Working together as resident powers, Canberra and New Delhi could uphold a favourable regional balance of power and better deter any conflict, coercion or blockade across the Indian Ocean Region
On 11 February 2026, S. Paul Kapur, Assistant Secretary for the Bureau of South and Central Asian Affairs, testified before the United States (US) Congress that President Donald Trump’s South Asia policy signalled a shifting division of labour in the Indian Ocean. He stated that an “independent and strong India” serves US strategic interests by preventing any single hegemon (hinting at China) from imposing coercive leverage over the region.
This statement underscores three critical points. First, China has continued to consolidate and expand its presence across the Indian Ocean Region (IOR). Second, the US expects India to shoulder greater responsibility for regional security. Third, like-minded countries continue to look to India to push back against China and sustain the values-based order. In this context, Australia, a key resident power in the Indian Ocean concerned about supply chains and regional security, faces an opportunity to deepen cooperation with India in the region.
Over the last two decades, China has significantly expanded its economic, diplomatic, and security presence in the IOR, particularly through the Belt and Road Initiative (BRI). Beijing has invested in several critical infrastructure projects across sectors such as energy, ports, and transport. Many of these projects are supported by large-scale commercial loans, which have increased debt burdens in host countries, exacerbated economic vulnerabilities, and created structural dependencies on Beijing. This dynamic is evident in Sri Lanka’s 2017 decision to lease the strategic Hambantota port to China for 99 years after failing to service its debts. It is a prominent example of Beijing gaining direct access to critical Indian Ocean waters through economic leverage and so-called ‘debt-trap diplomacy’.
China has used its economic engagement to persuade these countries, influence domestic politics, enhance defence cooperation, secure port access for commerce and surveillance, and advance its “One-China” policy. In 2021, China’s ambassador to Bangladesh publicly warned Dhaka not to participate in the Quad. In Sri Lanka, Beijing has leveraged its economic assistance to facilitate port calls by Chinese surveillance vessels. Across the region, these actions have fuelled concerns about China’s lending practices, control of critical infrastructure, militarisation of the IOR, and ability to assert influence.
For India, such collaboration reduces the risk of politicisation, strengthens implementation capacity, and helps counterbalance China.
These projects are not just commercial investments but serve China’s multiple strategic interests, such as ensuring its supply chains and energy imports — of which 80 percent transit the region; tapping into critical sea lanes; encircling India — one of its major competitors in Asia — and preoccupying it with immediate security concerns; and, domestically, developing its remote provinces. They also supplement Beijing’s presence across eastern Africa, where ports are now facilitating Chinese military exercises and logistics.
For India, this represents a direct challenge to what it has long regarded as its sphere of influence. New Delhi is concerned about the gradual normalisation of Chinese military access in its surrounding maritime space, a shift that could constrain its crisis response options in the future.
Since independence, India has viewed its neighbourhood — South Asia and the Indian Ocean Region — as its first line of defence. As China’s presence has expanded, New Delhi has responded through geo-economics, connectivity initiatives, and development partnerships, undertaking more than 100 connectivity projects across the region.
However, these efforts face two critical challenges. First, India’s role and cooperation are often politicised by turbulent nationalist politics in neighbouring states. Second, its financial and technical capacities, as well as the speed of project delivery, fall significantly behind China’s.
To overcome these shortcomings, India has expanded cooperation with like-minded partners. It is working with Japan in northeast India to improve connectivity with Bangladesh. In Sri Lanka, it has partnered with the UAE to develop Trincomalee as an energy hub. With the United States, India initiated projects at the Colombo Port and supported the Millennium Challenge Corporation’s programmes in Nepal before they were cancelled or slowed down.
For these partners, cooperation with India offers economic opportunity and enables them to expand their presence in the IOR. For India, such collaboration reduces the risk of politicisation, strengthens implementation capacity, and helps counterbalance China.
For Australia, a resident power in the Indian Ocean that shares India’s concerns over supply chain disruption and maritime security, cooperation with India presents an opportunity.
Any disruption to Australia’s Sea Lines of Communication—through coercion, conflict or blockade—would have severe repercussions for its economy, energy security, and overall national security.
Australia is the largest exporter of seaborne cargo globally, shipping over 1.5 billion tonnes annually. More than 50 percent of its seaborne exports depart from Indian Ocean ports, and AUD 130 billion (approximately US$ 92 billion) worth of goods transit the Strait of Malacca. The same applies to its energy trade: Australia imports 90 percent of its fuel, much of which crosses the Indian Ocean twice.
Australia’s hydrocarbon industry, concentrated in the northeast Indian Ocean Region (NE-IOR), generates approximately AUD 25 billion annually (approximately US$ 17.6 billion). From a defence perspective, its west coast is expected to be at the “forefront of Australia’s AUKUS pathway”.
Any disruption to Australia’s Sea Lines of Communication—through coercion, conflict or blockade—would have severe repercussions for its economy, energy security, and overall national security.
Accordingly, the Australian government has increasingly recognised the region’s strategic importance. Its 2020 Defence Strategic Update was the first to include the Northeast Indian Ocean Region (NE-IOR), spanning India, Bangladesh, Sri Lanka and the Maldives. The 2024 National Defence Strategy similarly identifies the NE-IOR as Australia’s primary area of military interest—alongside maritime Southeast Asia and the Pacific—and describes India as a ‘top-tier partner’.
Yet the 2024 National Defence Strategy reaffirmed that the alliance with the United States remains fundamental to Australia’s security. Recent developments in Washington, however, warrant closer examination of this assumption in the Indian Ocean theatre. The United States’ withdrawal from the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP) raises concerns about the future architecture of maritime security cooperation, potentially heightening vulnerabilities for Australian commercial shipping transiting the Indian Ocean.
While the United States depends on the Indian Ocean to transit forces between the Middle East and East Asia, its strategic focus remains elsewhere. Apart from its naval facility at Naval Support Facility Diego Garcia, the US maintains a limited military presence in the region, and only a modest share of its trade traverses these waters. The recently released US 2026 National Defence Strategy makes no mention of the Indian Ocean, suggesting that the IOR constitutes the weakest link in Australia–US security alignment.
Australia is expected to release its 2026 National Defence Strategy in the coming months. Despite growing recognition of the Indian Ocean’s strategic importance, Canberra’s operational focus remains largely on Southeast Asia and the Pacific, leaving the IOR comparatively under-prioritised.
The 2026 strategy should address this imbalance. It should emphasise the Indian Ocean’s strategic significance and outline a resourced Strategy of Denial tailored to the region, but would not seek dominance; instead, it would aim to prevent powers like China from coercively controlling chokepoints, critical infrastructure, or regional states through military intimidation or economic leverage.
Australia’s 2026 National Defence Strategy should reflect this reality—not merely by recognising India as a partner, but by embedding Indian Ocean security as a core pillar of defence planning.
Central to this effort is a significantly deeper defence relationship with India. In recent years, India and Australia have steadily strengthened their defence cooperation, while Australia has also deepened ties with other Indian Ocean littoral states. The two countries co-chair the Indian Ocean Rim Association’s maritime security subgroup and maintain numerous institutionalised engagements; however, a lack of mutual trust has left much of the potential for cooperation untapped. A joint plan for Indian Ocean security, along with cooperation and collaboration in third countries, would enable both states to safeguard their interests across the full breadth of the region.
Amid growing strategic unpredictability, Australia–India cooperation is becoming increasingly vital. As resident powers, Canberra and New Delhi can better deter conflict, coercion or blockade before any such threats materialise, while maintaining a favourable regional strategic balance essential for national, economic and energy security. Australia’s 2026 National Defence Strategy should reflect this reality—not merely by recognising India as a partner, but by embedding Indian Ocean security as a core pillar of defence planning. India’s willingness to engage with like-minded partners in the neighbourhood creates a strategic opening for collaboration.
Aditya Gowdara Shivamurthy is an Associate Fellow with the Strategic Studies Programme at the Observer Research Foundation.
Grace Corcoran is the Senior Policy and Projects Manager (Security and Geopolitics) at the Australia India Institute.
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Grace Corcoran is the Senior Policy and Projects Manager (Security and Geopolitics) at the Australia India Institute. ...
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