China, India duel for riverine lifeblood of Bangladesh

Bangladesh’s economy faces a perfect storm with double-digit inflation pinching wallets, foreign exchange reserves dwindling and economic growth fading away. To weather the crisis, the government is desperately seeking foreign loans.

Enter China into the eye of the tempest. With a timely US$5 billion soft loan, Beijing has positioned itself as Bangladesh’s potential financial savior. Beijing’s support comes just after Dhaka received a $1.4 billion tranche of a $4.7 billion IMF loan package.

But China’s offer has a geopolitical twist. Bangladesh’s economic vulnerability has opened an opportunity for China to counter India’s influence in the Bay of Bengal region as the two regional giants compete for control over the Teesta River project.

The Teesta River, also spelled Tista River, is crucial for both Bangladesh and India for irrigation and hydropower. It has also been a source of bilateral tension for years due to India’s reluctance to share the river’s water downstream.

Now, Beijing’s $5 billion loan is seemingly tied to making China the lead on completing the Teesta management and restoration project, provisionally estimated at $1 billion.

If China is indeed handed the project’s lead, it will inevitably spur new tension between Dhaka and Delhi. That’s in part because Indian Foreign Secretary Vinay Mohan Kwatra during a recent visit offered Indian funding for development projects on the river.

India’s Teesta offer was taken with a grain of salt in Dhaka. Before Kwatra’s visit, a major Indian newspaper, The Hindu, expressed concern about China’s proposed Teesta development project in Bangladesh.

India’s apprehension stems from the project’s location near the Siliguri Corridor, a strategically important strip of land connecting India’s northeast to the mainland. Nicknamed the “Chicken’s Neck,” this corridor holds immense geopolitical significance.

India fears China’s involvement in the Teesta project could be a veiled attempt to establish a foothold near this sensitive region.

The Teesta River is Bangladesh’s lifeblood. As the country’s fourth largest river and the primary source of water for its northern regions, it’s crucial for irrigation, supporting millions of citizens and a significant portion of agricultural production.

India’s water diplomacy, however, hasn’t been very diplomatic from Dhaka’s perspective. Bangladesh experts allege that upstream dams constructed by India have restricted water flow, significantly and negatively impacting downstream Bangladesh.

During dry seasons, Bangladesh receives only a fraction of the 1,200-1,500 cubic feet per second of water it needs and much less compared to the perceived ideal 5,000 cusecs, with levels dropping even below 200-300 cusecs at times.

In 2022, Bangladesh began working with China to build a multipurpose barrage and dredge and embank portions of the river to form a single manageable channel where the water level would be much higher.

Bangladesh sought $725 million from China for the $980 million project to ensure better water preservation on the Teesta River. China has already completed a survey and is awaiting Bangladesh’s response to its previous project proposal.

Chinese ambassador in Dhaka Yao Wen last year said his country awaited the end of Bangladesh’s election (which took place on January 7 this year and reinstalled the Awami League-led government) to continue talks on the development project.

After the election, China requested that Bangladesh revise its loan application and submit a new implementation plan if the government still deemed the project essential, to which Dhaka agreed in principle. 

Munshi Faiz Ahmed, a former Bangladesh ambassador to China, has criticized Bangladesh’s approach to the Chinese proposal.

Ahmed believes Bangladesh readily acknowledged China’s offer when it could have taken a more neutral stance. This, he says, suggests Bangladesh is favoring China in implementing the Teesta project.

China is already Bangladesh’s largest economic partner. Under its Belt and Road Initiative (BRI), Beijing has already committed a massive $17.5 billion in grants and loans to the country.

Some note this commitment stands in stark contrast to the global trend during the Covid-19 pandemic. While many nations scaled back foreign aid, a report by the William and Mary Global Research Institute reveals China maintained its support to Bangladesh, providing a consistent $2.3 billion annually.

The influx of funds allowed the Awami League government to fast-track critical infrastructure projects like the Padma Bridge, a key elevated expressway and several new power plants.

“China’s generosity isn’t purely altruistic,” Ahmed said, suggesting that Beijing’s largesse is part of a strategic soft power play in the Bay of Bengal region vis-à-vis India.

“By fostering economic ties and supporting Bangladesh’s development goals, China aims to build goodwill and secure a stronger foothold in the region,” he said.

“And this economic dependency of Bangladesh could give China leverage in the ongoing rivalry with India for regional influence,” the retired diplomat opined.

Taj Hashmi, an expert on history and security studies, noted in his popular podcast that Bangladesh badly needs Chinese aid and investment to prevent a financial crisis. He said Dhaka cannot afford to antagonize Beijing by allowing India to implement the Teesta project instead.

“If China denies Bangladesh’s request for a $5 billion soft loan and decides to scale back its investments, it will be a disastrous blow for Dhaka,” he said.

Former Bangladeshi foreign secretary Md Touhid Hossain agrees with Hashmi when saying Bangladesh has little choice but to consider China’s involvement in the Teesta Project in the current situation.

“I think it will be wiser for Bangladesh to go ahead with the Teesta project with China’s help,” he said.