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The new international accord has been sealed in order to facilitate military exchanges and exercises in the Indo-Pacific region. The landmark treaty also allows military ships and aircraft to refuel and access maintenance facilities.
The agreement – known as the Mutual Logistics Support Agreement – was reached during a virtual summit between Indian Prime Minister Narendra Modi his Australian counterpart Scott Morrison.
It had been the first time the Indian Prime Minister held virtual discussions with a foreign leader since the global pandemic began.
Upon announcing the agreement, Prime Minister Modi appeared to take a swipe at Beijing following weeks of conflict at the disputed border.
Mr Modi said: “We share democratic values, the rule of law, freedoms, and respect for international institutions.
“When these are being challenged, we need to strengthen our cooperation.”
Mr Morrison added: “It is time for our relationship to grow broader and deeper.”
Relations between India and China continue to be strained with thousands of unarmed troops locked in a standoff along the 2,000 mile-long border.
According to Indian security officials Beijing forces intruded into Indian territory along the western Himalayas – something China denies.
Tensions have also escalated over India’s plan to construct a road near the Galwan valley – which is regarded as a disputed region.
Meanwhile India continue to strengthen ties with the US and Prime Minister Modi held talks with US President Donald Trump on Tuesday.
It is understood the two world leaders discussed “the situation on the India-China border” and Mr Trump reportedly offered to help Delhi.
The Chinese Foreign Ministry has downplayed tensions and insisted the region remains “stable and controllable” but warned against intervention from a “third party”.
Chinese Foreign Ministry spokesman Zhao Lijian said: “At present, the overall situation in the China-India border areas is stable and controllable.
“On border-related issues, there have been sound mechanisms and channels of communication between China and India, and the two sides are capable of properly resolving relevant issues through dialogue and consultation.
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“There is no need for any third party to intervene.”
Fractions between China and Australia have also surfaced in recent months after Australian officials called for an independent investigation into the origin of coronavirus.
China has since impose economic sanctions on Australian goods.
Since May 12, China banned Australian beef and put 80 percent tariffs on Australian barley imports.
China is Australia’s largest trading partner and according to figures released by the Australian Department of Foreign Affairs, trade between the two nations totalled £115billion ($214bn) in 2018.
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