is anticipated the China may lead a world increase in demand for oil tankers of the Very
Large Crude Carrier (VLCC) variety as its energy needs rise in the next five years. Assuming
the increased oil tonnages are sourced from the Arabian Gulf it could, according to estimates
1
Entry ports and oil infrastructure facilities can be further defined by access to www.portguide.com. Lloyd’s
Register Airplay Ltd has published a Tanker Berth Guide available to subscribers.

3. Page 3 of 9
such as those published by consulting firm Poten & Partners, create demand for an
additional eighty VLCCs to meet Chinese oil consumption by 2015.
VLCC tankers will soon provide 80 per cent of China's oil and 65 per cent of India's – fuel
desperately needed for the two countries' rapidly growing world-fastest economies. Japan
and South Korea, too, are almost totally dependent on energy supplies shipped through the
Indian Ocean.
China now imports approximately 60 per cent of its oil from the Middle East, up from 40 per
cent in 2005. According to the BP Statistical Review of World Energy 2009, China imported
1.84 million barrels per day (MMBD) from the Middle East out of total imports of 4.4 MMBD.
While China’s economy is dependent on many imported resources, oil is a particularly strong
motivator for the expansion of its defensive perimeter. China’s oil imports grew at an
average rate of 9.1 per cent annually from 1993 to 1998 and consumption reached 7.9
MMBD in 2008. The US EIA projects a near doubling of imports to 15 MMBD by 2020. This
spike in consumption is compounded by an 18 per cent drop in the estimates of domestic
reserves and further calculations of production decline from a high of 3.9 MMBD by 2010,
before gradually decreasing. By 2035, China is likely to import between 70 to 80 per cent of
its oil from the Middle East if the current US EIA projections prove to be true.
China's “SOP” Concept
It now remains to give closer attention to the “pearls” and “fortress” in the Indian Ocean.
Gwadar (Pakistan)
The re-vitalised port of Gwadar is a mere 200 nautical miles from the mouth of the Arabian
Gulf. Gwadar, in particular, was listed as an essential constituent of the SOP in the Indian
Ocean.
Beijing is helping Pakistan to construct a deepwater port and naval base. Port improvements
and dredging have been undertaken. (During the time the Red Army occupied Afghanistan,
the Soviet Union had similar intentions). China has provided 80 per cent of Gwadar port’s
US$248 million ($282 million) initial development cost. More specifically, China is providing
US$198 million ($225 million) of the development cost in the form of official development
assistance, while the balance of US$50 million ($57 million) is paid by Islamabad.
‘Gwadar will provide economical access to the sea for cargo generated in the
northern and southern parts of Pakistan and neighbouring States. Pakistan
offers the shortest route to Central Asia ....’
Inherent in the above statement from the Pakistani Government is the fact that Gwadar will
eventually provide direct access to Xinjiang in western China, assuming the Pakistani
initiative of the Sino-Pakistani railway system comes to fruition (though that may turn out to
be a utopian dream). China may have an ulterior motive to eventually establish a new oil
and gas pipeline to Central Asia, providing the cost is not prohibitive and the Hindu
Kush/Karakoram mountain ranges surmountable. Longstanding boundary disputes with
India will be a problem.

4. Page 4 of 9
Hambantota has
the potential to
become an island
fortress … guarding
Chinese oil supply
movements through
the South China
Sea.
Gwadar lies at the confluence of not just local offshore drilling pipelines, but also of the sea
and land routes that will move oil to India, China and Japan in the 21st
Century. It will
become a new “Venice” for the oil trade: a modern replacement for the “silk trade”.
In addition to the port and naval facilities, China has financed an airport (envisaged as
Pakistan’s largest) and an oil refinery destined to produce 60,000 barrels per day from
offshore drilling. A new Chinese-funded superhighway, built for mercantile and defence
purposes, connects Gwadar to Karachi.
The infrastructure development at Gwadar marks China’s new strategic presence on the
Indian Ocean. The Gwadar port, referred to by US analysts as the “Chinese Gibraltar,”
represents a total of US$1.2 billion ($1.4 billion) in Chinese investment.
Hambantota (Sri Lanka)
Again, in Sri Lanka, Chinese aid and commercial investments have increased markedly while
the government of President Mahinda Rajapakse has been in power. The US$1 billion ($1.16
billion) Chinese-funded Hambantota Port Development Project near Dondra Head in the
southern part of Sri Lanka will set up a naval military base to rival that of the UK’s Diego
Garcia military base in the Chagos Islands, which is currently leased to the United States
Navy. Hambantota is a strategically vital gateway for
securing access to sea lines of communication (SLOCs)
in the Indian Ocean. The new port is only six nautical
miles from major SLOCs between the Bay of Bengal
and Arabian Sea.
When completed in thirteen years from now,
Hambantota will be more than three times the size of
Colombo harbour. The port will be able to
accommodate a new generation of mega-ships and is
to include four terminals (12 berths), bunkering and
refuelling facilities, an LNG refinery, aviation fuel storage facilities and dry docks. The port
will be able to handle VLCCs, smaller oil tankers and mercantile shipping as a halfway respite
stop on their way to China. Other Chinese-funded projects in Sri Lanka include new port
infrastructure at Galle; the new international airport, the Norochcholai Coal Power Plant
Project (US$855 million); the Colombo-Katunayake Expressway (US$248 million); and the
National Performing Arts Theatre (US$21 million). In recent years, Chinese aid to Sri Lanka
has grown fivefold.
According to Dr Priyath Wickrama, Chairman of the Sri Lanka Ports Authority, the new port
will boost the country’s annual cargo handling capacity from 6 million containers to some 23
million.
Hambantota has the potential to become an island fortress analogous to that of Hainan Dao,
guarding Chinese oil supply movements through the South China Sea.

5. Page 5 of 9
Chinese-funded developments located elsewhere in the Indian Ocean
China has further modernised or constructed ports belonging to Maldives (a naval base at
the port of Marao, close to the Laccadive Sea at the tip of India), Seychelles, and
Madagascar.
China has also capitalised on a 1992 agreement with Burma (Myanmar) for the construction
of ports at the Small and Great Coco Islands (at the eastern side of the Bay of
Bengal/Andaman Sea) in return for the modernisation of Burma’s navy. Chittagong
(Bangladesh) has also benefited from Chinese-funded projects.
In addition, Chinese firms have constructed or modernised ports at Sittwe, Kyuakpu, Mergui
and Hainggyi Island. Some Western analysts claim that the Chinese military also operates
reconnaissance and electronic intelligence stations on several islands belonging to Burma,
though both Indian and American intelligence officials have said evidence is lacking.
The eastern seaboards of Bangladesh and Burma (as far south as the Coco Islands), appear
to be covered militarily and subject to Chinese geopolitical intentions. It is not known to
what extent military resources are involved or will be involved in these projects.
China is examining the feasibility of constructing a US$20 billion ($23 billion) canal across the
Kra Isthmus in Thailand. This new canal would allow tankers and other commercial vessels to
bypass the “chokepoint” Strait of Malacca. The canal project, if implemented, will give China
port facilities, warehouses, military installations, and other infrastructure in Thailand
capable of further enhancing Chinese influence in the Andaman Sea and the Gulf of
Thailand.
A number of military analysts in the US are wondering about an eventual Chinese naval base
in the Arabian Gulf. The most likely site is Bandar Abbas (Iran), directly opposite the
Musandam Peninsula, at the very throat of the Strait of Hormuz (roughly 50 kilometres wide
at its narrowest point). Chinese electronic eavesdropping, monitoring ship traffic (around
300 shipping movements per day), through the Strait of Hormuz and the Arabian Sea is
already fully operational.
The Chinese encirclement of the Indian Ocean using the SOP concept (as a blueprint) is yet
to be fully realised and could be portentous for many decades to come. Military analysts in
the West have expressed concerns. The phrase “Power, One Pearl at a Time” has been
coined and is understood by many as a tightening of the noose.
Chinese naval strategy and military philosophy (not examined in detail in this paper) in the
Indian Ocean may be seen by some analysts as a virtuous regional hegemony: that is, a
calculated bid to one day reach ultimate maritime supremacy. This extreme viewpoint is,
however, to be refuted. For the reasons stated below, it will be impossible for China to apply
regional hegemony in the Indian Ocean in the near future, for there is far too much
competition. The situation could, however, easily change by 2030 or later.

6. Page 6 of 9
Any future US
deployments from
Diego Garcia will
not take place in a
vacuum but, rather,
in an Indian Ocean
influenced by India
and, potentially,
China as well.
At the present time, at least, Chinese naval strategy largely comprises a defensive mode to
deter Western/Allied attempts to interdict the supply of oil and vital strategic minerals via
SLOCs to Mainland China.
Responses to Chinese Developments in the Indian Ocean
The United States (and Diego Garcia)
The 2008 American Political Science Association conference in Boston noted a key point for
the US in relation to operations in the Indian Ocean:
‘Unlike in other critical sub-regions of Asia, in the Indian Ocean littoral the US
lacks reliable host-nation bases and is unlikely to acquire them. For that
reason, the UK territory of Diego Garcia, whose location and political reliability
give it significant utility for both routine operations and crisis response, is
central to US power projection in the Indian Ocean’.
Today, apart from US military assets located further north in Japan and South Korea, only
Diego Garcia and Guam remain as purely dedicated Western military bases nearest to
China’s oil supply route from the Middle East, through the Indian Ocean, the Malacca Strait,
the Nan Hai and from other oil import sources in
Africa.
Guam (excluding Kadena Air Base in Japan) is perhaps
nearest to VLCCs transiting the Nan Hai en route to
Mainland China. Singapore (not officially a US naval
base) conveniently sits at the Malacca “chokepoint”.
Bahrain (hosting the US Fifth Fleet) controls the oil
supply fountainhead in the Arabian Gulf at the
Western end of the Chinese SOP.
The British-owned atoll of Diego Garcia in the
Chagos Islands is a pre-positioning airfreight and
maritime support base lying approximately 1,130 kilometres southwest of Dondra Head (Sri
Lanka). It is roughly 4,000 kilometres south-east of the Strait of Hormuz. The 3,650 metre
long airfield runway has been extended to cope with air-tankers and air-freighters. The
harbour is currently leased to the US Navy. An estimated 1,700 US military personnel, 1,500
civilian contractors, and about 50 British personnel populate the island. The strategically
located base played a key role in the 1991 military operation against Iraq.
By 2013, the four phased construction projects, which commenced in 2008, totalling in
excess of US$200 million ($232 million), will transform the island into a superior fully-fledged
naval base and logistical hub so as to achieve “fullest capability soonest”.
Most importantly, the island is able to host a US Navy nuclear-powered guided-missile
submarine (SSGN) for limited repairs and extended crew rest. This new SSGN is an Ohio-class
Trident ballistic missile submarine refitted to carry conventional Tomahawk cruise missiles.
With a “maximum strike” strike complement of 154 Tomahawk missiles, a single SSGN has

7. Page 7 of 9
the cruise missile striking power of a typical carrier battle group. The SSGN is well suited to
the security environment of the Indian Ocean littoral.
The USS Emory S. Land, a submarine tender, is also deployed to Diego Garcia, serving as a
floating shipyard to repair and supply submarines and surface combatants.
Diego Garcia facilitates US power projection throughout the Indian Ocean littoral through
pre-positioning of Army and Marine Corps brigade sets, long-range bomber operations,
replenishment of naval surface combatants, and the strike and special operations
capabilities of the SSGN.
The remote Diego Garcia links three nearby US Combatant Commands, namely
USCENTCOM, USPACCOM, and the recently constituted Africa and Kenya Command. As
such, the island is a primary hub for US power projection in the region and is one of the most
strategic US bases in the world.
Any future US deployments from Diego Garcia will not take place in a vacuum but, rather, in
an Indian Ocean influenced by India and, potentially, China as well.
Singapore
Pro-Western Singapore is without question the most important strategic port nearest to the
eastern Indian Ocean and the Nan Hai, as it sits so close to the busy Malacca Strait and close
to the southern end of the Nan Hai. There are four large container terminals at the port and
commercial shipping throughput traffic is enormous. It is one of the busiest ports in the
world. Singapore has become a close security partner of the US since the end of the Cold
War. The US Navy (together with other pro-Western navies) often visits and uses ship repair
facilities at the Changi Naval Base. The base would be most important strategically if any
military confrontation occurred in either the Indian Ocean or the Nan Hai.
Chinese military strategists were infuriated when the US Government successfully lobbied in
the 1990s for the US Navy to build a military pier at the Changi Naval Base. When the pier
was completed in 2001, it was large enough to accommodate a Nimitz-class super carrier.
Singapore has thus become the US Navy’s hub in the eastern reaches of the Indian Ocean
and the Western Pacific.
Chinese-Singaporeans are hotly canvassed by either China’s Ministry of State Security (MSS),
or by its Western counterparts. There is a distinct dichotomy at trade functions and
symposia in Singapore between pro- and anti-Chinese-Singaporeans. China continues to
lobby for naval facilities at Singapore.
Manama (Bahrain)
The US base at Bahrain is now called Naval Support Activity Bahrain (NSA Bahrain) and is
home to US Naval Forces Central Command and the US Fifth Fleet.
The operational area of the Fifth Fleet encompasses about 6.5 million square kilometres of
water spanning the coastlines of 27 countries including the Arabian Gulf, the Red Sea, the
Gulf of Oman and parts of the Indian Ocean.

8. Page 8 of 9
China has now
replaced the US as
the extra-regional
actor of primary
concern for Indian
strategists.
On 27 May 2010, it was announced that NSA Bahrain is receiving US$580 million ($672
million) to double the size of the naval station and to upgrade infrastructure facilities
available to the US Navy. The monies are to be expended in four phases over five years to
2015.
The above expenditure would enable the US to better
withstand the growing number of threats in the
region’s strategic waterways.
If a worst-case scenario eventuates, such as a
prolonged Sino-US conflict, NSA Bahrain would have
the capability to block oil supply to China from the
Middle East. This will somewhat negate the viability of
the SOP concept in terms of the logistical support
and/or military protection afforded to Mainland China’s oil supply SLOCs through the Indian
Ocean. In fact, the Indian Ocean would be “an ocean too far” on which oil supply could
dwindle to a sporadic drip. The tap in the Middle East could be turned off.
India
‘Each pearl in the string is a link in a chain of the Chinese maritime presence’, India’s navy
chief, Admiral Sureesh Mehta, said in a speech in January 2010, expressing concern that
naval forces operating out of ports established by the Chinese could ‘take control over the
world energy jugular.’
India’s perceptions of the Chinese SOP concept are a complicated subject requiring careful
treatment. This is in no small part due the fact that Indian attitudes towards US naval power
have recently ameliorated in tandem with the perceived threat to New Delhi from Chinese
expansion in the Indian Ocean. As such, China has now replaced the US as the extra-regional
actor of primary concern for Indian strategists.
Conclusions
Could the “String of Pearls” strategy become a military reality anytime soon?
The compensating factor for the West is that it already has perceived techno-advanced
weapons able to blunt Chinese military initiatives to attain maritime supremacy in the Indian
Ocean. Currently, the US and Allied navies are comfortable in the knowledge of being able to
exert supremacy and interdict the SLOCs, if required, in the event of any confrontation with
China.
It remains to be seen if the Chinese Navy could – assuming it is Beijing's intention – develop
a “blue water” naval capability that could even come close to matching that of the US. In any
event, that will not happen for several decades, assuming once again that China is prepared
to embark on such a course.
A fully realised SOP strategy could, over time, ensure the PLAN obtains maritime supremacy
in the Indian Ocean. That would certainly result in a quantum shift in the balance of

9. Page 9 of 9
mercantile and naval power in the Indian Ocean and would provide the PLAN with some
assurance of success in any future conflict with the West.
To date, however, the SOP strategy – assuming one exists – has been essentially defensive in
nature. But this could change over time and needs to be closely monitored.
Another issue that needs close analysis is whether Iran will play a major role, particularly as
China will ultimately source up to 80 per cent of its oil supply from the Middle East.
Finally, in the event of a future confrontation between China and the US, the Arabian Gulf
and the northern Indian Ocean could be the primers. In another thirty years or so, PLAN
naval dispositions could lead to Chinese maritime supremacy in the Indian Ocean and an
attendant heightened risk of resource-driven conflict.
*****
About the author: CAPT David L. O. Hayward (Rtd) is a former Army Reserve Officer, IT consultant to the oil
industry and systems analyst at the Royal Australian Corps of Transport, Melbourne. He is a Defence Research
Analyst with the Royal United Services Institute (RUSI) of Australia and a member of the China Research Team.
The author is also in regular contact with the “China Team” at the US Army’s Foreign Military Studies Office
(FMSO) and with the World Basic Information Library (WBIL) at Fort Leavenworth, Kansas USA. The above paper
should be read in conjunction with a RUSI defence research paper titled China’s Dependence Upon Oil Supply
published by the author on the internet in Potomac, Maryland USA (abstract) and in Canberra, Australia (earlier
version). Refer to www.iags.org and www.rusi.org.au respectively. This particular paper is an edited version of a
paper that is to be published later this year by DefenceIQ/IQPC/IDGA in London and New York.
Any opinions or views expressed in this paper are those of the individual author, unless stated to be
those of Future Directions International.
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