Updated: Jun 6, 2021
Image credits: Bloomberg
The Strait of Malacca is the world’s most important trade route. Most of the oil and gas from the Middle East to China, East and South-East Asia and more than 40% of global trade passes through Malacca. These numbers and the regions from where the goods come and go are the bread and butter of the current global supply chain and manufacturing order. The Strait of Malacca is the lane that is important for the whole global free market order, and any conflict in this region will lead to huge costs on the global market for all nations. Keeping Malacca open is in the interests of everyone. As Malacca has its geopolitical importance, regional and global players like the US Navy, Indian Navy, Singaporean Naval Force and the Chinese Navy patrol this area frequently.
80% of China’s oil imports come from the strait of Malacca, and this is a vulnerability that can be exposed during times of conflicts by China’s adversaries. Malacca is the gateway from the Indian Ocean to the Pacific Ocean, and this trade route alone is worth trillions of dollars. The navy that controls the keys of Malacca has commanding control over many nation’s economic and trade lifelines. This geopolitical weight and power are of enormous effect and can tame the region. In today’s piece, we take up the geopolitical stand of the Strait of Malacca.
LOCATION OF MALACCA
The Strait of Malacca is located between Singapore, Malaysia and Indonesia. It is a narrow crossing lane that leads to the Pacific Ocean and the South China Sea from the Indian Ocean. This region is home to some of the world’s biggest economies and manufacturing hubs - Singapore, China, Indonesia, Japan, and other ASEAN members. Malacca is the biggest maritime Choke Point for petroleum after Hormuz.
Malacca is the shortest maritime route between the Middle East’s market and the Asian markets, making it economically and in delivery terms valuable for the global traders to opt for Malacca's fellow Straits - Sunda and Lombok Straits. These straits are far, and it would take more time to cross them and reach other markets. In international maritime trade, if delivery time is much faster, it adds to the market positivity and competition. Hence, nations and traders opt for Malacca.
Another reason for Malacca over the other Straits is that it is located in the prominent market position of Singapore, Malaysia and Indonesia, which are major manufacturing hubs. From these hubs, a lot of trade takes place. Malacca is also feasible as a passage for reaching the Chinese, Korean and Japanese markets from Singapore, Malaysia and Indonesia.
The Strait of Malacca also has one of the world’s busiest and most developed ports - the Port of Singapore and many other ports like Medan and Kuala Lumpur, which gives it an intra-regional trade location advantage. It is the busiest Straits in the world as vessels crossing it every year are above 98,000. This strait is 1.5 nautical miles wide (2.8km) at the point of Philip Canal, making it one of the narrowest straits in the world and easy to be choked in case of traffic or conflict.
What gives Malacca a disadvantage is that its nearest fellow strait Sunda is even narrower than Malacca. This means that ships that cannot pass Malacca or more than 25 metres depth have to detour from Malacca to Lombok or Mindoro Strait. The maximum vessel size that can cross Malacca is known as the Malaccamax. There have been many proposals to create an alternative route or canal in between Thailand, but these plans are costly and challenging to implement as of now. There was also an alternative oil pipeline proposal which is still in the paper desk talks. Both Myanmar and Thailand showed interest in this project.
GEOPOLITICS OF MALACCA
Malacca has its great geopolitical weight. First, it is a chokepoint for much of the global economy and most of the manufacturing hubs of the world. The choke point can be used to Choke China’s energy imports and restrict China’s exports to other parts of the world. Especially to Europe, which gets its manufactured goods from this route, the Arctic circle is still not entirely feasible for trading and supply. Across the region, there are significant trading partners of China, which, by choking Malacca, will lose access to the Chinese market by maritime means. Any conflict in the region or globally can prove detrimental for the Asian and Chinese market if involving big players like India and the United States.
India can easily block and restrict access to Malacca cutting China’s 80% oil imports in a second from the Middle East. It would take India just one Aircraft carrier - INS Vikramaditya to make China bow down. This shows why the Chinese are desperately expanding alternative oil import routes from Pakistan’s CPEC and Gwadar to the Arctic circle. India’s two-front war concern with China and Pakistan, along with China’s regional containment of India through the String of Pearls, has led to India expanding its maritime influence and weight by establishing bases in Agalega and improving bases in Andaman. According to an estimate, China’s shipping costs could increase by more than $64 million if the Strait of Malacca is closed for even a week, another estimate says alternative routes could cost Beijing anywhere between $84 to 220 billion a year.
Second, China’s belligerent and muscle-flexing behaviour in the South China Sea can be checked by the United States by imposing costs on it elsewhere, like in the Strait of Malacca. The American Navy is still the world’s most powerful and effective force to call the costs in global sea lanes of communications. The Americans can efficiently underwrite the Chinese and dictate terms in the region by choking them in the Strait of Malacca. This conflict will impose high costs on the Chinese but also on the region, so any calculation to choke Malacca will include all the possibilities and costs. QUAD is another player in this geopolitical arena.
The power struggle between China and the QUAD nations has led to a new geopolitical scenario in Malacca too. Australia, India, Japan and the USA guard the Malacca and Oceans in cooperation with each other. This has been seen as an attempt to contain and restrict China by the QUAD nations. This has elevated the threat level in the region. This also comes after a new global awakening to dependence on the Chinese market after the Pandemic and its belligerence in the South China Sea.
Third, apart from economic, military and geopolitical importance, Malacca has some regional chokehold problems too. Piracy was in its zenith in the early 2000s, making the passage economically and socially costly to maintain and pass through. Looking at this alarming rise, regional navies like Singapore, Indian and Indonesia, along with global powerhouse - the US Navy patrolled the area to end the extensive piracy network. Pirate activities lead to substantial economic costs and damages in the passage. This has now plateaued, but still, there are many incidents. The position of Malacca is vulnerable to many threats, and it is only with the cooperation between the powers like India, China and the USA that the region will remain safe and secure from pirates and any global level conflicts.
Image credits: IPDF
FUTURE FOR MALACCA
Today, the Strait of Malacca is in proper condition, but rising geopolitical threats, competitions and the burden of rapid and excessive globalisation will prove detrimental for Malacca. With a narrow passage, Malacca won’t be the desired passage that it is today, along with changing global market areas, diversification of manufacturing and melting of the Arctic circle leading to a new maritime trade route in the high seas. Nations in this region know what holds in the future - rising costs and ecological issues have already started showing their effect on maritime trade and passages. The recent example of the Suez Canal choke by Ever Given showed us that excessive globalisation has its costs.
The future for Malacca can be of conflict with the regional and global powers as clashes rise in the South China Sea and Borders in the Northern part of India and China. Apart from clashes, the future of Malacca is of alternate routes for trade as the burden on Malacca increases. The Arctic is one alternative and a viable one both for oil and manufactured goods trade between Asia and Europe. Still, for regional trade, an Alternative route in the face of a Canal between Thailand or Malaysia is the need of the future and can be implemented once costs are balanced.
This will determine and rewrite the geopolitical and economic future of the region, and that remains to be seen.
BY HARSH SURI
CO-FOUNDER THE GEOSTRATA