By Nathan Balis

India’s economy depends overwhelmingly on maritime routes, with 95% of its trade by volume passing through the Indian Ocean. In an era where economics and national security are increasingly intertwined, this maritime dependence carries extraordinary strategic weight, particularly given India’s position between hostile neighbors in Pakistan and China. Chokepoint crises, whether in the Red Sea or South China Sea, repeatedly demonstrate how maritime disruptions shock the global economy, making sea lane security a central element of India’s strategically ambiguous positioning in today’s divided geopolitical landscape. Understanding India’s maritime strategy requires examining three interconnected elements: the economic stakes of its sea lane dependencies, the security investments anchoring its regional presence, and the port diplomacy and naval power that extend its influence across the Indian Ocean.

The Economics Stakes of Sea Lanes

The economic risks of maritime trade disruption are well-established: higher shipping costs, surging insurance premiums, inflationary spillovers into energy and food prices, and supply chain disruptions that slow growth. While these shocks reverberate through every trading economy, they hit particularly hard in highly exposed economies like India’s, where maritime routes sustain economic activity.

The 2023 Red Sea Crisis illustrated India’s maritime vulnerability. Regional instability disrupted a strait through which India passed roughly 80% of its European exports (the EU accounts for about 15% of India’s goods exports). Freight costs exploded, with Kolkata to Rotterdam shipments surging from $500 to $4,000. While this crisis represented a rare case of overt Indian geopolitical alignment with Israel, which prompted Houthi aggression against its vessels, it nonetheless underscored India’s exposure to maritime instability. The timing proved particularly damaging given the already ongoing war in Ukraine, as India had surged its imports of Russian crude oil, leveraging its refining capacity to re-export petroleum products to Europe and bypass Russian sanctions. This petroleum export flow dropped 38% due to the crisis.

The “Malacca Dilemma” is often framed as a Chinese vulnerability, but India faces an equally acute dependence, as 60% of its sea-based trade passes through the strait, including nearly all its liquefied natural gas (LNG) and 80% of its oil imports.

Maritime Security Strategy

1. Policy Frameworks

India’s Act East Policy, announced in 2014, represents the strategic evolution of its 1990s-era Look East approach. Where the earlier policy focused primarily on economic engagement, Act East adds substantial security layers that explicitly aim to counter Chinese regional influence geoeconomically. The policy seeks to deepen economic ties with Southeast Asia while projecting influence eastward through security partnerships, maritime diplomacy, and connectivity projects.

India reinforced this framework in 2019 with the Indo-Pacific Oceans Initiative (IPOI), a multilateral platform that explicitly prioritizes maritime security and cooperation.

2. Andaman and Nicobar Command

The most concrete manifestation of these policy frameworks is the Andaman and Nicobar Command (ANC), established in 2001, just 100 nautical miles northwest of the Malacca Strait. As India’s only tri-service command, the ANC integrates Navy, Air Force, and Army assets under a single Commander-in-Chief (CINCAN) that provides unified operational command at one of India’s most strategically valuable positions.

The ANC’s mission encompasses maintaining domain awareness over the eastern Indian Ocean, securing sea lanes, conducting anti-piracy and disaster response operations, and providing surveillance coverage across the Malacca, Lombok, and Sunda Straits. It also serves as a staging point for joint exercises with partner navies, including the U.S., Japan, Australia, France, Singapore, and Indonesia. Effectively, the ANC functions as India’s forward operating base at its most crucial chokepoint.

3. Infrastructure Expansion

Over the past decade, India has significantly expanded ANC-supporting infrastructure. INS Baaz, a naval air station established in 2012 at the southern tip of Great Nicobar Island, is India’s closest airfield to the Malacca Strait at roughly 300 nautical miles. Currently being upgraded to handle P-8I maritime patrol aircraft and potentially fighter jets, INS Baaz extends India’s surveillance and rapid response capabilities directly into the strait’s northern approaches. Supporting installations include INS Kohassa and INS Utkrosh, which provide rotary-wing and light aircraft operations.

India has also developed extensive dual-use infrastructure, including jetty expansions, fuel storage facilities, radar stations, and communications networks. Future plans include a major transshipment port and airfield on Great Nicobar Island that will serve as both a civilian commercial hub and strategic military facility.

4. Multilateral Exercises

Complementing this physical infrastructure, India’s Malabar naval exercises with the U.S., Japan, and Australia serve as both strategic signaling and interoperability building. The exercises’ locations include the Philippine Sea and waters off Japan; an implicit message to China that the Quad nations are capable of coordinated naval operations across the Indo-Pacific, including in areas of core Chinese interest.

This cooperative posture serves two purposes: it acts as a counterweight to Chinese regional aggression while embedding a crucial economic logic into India’s security framework. From the Indian perspective, protecting sea lanes is fundamentally about safeguarding economic stability, and not merely power projection.

Port Diplomacy and Regional Connectivity

Beyond developing its own major ports, India has pursued a deliberate strategy of international port partnerships that provide strategic regional access. This approach operationalizes Prime Minister Modi’s SAGAR vision (Security and Growth for All in the Region), which sets a framework for maritime cooperation while directly countering China’s “String of Pearls” strategy.

Indian strategists widely perceive this network of port investments encircling India as a containment threat, which prompted India to develop its own “Necklace of Diamonds” strategy, in a counter-network of port access agreements. Five ports illustrate this strategy’s geographic scope and logic. 

1. Chabahar Port

Chabahar Port, located on Iran’s southeastern coast along the Gulf of Oman, represents India’s most important port access agreement near the mainland. Serving as India’s primary gateway to Afghanistan and Central Asia, the port allows India to bypass Pakistani territory entirely—a capability that has become increasingly indispensable given hostile relations. Since Modi’s 2016 deal, India has invested over $500 million in the port itself, part of a larger $8 billion commitment to Iran’s Chabahar Special Economic Zone that includes road and rail networks connecting to iron and steel mining projects in Afghanistan.

Chabahar’s true purpose, however, lies in countering the China-Pakistan Economic Corridor (CPEC). Launched in 2015, CPEC forms the flagship project of China’s Belt and Road Initiative (BRI), a 3,000-kilometer infrastructure network linking western China directly to Pakistan’s Gwadar Port on the Arabian Sea. Gwadar provides China with a land-sea bypass route that avoids the Malacca Strait entirely, while simultaneously giving Beijing a permanent presence in India’s maritime sphere. Modi’s 2016 Chabahar announcement was intentionally responsive, coming just one year after CPEC’s inception. Both China and India employ similar “port diplomacy” frameworks in a striking parallel, where infrastructure investments are made in economically struggling neighbors whose governments welcome the capital.

2. Duqm Port

Oman, the first Gulf nation to formalize defense relations with India, is a natural partner for Indian port diplomacy. The relationship has incrementally strengthened, with India stationing its INS Mumbai guided-missile destroyer at Duqm for years before securing formal access for both Navy and Air Force assets in 2018.

The arrangement is mutually beneficial. Oman gains a capable security partner in a region frequently destabilized by piracy, militant attacks, and regional conflicts, as India has run anti-piracy operations and protected commercial shipping from Houthi attacks. India, in turn, gains strategic access in the Arabian Sea outside the Strait of Hormuz, extending its reach westward and providing a logistics hub for sustained Gulf operations.

3. Sabang Port

Sabang Port is a valuable example of the gap between aspiration and political reality. Located at the northern tip of Indonesia’s Aceh province, directly at the northern entrance to the Malacca Strait, Sabang would provide India with a forward position far closer to the chokepoint than the ANC. Indonesia extended an invitation in 2018 for India to develop the port and city, and Indian naval vessels have been granted access.

However, meaningful development has stalled, as investment proposals remain under review and appear unlikely in the near term. The Indonesian strategic community has firmly rejected Indian characterizations of Sabang as a potential military base, emphasizing Indonesia’s long-standing alliance-free foreign policy. Indonesia has already raked in over $35 billion worth of Chinese investment through the BRI and is unlikely to provide India with any military exceptionalism. Until India and Indonesia reach formal agreements with long-term visibility, Sabang remains largely aspirational. 

4. Sittwe Port

Sittwe Port in Myanmar’s Rakhine State represents a unique case in India’s port diplomacy, as one focused on internal connectivity rather than expansive power projection. Part of the broader Kaladan Multi-Modal Transit Transport Project (KMTTP), the port came under full control of India Ports Global in 2024. The project aims to connect Kolkata to Myanmar through combined sea and land routes, reinforcing supply lines to India’s northeastern states. This addresses the critical vulnerability that is the Siliguri Corridor (“Chicken’s Neck”), which represents the sole land connection between mainland India and its Seven Sisters states. This 20-kilometer-narrow corridor, squeezed between Nepal, Bhutan, Bangladesh, and China, could be severed in any conflict scenario, effectively isolating the region. Sittwe Port provides a maritime bypass, allowing India to supply its northeastern territories through Myanmar even if land routes are compromised.

While India’s port diplomacy generally aims to counter external threats and chokepoints, Sittwe illustrates a case of arguably superior importance, where maritime strategy works towards inward territorial cohesion.

5. Changi Naval Base

At the southern entrance to the Malacca Strait, Singapore’s Changi Naval Base provides India with another key access point as part of a long-standing defense relationship. Singapore positioned itself as among the earliest supporters of India’s 1990s Look East policy, and as Indian Defense Minister Mukherjee noted in 2006, Singapore had become “the hub of [India’s] political, economic and security strategy in the whole of East Asia.”

Military cooperation formalized in 2017 when both nations signed an agreement allowing reciprocal access to naval facilities for logistics and resupply. Combined with access to Sabang Port (should that materialize), Changi would provide an Indian presence at both the northern and southern entrances to the Malacca Strait, effectively bracketing the chokepoint with logistical hubs. Even without Sabang’s full development, Changi alone extends India’s sustained operational range into Southeast Asian waters.

The Economics of Naval Power

1. Naval Shipbuilding and Industry Growth

Indigenization forms the cornerstone of India’s naval modernization strategy, embodied in the “Aatmanirbhar Bharat” (self-reliant India) doctrine. This approach serves to both reduce dependence on foreign defense suppliers while capturing the economic benefits of domestic shipbuilding. Currently, the construction of 60 naval vessels is projected to generate over 800,000 jobs and circulate more than $35 billion through the Indian economy. Success stories like the indigenously built INS Vikrant aircraft carrier and INS Arihant and Arighaat ballistic missile submarines demonstrate India’s advancing shipbuilding capabilities.

Nearly 70% of the Navy’s capital expenditure now flows to indigenous projects, while approximately 90% of Maintenance, Repair, and Overhaul (MRO) operations are performed by Indian contractors, primarily Micro, Small, and Medium Enterprises (MSMEs). The economic multiplier effect means each shipyard worker creates approximately 6.4 additional jobs in ancillary industries, as the complexity of modern naval construction reverberates demand across the electronics, steel, maritime equipment, and defense sectors. This multiplier effect operates not just through capital expenditure on new ships but also through continuous MRO spending, pushing sustained economic activity.

These investments are reflected in the shipbuilding industry’s growth, from approximately $90 million in 2022 to over $1.1 billion in 2024, with projections reaching $8 billion by 2033.

2. Returns on Investment:

India’s blue-water naval capabilities have produced returns across multiple sectors, and while this analysis has focused primarily on strategic chokepoints, the Navy’s operational contributions extend to trade route security, anti-piracy operations, humanitarian assistance, and nuclear deterrence through its ballistic missile submarine fleet.

Operation Sankalp, India’s sustained Gulf deployment, escorted 624 lakh tons of cargo aboard 503 Indian-flagged merchant vessels in 2023. In 2024 alone, the Navy deployed approximately 30 ships to the region, protecting some 230 merchant vessels carrying over $4 billion in cargo. This capability has established India as a “net security provider” in the Gulf of Aden and Arabian Sea, as it has directly prevented cargo losses from attacks and helped stabilize surging maritime insurance premiums during periods of instability. 

Unsurprisingly, India’s incentives for this protection are substantial. In FY 2019-20, over 60% of India’s oil imports (worth some $66 billion) originated from Persian Gulf producers. Following the Ukraine conflict, India’s dependence on seaborne energy imports likely surged as did Russian oil supplies (arriving via maritime routes). With India importing roughly 85% of its oil needs, and nearly all of that arriving by sea, naval protection of energy supply lines directly sustains economic stability.

3. Budget Allocation and Structure:

In India’s FY 2024-25 defense budget of approximately $75 billion, the Navy received just 19% of the total, representing the smallest allocation among the three services. This budget sustains a blue-water navy of approximately 130-150 ships, including two aircraft carriers and two ballistic missile submarines. While modernization funding has increased in both absolute terms and as a percentage of the naval budget, most expenditures still flow to recurring costs of salaries, pensions, and operational maintenance. This structural constraint limits capital available for new platforms and capabilities, directly hindering the Navy’s ability to operate from the Persian Gulf to the South China Sea. This reflects a fundamental tension in India’s security strategy, where it faces primarily land-based adjacent threats from Pakistan and China, which drives Army and Air Force prioritization, yet its economic security depends overwhelmingly on maritime trade routes.

Strategic Synthesis

India’s maritime strategy reveals a sophisticated understanding of 21st-century geoeconomics, where naval power functions less as traditional military projection and more as economic lifeline protection. This article demonstrates how India has built a comprehensive maritime security framework through three mutually reinforcing elements: forward military infrastructure, port diplomacy, and a modernizing indigenous naval-industrial base.

India’s achievements are thus far concrete. The ANC provides a robust forward presence close to the Malacca Strait as a unified tri-service command. The port diplomacy network extends India’s operational reach across critical flashpoints: Chabahar counters CPEC, Duqm provides Arabian Sea access outside the Hormuz chokepoint, Changi brackets the Malacca strait from the South, and Sittwe fortifies the strategically vulnerable Seven Sisters’ link to the mainland. These deliver power projection without the political complications of permanent overseas bases.

By prioritizing indigenous shipbuilding, India has transformed naval modernization from a pure security expenditure into a wider economic development program. With multiplying effects across ancillary industries, economic circulation simultaneously builds the platforms that protect billions in annual trade. Multilaterally, India has positioned itself as the regional “net security provider” through the SAGAR framework and Quad partnerships. The Malabar exercises demonstrate interoperability with leading navies, while anti-piracy operations in the Gulf of Aden protect public goods, enhancing India’s regional standing. Importantly, India maintains this cooperative posture without abandoning its strategic autonomy and avoiding formal alliance commitments that constrain its diplomatic flexibility.

Yet formidable challenges constrain India’s ambitions, as China’s PLA Navy poses the most acute threat with a growing numerical advantage. China commissions warships at a pace India cannot match, supported by a shipbuilding industrial base that dwarfs India’s capabilities and dominates the global market. China’s BRI compounds this with strategic encirclement, as its “String of Pearls” has created a network of forward operating locations surrounding India.

CPEC and Gwadar Port represent important concerns, placing Chinese-backed (and controlled) infrastructure directly on India’s maritime doorstep. Domestically, the Indian Navy’s lacking budget share reflects a fundamental geostrategic dilemma: major land-based threats from Pakistan and China mean the Army and Air Force consume most defense resources, even as India’s economic security depends on maritime trade. Capital expenditure for new platforms competes with recurring costs, holding back the necessary acquisition pace. Structural vulnerabilities remain, as a majority of India’s seaborne trade still transits the Malacca Strait, over which it does not have control. The Siliguri Corridor remains a weakness despite access to Sittwe port, with the entire northeastern territory depending on either a narrow land corridor or maritime coordination through Myanmar.

Nonetheless, India’s maritime positioning suggests strategic awareness rather than complacency through the integration of economic imperatives with security investments. As it accelerates its current trajectory, India will seek to secure a position of regional prominence to protect its economic interests. This will require sustained prioritization of maritime capabilities despite competing land-based security demands. India’s maritime strategy reflects the reality that naval power is not optional expenditure but essential economic infrastructure. The ~$14 billion annual naval investment spent on protecting over $850 billion in maritime trade represents a ~1.7% insurance premium on economic survival.

For India, this era of increasing economic statecraft means the ability to safeguard sea lanes directly determines the nation’s capacity for growth, energy security, and national autonomy. The strategy’s success will largely determine the extent to which India develops as a truly independent pole in the Indo-Pacific or remains vulnerable to coercion through maritime interdiction.

References

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Sakhuja, V. (n.d.). The Sabang and Aceh-Andamans initiatives: Beyond base access and balancing. National Maritime Foundation. https://maritimeindia.org/the-sabang-and-aceh-andamans-initiatives-beyond-base-access-and-balancing/

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Other References:

https://www.bu.edu/gdp/files/2022/07/GCI_WP_021_FIN.pdf

https://chakranewz.com/critical-technologies/trending/malacca-straits-patrol-msp-and-india-rsquo-s-access

https://ris.org.in/cmec/pdf/Commentary.pdf

https://www.icwa.in/pdfs/IndoPacificOceansInitiative.pdf

https://byjus.com/free-ias-prep/sabang-port-upsc-notes

https://maritimeindia.org/the-sabang-and-aceh-andamans-initiatives-beyond-base-access-and-balancing

https://www.orfonline.org/expert-speak/shifting-tides-indias-port-dominance-in-myanmar

https://en.tempo.co/read/2043827/chinas-investment-in-indonesia-hits-us35-3-billion

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https://defence.in/threads/pm-modi-touts-rs-3-trillion-economic-benefit-from-60-naval-ships-under-construction-expected-to-generate-8-40-000-jobs.12334

https://www.drishtiias.com/daily-updates/daily-news-editorials/moosting-india-s-shipbuilding-industry

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https://www.bu.edu/gdp/files/2022/07/GCI_WP_021_FIN.pdf

By Alina Lee

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In March 2025, Poppi made headlines with a $1.95 billion acquisition by PepsiCo that caught the attention of investors and media alike. The prebiotic soda brand, founded by Allison Ellsworth, began in 2018 as “Mother Beverage” — a homemade apple cider vinegar drink sold at farmers markets before landing a spot on Shark Tank.

For years, the soda industry has seen a steady decline, struggling to keep up with growing consumer demand for healthier options. Meanwhile, drinks like kombucha, wellness shots, and gut health supplements have a loyal niche following but are rarely fun or easy to love; most come with a vinegary taste, muted branding, and a vaguely clinical feel.

So how did Poppi manage to combine gut health and soda and turn them into a vibrant, viral brand with mass appeal, especially among Gen Z women? It leveraged the power of TikTok.

In 2021, Ellsworth posted a TikTok video sharing Poppi’s origin story. The video went viral, generating $100,000 in sales within 24 hours. From there, Poppi leaned all in on content. Recognizing the platform’s potential, the company hired a dedicated community manager, shifted a portion of its marketing budget to TikTok, and began experimenting with creator partnerships and trend-driven content. Soon, videos featuring organized fridge restocks, gut health Q&As, and wellness routines highlighting the brightly colored cans helped the brand build an organic following that blended seamlessly into Gen Z and millennial culture. Throughout 2023 and 2024, influencers like Alix Earle, Avery Woods, and Jackie Aina featured Poppi in their GRWM videos, placing the soda squarely alongside beauty staples like Glossier, Milk Makeup, and Laniege, positioning Poppi as just as essential to the daily routine. 

Poppi’s product delivered on its promise — a soda with prebiotic benefits, low sugar, and good flavor — but its brand appeal was just as important. Consumers weren’t just drinking it for the health benefits; they were opting into a lifestyle. The brand also blurred the line between consumer and creator. In 2024, Poppi gifted custom sweatsuits to social media creators as part of a Coachella partnership. Later that year, they launched a limited-edition Target apparel line featuring the drink’s iconic color palette. By capitalizing on the kind of exclusivity that influencer culture thrives on, the company turned its loyal following into a walking billboard for the brand, solidifying the theme of community that had characterized their entire advertising journey. Thanks to TikTok, when you drank Poppi, you didn’t just feel healthier; you felt like you were joining an exclusive club, now with its own merch. 

This “grassroots” influencer marketing approach extended to the brand’s college sorority partnerships, an ideal slice of Poppi’s target demographic. Sororities were already known to post coordinated, high-visibility content during the viral #RushTok recruitment season. By sponsoring events with banners, branded T-shirts, and product samples, Poppi inserted itself directly into that ecosystem and enabled sororities to do the content creation for them. 

As Poppi’s presence grew, so did its celebrity alignment. In June 2023, the brand became the official sponsor of the Miami Pickleball Club, co-owned by Naomi Osaka, Patrick Mahomes, Kygo, and others, tapping into one of Gen Z and Millennials’ fastest-growing sports. Less than one year later, in February 2024, Poppi dropped a Super Bowl commercial (its first-ever national commercial, and the most-watched ad of the game), capturing 29.1 million views. Then came their partnership with 7-Eleven, which they celebrated with an interactive 7-Eleven pop-up complete with slushies, merch, and Instagram-ready installations. Their earlier pop-ups — Hamptons houses, U.S. Open collabs, Bloomingdale’s with Marc Jacobs — had already been blurring the line between soda and lifestyle.

Now, in 2025, it’s clear that behind the aesthetics was a deliberate strategy. Poppi spent years building brand loyalty with a very specific audience in mind: Gen Z and Millennials, particularly Gen Z and Millennial women. From TikTok to Target shelves, every move was designed to meet that demographic where they already were and make them feel like the brand was built for them.

In the end, Poppi’s success didn’t come from simply creating a new category. Their ability to organically embed themselves within Gen Z internet behavior was a crisp execution of marketing fundamentals: know your audience, speak their language, and show up where it matters. Rather than chasing trends, Poppi positioned itself to become one, prioritizing community-building and continually reinforcing those bonds through relatable content and experiences. And in doing so, it showed what it takes to build the next generation of consumer brands. 

By Alex Yang

Imagine receiving $100 for your birthday. How would you decide to use it? Would you splurge on an extravagant meal, deposit it into a savings account, or put it towards monthly expenses? Behavioral economics suggests that you’re more likely to spend this money impulsively compared to money you earn through your salary.

This tendency is explained by a concept known as mental accounting, introduced by economist Richard Thaler. Mental accounting refers to the way individuals categorize and value financial transactions based on their source or intended use. Rather than viewing all money as fungible, people often divide it into mental “buckets”, such as expenses, savings, entertainment, or travel.

Sorting money into different mental accounts may seem like a sensible process, but mental accounting can drive individuals to make irrational, often arbitrary decisions. Take, for example, someone who maintains a savings account earning little to no interest while also carrying substantial credit card debt. Despite the high interest rates on credit cards, they may be reluctant to dip into their savings to alleviate their debt, ultimately reducing their net worth. Here, the money in savings is treated differently compared to the money used for repayment, despite the financial gains that may result from using the savings.

Thaler identifies three key components that form the basis for mental accounting, the first of which covers how individuals perceive outcomes. Thaler gives the example of his friend who went to buy a double-sized bedspread. The department store offered double, queen, and king-sized bedspreads priced at $200, $250, and $300, respectively, all discounted to $150 due to a sale. Although needing a double-sized bedspread, the woman ultimately chose to purchase the king-sized one, perceiving more value in the $150 discount than the $50 she would have otherwise “saved”. Her mental account weighed the deal more heavily than the fit or practicality of the item.

The second component involves how people assign finances. Expenditures are grouped into categories and assigned different mental accounts, with individuals placing more emphasis on some accounts than others. The earlier example of an individual juggling a savings account and a mountain of credit card debt illustrates this well. Having dedicated one portion of his funds to savings and another to repayment, this individual failed to recognize the financial benefits of using the savings to pay off his debt. A bias stemming from this is the windfall effect, or the tendency to spend unexpected income more impulsively. Case in point: Tax returns. Individuals often treat tax returns as “found money”, or funds that don’t fit into their financial plans, and spend them lavishly. Despite the fact that tax returns represent overpaid money returned to the taxpayer, many individuals treat the funds as disposable income, spending them on entertainment or travel instead of allocating them thoughtfully as they would regular income.

Additionally, mental accounting involves choice bracketing – how frequently people evaluate their mental accounts. These accounts can be assessed daily, weekly, or yearly, and can be defined narrowly or broadly. The scope at which an account is balanced can provide substantially different anchor points and significantly influence decisions. For instance, a college student buying a cup of coffee every day may consider the $5 spent per day as a negligible purchase. However, considering their yearly $1825 expense and thousands of extra calories consumed, the consequences are no longer so insignificant. 

Another important aspect of mental accounting is the pain of paying, which refers to the emotional responses associated with spending money. This pain varies depending on the timing and method of payment. For example, using cash tends to produce more psychological discomfort than swiping a credit card or using a digital wallet, which feels more abstract and less immediate. Additionally, many consumers experience less pain when a payment is separated from the moment of consumption, such as preordering an expensive product, making the item feel “free” when it is received. Similarly, subscription services reduce the pain of paying, as the cost is mentally written off after the initial payment, hiding any subsequent payments and undermining the true cost of the service. These dynamics highlight how mental accounting can influence not only what we buy, but how we feel when we buy it.

While mental accounting offers a useful lens for observing our everyday financial decisions, it may also distort perceptions and override logical decision-making. Understanding mental accounting is imperative to combating consumer biases and leads to a more rational approach to weighing financial decisions.  

By Ghazal Ismandar

Donald Trump’s return to the presidency marks a turning point for U.S. climate and energy policy — one defined by sweeping deregulation, fossil fuel revival, and a deliberate unraveling of the clean energy agenda. With his administration rapidly dismantling key initiatives from the Biden era, the future of America’s green economy — a sector that has emerged as a cornerstone of innovation, investment, and global competitiveness — now faces unprecedented uncertainty. The economic consequences of this reversal are profound, threatening to stall momentum, undercut job creation, and surrender U.S. leadership in the industries of tomorrow.

Trump’s second term has already seen sweeping actions. On his first day in office, he signed Executive Order 14162, withdrawing the U.S. from the Paris Climate Agreement for a second time and terminating all related international climate finance commitments. He also declared a national energy emergency, lifting the moratorium on new liquefied natural gas (LNG) terminals, ending the federal electric vehicle (EV) mandate, and accelerating fossil fuel infrastructure projects, including offshore drilling and pipeline expansion (Douglas, year).

In line with this agenda, the Department of Energy has canceled clean energy grants, including projects aimed at reducing emissions in low-income housing and expanding EV car-sharing programs (Knickmeyer, 2025). The Environmental Protection Agency (EPA), now staffed with oil, gas, and chemical industry lobbyists, has also granted polluters broad exemptions from rules limiting toxic emissions such as mercury and arsenic (McCormick, 2025). Meanwhile, the administration is reviewing the EPA’s endangerment finding — the scientific basis for regulating greenhouse gases under the Clean Air Act (Second Presidency of Donald Trump, 2025).
Trump’s offshore wind policy has been particularly aggressive. In January 2025, he signed an executive order halting new leasing and permitting for offshore wind projects and initiated a review of existing projects like New England Wind and Empire Wind, threatening their financial viability (Empire Wind, 2025).

These actions have already begun to chill investment in the clean energy sector. The Inflation Reduction Act (IRA), passed in 2022, had catalyzed over $200 billion in private investment by early 2024, offering tax credits and incentives for renewable energy, EVs, and domestic manufacturing (International Energy Agency, 2024). However, the Trump administration has paused disbursement of IRA funds and is attempting to claw back climate-related grants, including those from the Greenhouse Gas Reduction Fund (Second Presidency of Donald Trump, 2025).

Harvard economist James Stock’s warning remains prescient: “Green energy requires long-term certainty. The risk of regulatory whiplash alone can chill investment even if tax credits remain technically available” (Stock, 2025). These policy reversals are already affecting capital-intensive sectors like solar, wind, and battery storage.

Beyond investment, Trump’s second-term agenda is undermining the broader framework of environmental accountability. His administration is targeting ESG (Environmental, Social, and Governance) investing, with efforts to restrict its use in federal and state pension funds (Knickmeyer, 2025). Meanwhile, the rollback of pollution protections has raised alarms among scientists, including Gene Likens, who warns that weakened emissions standards could lead to the return of acid rain in the U.S. (Milman, 2025).
Internationally, the U.S. withdrawal from the Paris Agreement and the slashing of climate finance commitments have weakened global cooperation on climate change. Analysts warn this could trigger a domino effect, encouraging other nations to scale back their own efforts (Setzer, 2025).

While Trump’s supporters argue that deregulation reduces costs and boosts energy independence, the long-term economic tradeoffs are becoming harder to ignore. The global clean energy market is projected to exceed $10 trillion by 2050, and countries like China, the EU, and Canada are aggressively investing to dominate future markets in green hydrogen, carbon capture, and electric transportation (Meyer, 2025). If the U.S. continues to reverse course, it risks ceding leadership in these high-growth sectors.

Trump’s second term is not merely reshaping the trajectory of the green economy — it is actively eroding the policy foundations and market confidence needed for its continued growth. The aggressive dismantling of climate protections, withdrawal from global agreements, and favoring of fossil fuel interests send a clear signal: the United States is retreating from its role as a leader in the clean energy transition. This political reversal may yield short-term economic gains for entrenched industries, but it risks long-term costs that will be far more difficult to recover from — lost investment, forfeited innovation, declining global competitiveness, and mounting environmental damage. In an era where climate leadership defines economic leadership, the choice to step back is not just a policy shift; it is a forfeiture of the future. The green economy, once positioned as a pillar of sustainable growth, now hangs in the balance — not for lack of potential, but for lack of political will.

Sources:
Douglas, Erin. (2025, January 20). Trump Declares Energy Emergency, Pushes LNG and Fossil Fuel Projects. Houston Chronicle. www.houstonchronicle.com/politics/article/trump-energy-emergency-texas-20045343.php. Accessed 29 Mar. 2025.
Empire Wind. (2025). Wikipedia, Wikimedia Foundation. en.wikipedia.org/wiki/Empire_Wind. Accessed 29 Mar. 2025.
Executive Order 14162. (2025). Wikipedia, Wikimedia Foundation.en.wikipedia.org/wiki/Executive_Order_14162. Accessed 29 Mar. 2025.
U.S. Climate Policy and Investment Outlook. (2024). International Energy Agency. . Accessed 29 Mar. 2025.
Knickmeyer, Ellen. (2025, March 6). Trump’s DOE Cancels Clean Energy Grants.. apnews.com/article/cf1dff9ee771c566765e9ca3e3599d91. Accessed 29 Mar. 2025.
McCormick, Erin. (2025, March 27). Trump’s EPA Opens Door for Polluters. The Guardian. www.theguardian.com/environment/2025/mar/27/acid-rain-trump-epa. Accessed 29 Mar. 2025.
Meyer, Robinson. (2025). “What Trump’s Return Means for Climate.” Heatmap News. heatmap.news/politics/trump-climate-second-term. Accessed 29 Mar. 2025.
Second Presidency of Donald Trump. (2025). Wikipedia, Wikimedia Foundation.en.wikipedia.org/wiki/Second_presidency_of_Donald_Trump. Accessed 29 Mar. 2025.
Setzer, Joana. (2025). Global Climate Action in the Age of Trump. USALI Perspectives. usali.org/usali-perspectives-blog/implications-of-the-trump-presidency-for-global-climate-action. Accessed 29 Mar. 2025.
Stock, James. (2025). Quoted in Meyer, Robinson. “What Trump’s Return Means for Climate.” Heatmap News. heatmap.news/politics/trump-climate-second-term. Accessed 29 Mar. 2025.

By Nathan Balis

The China-Pakistan Economic Corridor (CPEC) — the $62 billion flagship project of China’s Belt and Road Initiative (BRI) — entered its second phase late last year, dubbed CPEC 2.0. Designed to connect Pakistan’s Gwadar and Karachi ports to China’s Xinjiang Uyghur Autonomous Region, CPEC has been one of Beijing’s most ambitious geoeconomic undertakings. For China, it offers strategic access to the Arabian Sea; for Pakistan, a potential route out of economic stagnation. This analysis examines how the launch of CPEC 2.0 signals China’s continued commitment to the project despite Pakistan’s rising political instability, economic fragility, and internal resistance — all of which test the corridor’s long-term sustainability.

Historical Background:

Few bilateral relationships rival the strategic depth of China and Pakistan’s. Islamabad was among the first to recognize the People’s Republic of China and one of only two nations to stand by Beijing after the 1989 Tiananmen Square crackdown. The two have consistently backed each other’s positions — from Kashmir and Xinjiang to Taiwan and Tibet — forging a political alignment that laid the groundwork for CPEC’s birth in April 2015.

This relationship provided the foundation for CPEC’s inception, when Chinese President Xi Jinping unveiled his “1+4” vision for Pakistan, focusing on improving Gwadar Port, energy and transportation infrastructure, and industrial cooperation. These initiatives directly addressed Pakistan’s chronic energy shortages and sought to improve highway access to its ports, particularly from Pakistan’s underdeveloped western regions. Key achievements thus far have included the development and construction of Gwadar’s seaport and airport, over 8,000 megawatts of additional power capacity through multiple power plants, and an extensive road network spanning nearly 1,000 kilometers.

CPEC 1.0 and Its Strategic Logic

CPEC serves multiple strategic aims for China. First and foremost, it provides a shorter, land-based alternative to import oil from the Middle East via Gwadar Port, reducing China’s dependency on the Strait of Malacca — a vulnerable chokepoint that sees 80% of its energy imports and could be blockaded in a potential conflict with the U.S. or India. Known as the “Malacca Dilemma,” this dependency has long troubled Chinese strategists.

The corridor also advances China’s internal goals. Economic integration of the Xinjiang region via CPEC is seen as a soft power method to stabilize it and reduce separatist sentiments. Externally, CPEC enhances China’s commercial and naval reach into the Indian Ocean. It supports China’s broader String of Pearls strategy — building a network of commercial and military assets across the Indian Ocean to project power and secure sea lanes.

For Pakistan, CPEC has been marketed as an economic game-changer. It has improved infrastructure, addressed electricity shortages, created hundreds of thousands of jobs, and expanded regional connectivity with Central Asia. Yet concerns remain. Beijing has grown wary of the Pakistan Army’s increasing control over CPEC execution, which raises fears of militarized economic policy. Moreover, insurgents in the Pakistani province of Balochistan have attacked Chinese assets, viewing the project as neo-colonial and exploitative. Financially, Pakistan’s mounting debt burden, of which China is the largest bilateral creditor, has raised alarms. As of 2024, approximately 22% of Pakistan’s $131 billion external debt is owed to China, according to the IMF. Although both governments deny it, Pakistan’s financial dependence has fueled accusations of Chinese debt-trap diplomacy, where opaque loans and economic leverage provide Beijing with disproportionate strategic influence.

CPEC 2.0: New Goals, Same Stakes

Despite these challenges, China is doubling down. CPEC 2.0 marks a strategic pivot from basic infrastructure development to higher-value economic integration through:

–   Developing Special Economic Zones (SEZs) to boost manufacturing, exports, and attract foreign direct investment (FDI) into Pakistan.

–   Facilitating technology transfer to modernize Pakistan’s agricultural sector and increase value-added exports to China.

–   Expanding fiber-optic and digital infrastructure to link Pakistan to China’s Digital Silk Road.

–   Introducing public-private partnerships (PPPs) and local financing to reduce debt dependence on Chinese state loans.

This shift mirrors China’s evolving geoeconomic toolkit: rather than just building infrastructure, it now seeks to shape entire ecosystems of industrial and technological development. As of 2023, bilateral trade between China and Pakistan stood at $23 billion, with China as Pakistan’s largest trading partner and biggest source of imports — further deepening economic interdependence.

However, major questions remain. Pakistan’s political system, being plagued by military dominance and bureaucratic inefficiency, has historically struggled to manage complex reforms. Whether it can effectively oversee SEZs under CPEC 2.0 remains doubtful. Past efforts have faltered due to land disputes, bureaucratic gridlock, and lack of local buy-in. Likewise, the promise of genuine tech transfer often falls short in China’s BRI projects, raising doubts about the long-term industrial benefit for Pakistan.

Regional Implications

By committing to CPEC’s second phase, Beijing has signaled that it views the corridor as a critical geoeconomic opportunity with far-reaching regional implications:

1. Mitigating the Malacca Dilemma

China has thus far been unable to effectively solve its Malacca Dilemma, where rising tensions in Taiwan and the South China Sea have only emphasized the chokepoint’s importance. CPEC 2.0 demonstrates the premium Chinese strategists place on diversifying trade, military, and logistical routes through friendly territory.

CPEC’s significance is further elevated when compared to other faltering alternatives. While the China–Myanmar Economic Corridor (CMEC) once offered a similar path, Myanmar’s 2021 military coup and subsequent instability have slowed progress dramatically. In contrast, despite Pakistan’s volatility, CPEC now stands as China’s most viable westward corridor, offering strategic redundancy and trade security. It demonstrates the increasing importance the CCP places on solving the Malacca Dilemma and developing alternative economic networks.

2. Check on India

India views CPEC as a violation of its sovereignty, since parts of the corridor pass through Gilgit-Baltistan, a disputed region in Jammu and Kashmir. China’s persistent development in this area reinforces Pakistan’s territorial claims, undermines India’s position in bilateral and multilateral forums, and forces India to militarize its northern frontiers, draining strategic bandwidth.

Furthermore, China’s deepening stake in Pakistan’s economy gives Beijing a veto-like influence over Islamabad’s India policy. CPEC 2.0 thus emphasizes its function as a geopolitical buffer zone, constraining India’s freedom of maneuver both regionally and globally.

3. Countering the U.S. Indo-Pacific Strategy

CPEC is also China’s counterweight to the U.S. Indo-Pacific Strategy (IPS), the Quad alliance, and the newly announced India–Middle East–Europe Corridor (IMEC). China aims to promote a regional China-centric trade and logistics network that challenges the dominance of U.S.-backed trade corridors, while its Digital Silk Road initiatives divert countries from U.S.-led tech ecosystems.

Finally, the continuing development of Gwadar Port further raises U.S. concerns over the potential future logistics or dual-use naval base for the Chinese navy (PLAN). This would give China a strategic node in the Indian Ocean that would directly challenge the U.S. 5th Fleet based in Bahrain and Diego Garcia — particularly given its proximity to the Strait of Hormuz, another vital choke point of global shipping.

Conclusion

While CPEC has thus far exemplified the CCP’s geoeconomic strategy through the BRI, the launch of its second phase in 2024 underscores a renewed and evolving set of strategic objectives. Its renewed momentum quashes speculation of Chinese retreat and underscores Beijing’s strategic calculus in the region: to secure access to the Arabian Sea, check Indian influence, and counter the U.S.’s presence in the region.

CPEC has already delivered tangible economic gains for Pakistan — from power generation to port development — and shows no signs of slowing, despite mounting debt concerns and local unrest. In fact, China’s willingness to continue investing amid instability may reflect the very logic of its so-called debt-trap diplomacy: creating long-term political leverage through economic dependency.

Understanding China’s evolving relationship with Pakistan — and the deeper logic behind CPEC’s expansion — is essential for evaluating both regional dynamics and the future of geoeconomic competition across Asia.