The Malacca dilemma and Asia’s shifting trade balance of power

Most people in Bangladesh have probably never heard of the Strait of Malacca. It is far from our country. It does not make headlines every day. Yet this narrow sea route may influence Bangladesh's future more than many people realise.

Another tiny waterway beside the Strait of Hormuz is located in the Indian Ocean which controls the world economy. It is known as the Strait of Malacca located between Indonesia, Malaysia and Singapore having only 2.8 km wide. Yet, this narrow channel is the ultimate choke point for global factory e.i China. As China is the largest Crude oil importer country of the world.

If shipping through this route stops for only a few days, the effects will spread far beyond Southeast Asia. Oil prices could rise. Factories might slow down. Delivery times will surely delay. Many countries would feel the pressure almost immediately.

No country understands this better than China.

China is often considered the "factory of the world".  From small things and computers to solar panels and electric vehicles, Chinese factories produce an enormous share of the goods used across the globe. But factories cannot run without energy. Factories need fuel for it operations. Today, the Strait of Malacca is the center of a silent but dangerous in near battle field between two superpowers: The United States and China.

Greatest Weakness of China: The Malacca Dilemma

China has a massive economic problem. It does not have enough domestic crude oil mines. It relies heavily on imported oil to keep its massive economy alive. Around 80% of China's imported fuel comes from the Middle East and Africa through the Strait of Malacca. Unlike the United States, China does not have massive underground oil reserves to last through long-term conflicts.

This extreme weakness is known as the "Malacca Dilemma".  The term was coined in 2003 by former Chinese President Hu Jintao. He realised that China's economic lifeline is tightly surrendered by foreign powers. Specifically, the United States Navy and its allies control the waters surrounding this trade lane.

The Geopolitical Sparks: Iran, BRICS, and Rohingya

The fight over the Malacca Strait is linked to conflicts across the globe. One major point is the Middle East. The ongoing US-Iran military tensions have deeply affected global energy security. China has continually provided economic support, AI –Technical support and diplomatic support to Iran. This Chinese supports to Iran has deeply ignited anger in the United States. Washington views this alliance as a direct threat to its dominance over global energy routes.

At the same time, the West is deeply concerned about growing Chinese dominance within the BRICS bloc. China is using BRICS allied countries to build alternative financial networks with regional currency and push for de-dollarization. By doing this, Beijing aims to protect its trade from Western sanctions if a war ever breaks out over the Malacca Strait. India maintains strong relation with West allies but India is a BRICS membering country. BRIC(S) countries founding countries are going to launch a Currency named R5 in BRICS Summit which will be held in New Delhi on September 12 of this year. It has been coined with precedent word of founding countries currency name such as Brazil Currency "Real", Russian Currency "Rubble" Indian Currency "Rupee" China Currency "Renminbi" and South African Currency "Rand" . Here R5 is the Acronym of Five Countries Currencies name. How the US will take the role of India is a big question.

This desperate need to protect alternative trade routes explains China's controversial actions in South Asia. For example- when the Myanmar Junta was killing the Rohingya people, China kept itself silent. As silence is the sign of consent to the military regime. China did this because it had to protect its billion-dollar twin oil and gas pipelines running through Myanmar. Beijing valued its energy survival route from the Bay of Bengal far more than human rights. Although Kaladan Multi-Modal project of India was established to secure its landlocked Northeast region.

The Invisible Trap: US and India at the Gates

The United States has set a geographical trap for China at both ends of the strait. The entry side of the Strait aligns with the Pacific Ocean which lies Singapore. Singapore is home to the Changi Naval Base. This is where the powerful Seventh Fleet of the United States Navy visits regularly.

At the western side aligns with the Indian Ocean which lies the Andaman and Nicobar Islands. These islands belong to India. India is a key member of the Quad alliance formed to counter Chinese power. India has established a strong military and air command on these islands. In a war situation, India can easily block the western entrance of the Malacca Strait.

How China Attempts for Bypassing the Danger of Trap

To escape from this dangerous trap, China has launched the Belt and Road Initiative(BRI). This project looks like a series of commercial investments but the reality is that it is a grand plan to build alternative energy supply routes that fully bypass the Malacca Strait.

Chinese investment in the China-Pakistan Economic Corridor(CPEC) proves that China has great plan. The plan is simple. Cargo ships carrying oil from the Middle East will unload and load to Truck-Rail at the Gwadar Port in Pakistan. The oil will then pump through long overland pipelines directly into western China. This completely cuts out the need to sail past the US Navy in Malacca. Pakistan is known as the duel diplomacy compiler between two superpowers. It has been managing good diplomacy with both the USA and China for decades, making it a value and image.

China also offered a billion-dollar proposal to Thailand to dig a canal through the narrow Kra area. If built, ships could move straight from the Indian Ocean to the South China Sea, bypassing Singapore and Malacca completely.

Inspite of these massive projects, energy experts predict a harsh reality. All of China's alternative routes combined can only handle about 20% to 28% of its total fuel needs. The remaining 72% to 80% must still pass through the Malacca Strait.

What Role Should Bangladesh adopt

As China tries to secure alternative paths, the Bay of Bengal has become highly valuable. This is exactly where Bangladesh enters the superpower struggle.

Basically, the United States wants to monitor China from Central Asia. If the USA had successfully captured Iran, it could have built a major military surveillance base in Bagram, Afghanistan. From there, American aircraft could easily fly missions to keep watch on China's western borders. However, the US mission in Afghanistan ended, and efforts regarding Iran did not succeed. The USA now lacks a permanent ground base in that region to keep watch on Chinese movements.

Consequently, Bangladesh has emerged as the most critical geographic asset for the United States to maintain surveillance over the Indian Ocean and monitor China's maritime activities. There is simply no other suitable scope for the USA to do this.

Bangladesh is just as vital route for China. Maritime projects like the Matarbari deep-sea port, Moheshkhali, and Mongla port are valuable connection hubs for the Belt and Road Initiative. These ports offer China direct access to the Indian Ocean. They help secure the regional trade routes. 

Is Bangladesh Ready for the Superpower Pressure?

As competition between the United States and China grows, Bangladesh is becoming more important to both countries. The US wants to keep its leading role in the world, while China wants to secure the energy and trade routes that support its economy. This raises a key question: Can Bangladesh continue to balance relations with both superpowers?

For years, Bangladesh has been following the foreign policy of "Friendship to all, malice to none." But staying neutral is becoming more difficult. China is a major investor in Bangladesh's roads, bridges, ports, and other infrastructure, while the United States is one of the country's largest export markets and an influential player in the global financial system.

Leaning too far towards either side carries risks. Closer ties with China could deteriorate the relations with the United States and India, while falling too close to Washington could hit Chinese investment in Bangladesh. Managing this fragile balance will need careful diplomacy, as Bangladesh's growing strategic importance has made it a game changer in regional and global geopolitics.

Why the Malacca Strait Matters to the World's Superpowers

The geopolitical reality of the 21st century is simple. The nation which manages the Strait of Malacca holds the key to the global economy. If the United States maintains its grip, it can restrain China's rise during a conflict. If China succeeds in breaking through or finding a permanent alternative via Pakistan and the Bay of Bengal, the balance of global power will shift forever.

The struggle for this 2.8 km strip of water could trigger the next major global conflict. As tensions rise, South Asian waters are turning into the most critical zone in global politics.

Md. Badrul Millat Ibne Hannan is an Associate (ASA) CPA Australia and a Certified Financial Consultant (CFC) with IFC Inc. Canada. He is a seasoned banker and a strategic analyst specialising in the geopolitical economy, BRICS dynamics, and the evolving FinTech landscape.

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.