Dr. Bharath D Malali, Foreign Policy Expert, Bangalore
Introduction:
The Indian Ocean region (IOR) has become a pivotal point of geopolitical calculation in the recent decades. The major players of the region viz. India and China, are shaping the regional dynamics. The small island nation of the Maldives, which strategically located in the along vital sea lanes, has become a key player in this geopolitical confrontation. These three countries play an important role in shaping the regional dynamics due to their geographical positions, economic ambitions, and political agendas.
India-Maldives Relationship:
An analysis of the relationship between India and Maldives highlights a deep-rooted historical, cultural, and ethnic bond. Ever since the Maldives gained independence in 1965, India has acted as a first responder in times of crisis ranging from natural disasters to political turmoil’s. The engagement of India with Maldives is diverse ranging from development cooperation to strategic instrumentalities like the “Security and Growth for All in the Region” (SAGAR). India has been one of the important defense partners of Maldives. India and Maldives signed a trade agreement in 1981, which provides for export of essential commodities. Since than India is the Maldives’ largest trade partner. Till the Financial year 2024 the total export to Maldives stood at US $ 825.06 million and Imports from Maldives was around US$ 91.16 million1, India has also provided economic assistance, which includes a $400 million currency swap agreement. Tourism is one of the core aspects of the relationship between the countries. The Maldivian economy is heavily dependent on its tourism sector, which is the major source of foreign exchange earnings and government revenue. Tourism directly accounts for about quarter of GDP of Maldives and indirectly for a much larger proportion of GDP. It was this sector which was severely affected due to ‘India Out’ campaign and President’s Muizzu’s visit to China. The Prime Minister of India, Narendra Modi’s call for tourists to visit Lakshadweep n 2024 greatly impacted the tourist inflow to Maldives.
The Indian tourist bookings to the Maldives dropped 33 percent. The reduction in visitors to the tiny island had major economic consequences. Since the adoption of Joint Vision for an India-Maldives Comprehensive Economic and Maritime Security Partnership by India and Maldives on 07 October 2024, has catered to Maldives ongoing financial challenge by providing USD 400 million and INR 30 billion as a bilateral currency swap agreement. It has also extended a new Line of Credit (LoC) of $555 million to Maldives and agreed to reduce the annual debt repayment obligations on previous Lines of Credit. The two governments have decided to launch Free Trade Agreement (FTA) negotiations. Thereby there is a growing sign of thaw in the relationship.
China- Maldives Relationship:
The Formal diplomatic ties between China and Maldives were established in 1972. While the Chinese opened its embassy in Male in 2011 the Maldives embassy was established in 2009. Chinese officials began diplomatic visits in the late 1990s, and the China-Maldives relationship accelerated after the 2013 election of Maldives President Abdulla Yameen. The bilateral ties have fortified further under newly elected President Mohamed Muizzu. His maiden official foreign trip, in January 2024, reinvigorates this point. China’s engagement with the Maldives has grown significantly under its Belt and Road Initiative (BRI). It has funded major infrastructure projects in the Maldives, such as the ChinaMaldives Friendship Bridge (now called the Sinamalé Bridge) and various housing and road projects. Since joining China’s Belt and Road Initiative (BRI) in 2014, the Maldives has borrowed some $1.4 billion from Chinese banks, which now makes up 20 percent of its public debt. Since 1972, China has provided Maldives with aid totaling RMB74.7875 million. China’s major products to Maldives are rice and consumer goods. Meanwhile On January 1, 2025, the China-Maldives have enfornced the Free Trade Agreement officially came into effect. According to the agreement around 7,897 items across nine sectors, including 298 fisheries products, will become duty-free, opening vast opportunities for Maldivian exports. This economic diplomatic move of China has influenced it to wean Maldives to shift its focus of India first policy.
The Impact:
For India, the Maldives is part of its maritime backyard, essential for national security. China’s increasing influence in the Maldives, including military and economic cooperation, has been viewed cautiously by India and other regional powers. For India it is important in maintaining peace, stability and prosperity in the Indian Ocean Region and enhancing India’s Vision of Security and Growth for All in the Region (SAGAR). The increasing footprint of China through various infrastructural assistance, the demand for withdrawal pf Indian troops and rise of radical Islamic groups in Maldives is matter of concern for India. India needs to speed up cooperation and timely deliver infrastructure projects.
The table below summarizes the investments, highlighting differences in scale, focus, and structure over the last 10 years.
| Aspect | China | India |
|---|---|---|
| Total Estimated Value (2015–2025) | $1.4–1.5 billion (mostly loans, leading to 20% of Maldives’ public debt) | Over $1.4 billion (mix of grants, credits, and aid; non-debt focused) |
| Major Funding Mechanism | BRI loans from Export-Import Bank; some debt relief in 2024 | Lines of credit, grants, and budgetary support; 50% increase in assistance in 2024 |
| Key Projects | Friendship Bridge ($200M, 2018); airport upgrade (> $1B total) | GMCP bridge ($500M, 2021); water projects ($100M grant, 2024) |
| Focus Areas | Large infrastructure (bridges, airports, ports); tourism and trade | Connectivity, sanitation, defense, and economic stability |
| Debt Impact | High; $1.3B owed by 2024, raising sustainability concerns | Lower; emphasizes grants to avoid debt traps |
| Recent Developments | FTA effective Jan 2025; $50M write-off in 2024 | $50M Treasury rollover and infrastructure credits in 2024 |
The economic outreach is essential to help Maldives break free of China’s ‘debt-for-leverage’ model of diplomacy. India needs to lay emphasis on soft diplomacy and perception management. For China, securing sea lanes and expanding its naval presence is vital to its global ambitions. Maldives provides a strategic vantage point to project power and secure its own sea lines of communication, challenging India’s traditional dominance in its backyard. For China this relationship offers a strategic vantage point of influence in the Indian Ocean region. The Maldives sits along one of the busiest maritime trade passages in the Indian Ocean, through which nearly 80 percent of Chinese oil imports flow. Analysts say China wants Maldives to remain a friendly regional military presence to help safeguard its access to oil from the Persian Gulf. Maldives is geographically positioned like a ‘toll gate’ between western Indian Ocean chokepoints (Gulf of Aden and Strait of Hormuz), and eastern Indian Ocean chokepoint of Strait of Malacca. The Maldives’ relations with China and India are characterized by a delicate balancing act, influenced by historical ties, economic dependencies, and geopolitical dynamics. While it benefits from economic cooperation with both, it must maintain its sovereignty and avoid being caught in the crossfire of major power rivalries. The infrastructural loans with China has been viewed by critics as debt-trap, compromising the sovereignty of the smaller island nation. As the Maldives navigates these relationships, its foreign policy will likely continue to evolve in response to both domestic and international pressures. In order to successfully navigate between India and China without compromising its sovereignty, it should establish clear communication with the two major powers about the unique roles that they play in achieving the Maldives’ strategic objectives.
Conclusion:
India, China, and the Maldives all have a vested interest in maintaining peace and stability in the Indian Ocean region. Rather than viewing each other solely through the lens of rivalry, cooperation in areas like disaster response, blue economy, and anti-piracy operations could lead to significant implications for regional stability in the Indian Ocean. In conclusion, the relationship between India, China, and the Maldives is a microcosm of the larger geopolitical competition unfolding in the Indo-Pacific. The Maldives, a small island nation with immense strategic importance, is caught in the middle of a rivalry between a long-standing partner and an ascendant economic power.