The New Map: Energy, Climate, and the Clash of Nations

by Daniel Yergin

This points to what Christine Lagarde, formerly managing director of the IMF and now head of the European Central Bank, diplomatically called the risk of “problematic increase in debt.” Critics call it the “debt trap,” which they say could provide political and economic leverage to China. When countries cannot make their debt repayments, Chinese entities can take control. Case study number one is the port of Hambantota, in Sri Lanka, for which China provided $1.1 billion in loans. But the port has had little traffic and there was no chance of its ever earning sufficient revenues to repay the loans. So in exchange for cancellation of the debt, a state-owned Chinese company took a ninety-nine-year lease. But the Sri Lankan government, pressed hard by India, did extract a promise from the Chinese not to use Hambantota, strategically located on the Indian Ocean, for military purposes.