Jeremy Garlick. Journal of Contemporary China. Volume 27, Issue 112. July 2018.
Introduction
Intense interest in the China-Pakistan Economic Corridor (CPEC) was stimulated when US$46 billion of investment agreements were signed in April 2015, a sum which two years later increased to US$62 billion. A major focus of CPEC is on developing overland transportation and pipeline links from the port of Gwadar to the Chinese province of Xinjiang as a land-based alternative to the maritime ‘chokepoint’ of the Straits of Malacca. This article assesses the viability of pipelines connecting China to the Indian Ocean through Pakistan via a close analysis of evidence obtained from both primary and secondary sources. It concludes that the overland connection is beset with difficulties because of geographical, economic and security problems, and that China’s long-term motivations for maintaining a presence in Pakistan are likely to be chiefly geopolitical rather than geo-economic. In fact, China’s primary aim with CPEC and other investments is to hedge against India by establishing a physical presence in the Indian Ocean Region (IOR), a strategy which is herein referred to as geo-positional balancing.
The China-Pakistan Economic Corridor (CPEC) is, as part of the Belt and Road Initiative (BRI), one of Chinese President Xi Jinping’s flagship projects. Announced in April 2015 as a US$46 billion agreement (an amount which had by April 2017 increased to US$62 billion), CPEC is in effect a rebranding of the long-term cooperation between the two countries which has been in progress since the 1950s. This cooperation is generally characterised by the partners as an ‘all-weather friendship’, but has been beset by difficulties of many types since its inception. Some of the most notable nowadays are the wealth imbalance between China and Pakistan (which includes Pakistan’s lack of foreign exchange reserves), the frequently troublesome security situation in Pakistan, and the looming presence of India on both China and Pakistan’s borders.
However, in assessing CPEC’s ostensible aim of connecting Pakistan with China’s northwestern Xinjiang region, it is important not to omit mention also of problems relating to the physical topography and geographical location of the China-Pakistan border region. In particular, the Karakoram Highway which connects the two countries, built with great difficulty between 1959 and 1979 and now under reconstruction, passes through difficult mountain terrain and an earthquake zone. This territory is also claimed by India, meaning that any further development of the region is geopolitically sensitive. It is also potentially a transit point for Islamic insurgents such as the East Turkestan Independence Movement (ETIM) and other groups seeking the independence of the Chinese province of Xinjiang.
There are also further problems to be solved in the remainder of Pakistan. The poor state of most Pakistani infrastructure (for instance in the field of energy) and the lack of Pakistani financial resources demand massive Chinese investment with uncertain economic outcomes and doubts concerning Pakistan’s ability to repay loans. In addition, amid frequent regional insurgencies and other outbreaks of violence, there is the difficulty of maintaining security around infrastructure investment projects such as the construction of factories, plants, railways and pipelines.
This article aims to continue the research initiated by Saul B. Cohen and others in reasserting the central importance of physical geography in assessing evolving global and regional geopolitics. This physically-centred approach contrasts with that of critical geopoliticians who emphasise the ‘discursive/representational construction of geographic space’. Cohen’s approach is not set up in opposition to critical geopolitics, however, but rather as an attempt to re-emphasise the importance of physical geography for the study of geopolitics.
In developing Cohen’s approach, the article takes as a key discussion point David Brewster’s assertion that the establishment by China of overland connections to the Indian Ocean would radically transform the geopolitics of the Indian Ocean region by opening up to Chinese influence what has been until now a closed geographical space which India has been attempting to dominate. If China becomes a major actor in the IOR, he points out, the consequences for the region are hard to predict outcomes amid radically altered geopolitical dynamics. However, whether China can connect its remote interior regions (Xinjiang and Yunnan provinces) with the Indian Ocean via efficient transportation and pipeline networks remains to be seen.
This article is therefore intended to be a rich, empirically-grounded study based in the close analysis of data (to the extent that they are available) concerning the economic and logistical viability of constructing overland transportation and pipeline connections between the Indian Ocean and China’s landlocked Xinjiang province via Pakistan. To examine the proposed CPEC connections, the analysis takes as a starting point Brewster’s geographically-based investigation of the geopolitics of the Pakistan and Myanmar routes from China to the Indian Ocean, expanding on it by adding analysis of factors relating to logistics, economics and security.
Given the fact that oil and natural gas pipelines have already been constructed between the Chinese-developed port of Kyaukpyu in Myanmar and Yunnan province in China, the article also examines whether these pipelines can thus far be regarded as successful economically, politically and in terms of energy security. This part of the study, again based in empirical detail, strongly suggests that China’s multi-billion-dollar investment in the Myanmar pipelines has thus far not produced substantial economic benefits, is problematic in terms of China’s increasing entanglement in Myanmar’s internal politics, and has not enhanced Chinese energy security. The analysis of the Myanmar pipeline project is intended to provide an illustrative case study concerning the potential problems of constructing a pipeline and transportation corridor from the Pakistani port of Gwadar to Kashgar in China’s Xinjiang province. Myanmar and Pakistan are, of course, different in many ways, but the example of a completed pipeline project is intended to cast some light on the issues to be expected in the case of the projected CPEC link.
However, since the primary focus is on CPEC, the article mainly concentrates on a close study of the empirical data available concerning China’s involvement in Pakistan. There is an urgent need to examine the feasibility of constructing a land corridor between Gwadar and Xinjiang using primary sources as far as possible: it is difficult to unpack the complexity of the issues involved using only the prevailingly over-optimistic local media reports and official announcements by the Chinese and Pakistani governments. Information is therefore obtained from in-depth analysis of primary sources such as the Gwadar Port Operating Authority’s website and the official CPEC website, as well as secondary sources such as journal articles and policy papers.
Although there are limitations, enough information can be obtained to strongly suggest that China’s primary motivation for involvement in Pakistan is geopolitical rather than geo-economic and that the reality of the proposed overland pipeline and transportation corridor is that it is more a symbol of cooperation than a fully achievable goal. The argument presented here, based on the empirical evidence, is that the central aim of China’s engagement in Pakistan (as well as Myanmar) is to balance against its regional rival India by establishing and maintaining a Chinese presence in the IOR. The author proposes to call this type of balancing, based on long-term strategic assessment of physical geography, geo–positional balancing. This concept is based on traditional Chinese notions of geographical space, and is developed, as Henry Kissinger points out, from the tactics of encirclement used in the Chinese game of weiqi (called go in Japan). Geo-positional balancing is a system of putting down marker ‘stones’ in key geographical positions for potential future use and as a hedge against possible conflicts. The aim is for China to strengthen its long-term geopolitical position vis-à-vis rivals (in this case India) without great risk or, despite appearances to the contrary, excessive financial expense.
The article thus begins with an extended assessment of the background to and prospects for the CPEC land corridor, based mainly on an in-depth analysis of primary and secondary sources relating to CPEC’s conception and funding, the port of Gwadar, the physical geography separating Pakistan and China, security issues, and pipeline logistics. It then continues with an analysis of the China-Myanmar pipeline project, in order to assess the extent that the project has faced problems of an economic and political nature, and whether these issues can be taken to be indicative of potential problems for the proposed CPEC pipelines and overland connection to China. Given that the sources reviewed suggest that Chinese investment in CPEC pipelines is less likely to go ahead than some commentators appear to believe, due to economic, logistical, geographical and security problems which are acknowledged by some Chinese experts, the final sections then assess China’s motivations for involvement in Pakistan. The evidence assessed points, above all, to Chinese interest in offsetting India’s regional dominance in the IOR through a strategy of geo-positional balancing in Pakistan, Myanmar and other nations in the Indian Ocean littoral.
The CPEC ‘Land Corridor’ Problem Defined
Much debate and discussion, not all of it very clear-sighted—and some of it closer in tone and content to a public relations campaign than objective analysis—has swirled around the China-Pakistan Economic Corridor (CPEC) since its inception in April 2015. CPEC, ostensibly intended to connect the Persian Gulf port of Gwadar with Kashgar in northwest China’s Xinjiang province, is framed as a key part of China’s ‘Belt and Road’ Initiative (henceforth BRI), which was launched in 2013. The BRI is intended to encompass a network of projects across the Eurasian landmass and through the seas to the south, including the Indian Ocean. Apart from the land corridor aspect, CPEC also has a major focus on enhancing energy and transportation infrastructure in Pakistan. Of the 67 projects listed on the official CPEC website in December 2017, 21 are energy-related, while 20 are transportation-related.
Based on an observation which was made by Chinese President Hu Jintao in 2003 (and which has been reiterated so often by numerous commentators that it has become something of a truism), one of the principal motivations for China’s involvement in Pakistan is to establish an alternative to the usual maritime trade route via the Straits of Malacca and the South China Sea (SCS). In this interpretation, the Straits of Malacca is considered a ‘chokepoint’ because it is a stretch of water which could hypothetically be blockaded, thus preventing vital supplies of oil and other commodities from reaching China. The point is frequently made in both the energy security literature and elsewhere that approximately 80% of China’s oil supplies pass through the Straits of Malacca and the SCS on their way to Eastern China: this is termed, per Hu’s coinage, the ‘Malacca Dilemma’. However, already prior to the advent of CPEC two authoritative studies pointed out that the danger of blockade or piracy is not as serious as it has often been said to be, since alternative sea routes can easily be found in case of disruption at Malacca and blockading all of these routes would require a massive and costly deployment of naval resources.
In economic terms, one recent peer-reviewed study in a major energy journal claims that the overland route through Pakistan to Xinjiang is shorter and potentially cheaper than the sea route, and could therefore save time and money as well as provide China with enhanced energy security. The fact that Gwadar is located on the Persian Gulf across the waters from Oman and the United Arab Emirates (where the Chinese oil company Sinopec owns 50% of the oil terminal at Fujairah) and next to Iran is suggestive, cartographically at least, of an intention to transport at least some crude oil into China via CPEC along with other resources and goods. The question then is whether the Chinese intention would be to construct oil and gas pipelines to Xinjiang along the lines of the recently-constructed Myanmar-China pipelines, or whether fuel could instead be viably transported by road or a new railway. However, critics doubt whether oil and gas transported via pipelines would really be cheaper than using the maritime route. In addition, since large quantities of fossil fuels already pass via existing pipelines through Xinjiang on their way from Central Asia, there logically seems little need to add to these supplies at present. Since Xinjiang is also ‘China’s largest gas producing and second largest oil producing region and has one of the largest networks of oil and gas pipelines in China’, the rationale for adding extra fossil fuels via a logistically difficult and probably expensive route is not clear.
The literature on CPEC which has appeared since the announcement of China’s investment in April 2015 reveals that there appears to be a surprising lack of clarity and consensus to date about the practical feasibility of connecting Gwadar and Xinjiang. For instance, the study (by Shaikh et al.) referenced at the beginning of the previous paragraph set out to study the prospects for oil being transported northwards to China from Gwadar; but despite a detailed quantitative cost analysis, the authors did not even mention the feasibility of a hypothetical pipeline in terms of non-economic issues such as the logistics of construction in the physical geography of the Himalayas, security issues relating to terrorism, the necessity of building through disputed territories in the north of Pakistan, and capacity issues relating to Gwadar port. This is not the only article in a peer-reviewed journal to make the (unfounded) assumption that the geographically shorter distance to China from the Persian Gulf to Xinjiang via Pakistan must automatically mean cheaper oil.
Another incorrect claim (citing a Reuters news item which does not mention the data supposedly cited) which appears in a recent peer-reviewed journal article is that ‘[a]s a direct consequence of the huge investment by China, Gwadar port contains 13 berths and has the capacity to hold bulk carriers of 350,000 deadweight tonnage’. Examining the reality of Gwadar port’s present capacity on the Gwadar Port Authority’s website (as of December 2017) reveals that its capacity is currently much less than this, with three functioning multipurpose berths and the capacity to accept vessels of up to 50,000 deadweight tonnage (DWT) only. These three berths were all completed in 2005 in the so-called ‘Phase I’ of the project to expand the port. As of March 2016, according to the Pakistani Minister for Ports and Shipping, work on the further berths which were supposed to constitute ‘Phase II’ had not yet begun. Andrew Small, the author of the most authoritative book on China-Pakistan relations to date, confirms that from 2007 onwards, for a variety of reasons including the removal of Pervez Musharraf from office in 2008, acrimony surrounding alleged mismanagement by the Port of Singapore Authority (which had been granted the contract to run the port in 2007 but which withdrew from the project in February 2013 after extended bouts of litigation), and security issues relating to the safety of Chinese workers, ‘very little of “Phase 2” was ever undertaken’.
The confusion surrounding Gwadar and Sino-Pakistani relations since the launch of CPEC in 2015 means that there is a pressing need to further clarify the state of play today. As Andrew Small puts it,
for a long time the story of the economic relationship between the two sides has been one of excitable headlines touting large numbers, ports, pipelines, and energy transit routes followed by frustration, disappointment, stalled projects, and much smaller figures buried away in statistical reports.
A central aim of this article is thus to attempt to assess (or rather continue the assessment begun by others, including Small) the feasibility of CPEC acting as a transportation corridor for crude oil and other commodities and goods from the IOR to western China based on a reasonably thorough examination of the primary data available (such as they are), as well as evidence provided in secondary sources, including ones which predate the advent of CPEC.
From Gwadar to Kashgar, the Hard Way
Gwadar is located in Balochistan, in the southwest of Pakistan. It is on the Arabian Sea opposite Oman and to the east of the Straits of Hormuz. About 70 kilometres to the west is the Iranian border, on the other side of which is the port of Chabahar, now being developed by India. Approximately 650 kilometres to the east of Gwadar, along the Makran Coastal Highway (construction of which was completed by China in 2004), is Pakistan’s main port, Karachi, which is part-owned by China Harbor Engineering Company (CHEC).
Gwadar was a fishing village under Omani rule until 1958, when the enclave was purchased by Pakistan for US$3 million. Plans to build a deep-sea port were initiated in 1993, and construction began in 2002 using Chinese finance and labour. Phase I of the project was completed in 2007, whereupon the administration of the port was handed over to the Port of Singapore Authority (PSA International) on a 40-year lease. However, PSA withdrew by mutual consent from this deal in 2012-2013, and the rights to administer the port until 2047 were sold to China Overseas Ports Holding Company Limited (COPHCL) in May 2013. PSA’s withdrawal came ostensibly because Pakistan refused to transfer 584 acres of land under the control of the Pakistani Navy, although problems with security due to local Baloch militants have also been cited as an associated reason.
One major impediment to Gwadar’s utility as a port is geographical. Gwadar is relatively isolated from Pakistan’s major population centres, and Balochistan is one of Pakistan’s poorest provinces. Apart from the highway to Karachi, there is at present little else of note in the vicinity of the port in terms of infrastructure. Pakistan’s main industrial centres are far away in Gujranwala, Faisalabad and Lahore. For this reason, there has been an extended debate within Pakistan about whether the proposed connection from Gwadar to the Chinese border should take an eastern or western route (or both). Each route would likely encounter numerous logistical problems, and each has already met with objections from factions within the country.
Either way, linking Gwadar to China over land demands crossing the entire length of Pakistan, including the Karakoram Mountains in the north. The Karakoram Highway, completed in 1979, crosses into China through the Khunjerab Pass, at an altitude of 4,693 metres. Topographical maps, photographs and tourist films reveal that the pass, located on the border, is wide, but the road which winds up to it through Pakistani territory is precariously cut into the mountainside above the Khunjerab river, which is the headwaters of the Hunza river. As the highway passes from the Khunjerab Pass down into Pakistan, its ‘main geomorphic features include hanging valleys, waterfalls, glaciers, snow-fields, lateral and terminal moraines and cirques’: in other words, extremely difficult terrain for the building and maintenance of pipelines. Sections of the highway are subject to frequent landslides and rockslides since it crosses a geological fault line where the Eurasian and Indian plates collide. More than 1,000 Pakistani and Chinese workers died during the construction of the highway due to landslides. A major landslide in 2010 caused the closure of a section of road due to the formation of a new lake, until the completion in 2015 of 24 kilometres of bridges and tunnels which restored the road link. The geological instability of Pakistan’s northern region, allied with difficult terrain, high altitudes, the possibility of insurgency and the fact that the border region is disputed with India, mean that adding any further infrastructure alongside the highway (such as a railway or pipeline) is fraught with risk and extreme difficulty in terms of maintenance and construction, including extensive high-altitude tunnelling.
The prohibitive cost of constructing high-altitude pipelines is another factor against the proposed project. In November 2016, Mei Xinyu, a Chinese Academy of International Trade and Economic Cooperation research fellow and representative of the Chinese Ministry of Commerce, commented in the state-endorsed newspaper Global Times that since high-altitude pipelines ‘need extra heating and insulating equipment as well as high-power pumping stations’ to pump fuel uphill, the costs of transporting oil over the Himalayas to Xinjiang would be approximately 16.6 times higher than the conventional route from Saudi Arabia to Eastern China by tanker. Mei concluded that ‘[f]or the same amount of investment, it’s more economically viable to build very large crude carriers than oil pipelines’. Comparative analysis conducted by Erickson and Collins in 2011 reveals that oil transported by pipeline from Angarsk in Russia to Daqing in northern China via relatively flat terrain is around double (US$2.41 per barrel) that of oil transported from Saudi Arabia to Ningbo (US$1.25 per barrel), even though the distance covered is less than half (3,200 km versus 7,000 km). This indicates beyond reasonable doubt that the cost of fuel transported through the proposed CPEC pipelines would be substantially higher than that transported by existing routes.
Another question surrounds the draft—defined as the dredged depth—of Gwadar port. As previously stated, the port can currently receive vessels up to 50,000 DWT, with a draft of 12.5 metres. Gwadar has three 200-metre berths plus a 100-metre service berth. This capacity is insufficient to receive even mid-sized cargo carriers and oil tankers, severely limiting the utility and commercial success of the port at present. Further dredging of the approach channels and port is scheduled, but so far the depth to be dredged has not been specified. Since all models of large cargo carriers and oil tankers are over 200 metres in length and have drafts of between 16 metres and 35 metres, to receive even those of medium size the entry to Gwadar port needs not only to be dredged further, but its berths also need to be extended or new ones built. According to the official CPEC website, as of early February 2017 COPHCL’s draft business plan for port improvements was still under review by the Pakistani Ministry of Ports and Shipping. Wu Minghua, a shipping analyst, also noted that Gwadar Port had a handling capacity of 1 million tons per year in 2016, while China’s total oil imports were 335.5 million tons in 2015, further casting doubt on the practical value and cost-effectiveness of offloading and transporting oil supplies by this route.
A further problem for both Gwadar and CPEC is security. The security situation in Pakistan has been highly unstable for years, with terrorism and regional insurgencies producing violent attacks across the nation, not least in Balochistan, ‘an area over which Islamabad’s political hold has weakened substantially since 2007’. Three Chinese engineers were killed in a 2004 bomb attack at Gwadar by Baloch separatists, and nine more were injured. In 2017 a Chinese couple was kidnapped near Gwadar in Quetta by separatists and eventually killed. A recent Foreign Policy article suggests that the Balochi separatist issue is not likely to go away soon, and that the security situation may even worsen.
The remainder of Pakistan is also not noted for its safety. Indeed, more Chinese were targeted in terrorist attacks in Pakistan between 2004 and 2010 than anywhere else in the world. There were further attacks on Chinese nationals, including a group of engineers, in 2013, resulting in several fatalities. The security situation has become so unstable that the Pakistani cricket team has played almost all its ‘home’ matches in the United Arab Emirates since a terrorist attack on the visiting Sri Lankan team in 2009.
The difficulty of ensuring security means that constructing any hypothetical transportation and pipeline corridor to China which crosses the length of Pakistan is a risky enterprise demanding a high level of security manpower and placing a heavy load on the Pakistani armed forces. Exacerbating these concerns as far as China is concerned is the possibility of Islamic insurgents crossing into restive Xinjiang from Pakistan. Indeed, China tightened security at the Khunjerab Pass in January 2017 in an attempt to prevent militants from entering Chinese territory. There was also an upsurge in violence inside Pakistan in the first two months of 2017, with Pakistani security forces seen as struggling to cope. In short, it is far from clear that CPEC could provide a more secure route for fossil fuels from the IOR to China than the existing maritime one via Malacca. Indeed, it would be more likely to add to China’s energy security headache rather than to alleviate it.
An alternative solution for connecting Gwadar to Xinjiang is to cross the nearby border into Iran and/or Afghanistan and then go through the Central Asian states of Turkmenistan and Kazakhstan. Three gas pipelines originating in Turkmenistan already supply natural gas to China, so there might be a possibility of linking Gwadar with Turkmenistan via a more secure route at lower altitude, although it is not clear that this would make any economic or logistical sense. An alternative proposal for a Turkmenistan-Afghanistan-Pakistan-India pipeline (TAPI) is already on the table, but is reportedly beset with difficulties and delays. In 2015, with the lifting of sanctions on Iran, an Iran-Pakistan gas pipeline to be built by China was proposed. This is intended to pass through Gwadar on its way to Nawabshah in southeastern Pakistan. As of November 2016, the Iranian section of the pipeline was reportedly already constructed, but construction of the Pakistani section was delayed due to the lack of funds on the Pakistani side.
All in all, there are a number of serious logistical problems facing the hypothetical project of enhancing Gwadar to Xinjiang connections by adding to the existing road link. While the upgrading of the Karakoram Highway continues, proposals for pipelines and a railway have not yet got off the drawing board, and the absence of references to them in Chinese media in 2017 suggests that they are likely to have been quietly shelved. Pakistan appears to be constantly short of hard currency and dependent on Chinese loans or investment, implying that China will have a near-monopoly on decision-making in CPEC. This means that if the Chinese government and Chinese companies decide that certain aspects of CPEC are not economically viable, they will not be funded. Given the fact that a Chinese state newspaper has reported serious Chinese doubts about the profitability of supplying oil through pipelines to Xinjiang, and since even Pakistani experts have expressed doubts about Gwadar’s economic viability, it seems unlikely that such a difficult project will find a place high on China’s list of potential investments in the foreseeable future. The comments of two Chinese experts in Global Times undermine the assertion of Shaikh et al. that an oil pipeline is cost-effective and feasible, and confirm that Gwadar Port does not at present have the capacity to transfer oil from tankers to shore in anything other than relatively small quantities.
A Salutary Tale: Lessons from the China-Myanmar Pipeline
China’s first attempt to bypass the Malacca ‘chokepoint’ in the wake of Hu Jintao’s 2003 comments took shape in 2004 when talks were opened with Myanmar on constructing an oil pipeline to Kunming. Then in December 2005 a contract between the then Burmese government and PetroChina to deliver 6.5 trillion cubic feet of natural gas to Yunnan over 30 years was signed. Interest in exploiting the Shwe gas field drove the project to its next stage, and agreements to build both natural gas and oil pipelines were drawn up in 2008 and 2009. Construction of the crude oil pipeline commenced on 31 October 2009.
The project consists of two pipelines. One is for natural gas and one for crude oil. They were constructed between 2009 and 2014, and pass in parallel through Myanmar on their way to Kunming in China’s southwestern Yunnan province. The gas pipeline, which originates at Kyaukpyu port, is intended to exploit the Shwe gas field in the Andaman Sea, while the oil pipeline begins at a new deep water port on nearby Maday (or Made) Island, at which tankers from the Middle East can dock and offload crude oil. While the gas pipeline has reportedly been in operation since October 2013, the oil pipeline took longer to build, was ‘essentially completed’ in early 2015, but was beset by delays, questions concerning economic viability and disputes over terms. The fact that, according to Chinese state media, the first delivery of oil from a tanker occurred only in April 2017 underlines the fact that the oil pipeline lay unused for more than two years after its construction was completed. A proposal to construct a railway along the pipeline route between Kunming and Kyaukpyu was also put forward, but this was cancelled by the Myanmar government in July 2014 due to the pressure of negative public opinion concerning perceived Chinese exploitation of Myanmar’s resources.
The two pipelines reportedly cost a total of US$2.45 billion to build. However, while the gas pipeline began pumping fuel after its completion, the 771-kilometre oil pipeline lay unused during 2015, due, according to a Myanmar Oil and Gas Enterprise official, to a number of reasons including the following: disagreements over fees and taxes, probably due to the fact that the Myanmar government had changed between drawing up the contracts and the completion of the pipeline; the fact that construction of the refinery at the Yunnan end of the pipeline which was due to process the crude oil had not been completed; and low oil prices making operations unprofitable. Even after completion of the Yunnan refinery in July 2016, oil did not start pumping until 2017 due to continuing disputes over the level of taxes to be paid by China, revealing this to be a central reason for the ongoing delay: the Myanmar government wanted an extra 5% tax on top of the earlier agreed transit fee and pipeline tariff. A tanker which was due to deliver oil to Kyaukpyu for the first time in March 2017 was unable to deliver its load due to yet another breakdown in negotiations between PetroChina and the Myanmar government. After the first delivery in April 2017, oil started flowing through the pipeline in early May, and 2 million tonnes were transferred in the four months to September. However, the cost of the oil is high, with Myanmar set to collect US$13 million per year from China as a Right-Of-Way (ROW) easement payment, plus two custom duties whose exact amount has not yet been decided. It is also important to note that the tankers delivering crude to Kyaukpyu port for the transfer would otherwise take the oil to ports in mainland China where there would be no payments or duties. Thus, the costs associated with the running of the pipeline cast doubt on its economic efficacy.
The reaction to the Chinese pipelines in local Myanmar communities has also impacted their operation to a degree. The widespread civic protests which led to the cancellation of the railway project from Yunnan to Kyaukpyu in 2014 may have been a factor in the delay to the commencement of the operation of the oil pipeline: local inhabitants were outraged that they had not been consulted and had not benefitted from the pipelines, and also that energy resources were being diverted to China when most of Myanmar lacks electricity. Then, in early 2017, violence between Buddhists and the minority Muslim Rohingya group in the state of Rakhine, which includes Kyaukpyu port and the pipelines, put the operation of the Chinese enterprises in further doubt. An article by a freelance Burmese photojournalist in November 2015 reveals a picture of growing disillusionment among local people on Maday Island concerning the economic benefits of the Chinese-funded oil pipeline and terminal.
It is not possible at this stage to assess the impact on the pipelines of local protests and complex outbreaks of sectarian violence in firmly quantitative terms. However, it can be stated that the Chinese involvement with successive Myanmar regimes means that the pipelines have a political and social impact which demands further research since it affects the local environment within which the pipelines are operated. These issues have also added an extra layer of insecurity to the Chinese energy security equation rather than significantly alleviating the situation.
In short, the problems inherent in the China-Myanmar pipeline project are surely instructive as regards the potential construction of a pipeline between Gwadar and Kashgar. Indeed, the remarkable Chinese capacity for learning valuable lessons from failed projects in a timely fashion (precisely according to Deng Xiaoping’s dictum of ‘crossing the river by feeling for the stones’) appears to have led in late 2016 to China quietly shelving CPEC’s pipeline project in the customary low-key manner adopted by the Chinese authorities when dealing with failure, disappointment or tragedy: without fanfare or publicity.
So What is CPEC for?
If the notion of constructing pipelines (and perhaps also a railway) from Gwadar to Kashgar appears impractical, as the above analysis suggests, then four questions need answering. First, why is China involved in Gwadar? Second, what does China hope to gain from CPEC? Third, what are China’s overall intentions with regard to its ‘all-weather friend’ Pakistan? And fourth, what does Pakistan expect from China?
It is likely that the answers to all these questions are interlinked. It is also likely, given the complexity of the issues involved, that, as the authors of a 2016 study put it, ‘China’s motives in pursuing CPEC are variegated’. Filippo Boni, who conducted field research in Pakistan, concurs in stating that security, economics and foreign policy are ‘inextricably intertwined when it comes to the development of the port of Gwadar and, by and large, Pakistan-China relations’. However, the argument developed in this section is that China’s involvement in Pakistan is primarily motivated by considerations of geopolitics based on physical geography (geo-positional balancing), particularly with respect to the most significant nation located in the IOR, India, and it is this which brings China and Pakistan’s interests into alignment.
Geo-positional balancing differs from other forms of balancing (such as classical hard balancing, soft balancing and offshore balancing) in that the strategic actor, in this case China, prioritises geographical factors. Classical hard (or external) balancing involves states forming military alliances to ensure that stronger states do not achieve a dominant position, while in soft balancing weaker states employ economic and diplomatic means to equalise their position vis-à-vis a potentially hegemonic state. Offshore balancing, as outlined by Stephen Walt and John Mearsheimer, is a strategy recommended for the United States specifically: it entails encouraging allies to build up their own defences instead of the US maintaining an onshore military presence. In contrast with these other forms of balancing, geo-positional balancing aims to establish physical footholds in selected countries (in this case Pakistan and Myanmar) with a view to establishing a stronger long-term geo-strategic position with regard to a regionally more powerful rival (in this case India). The aim of geo-positional balancing, in this conception, is neither to build up onshore military bases nor to remain entirely offshore, but instead to establish a non-military presence at selected sites (such as commercial ports). These can be maintained long-term for the purpose of keeping a powerful rival geopolitically honest by making it aware of the incoming actor’s presence. At the same time, onshore economic investment and infrastructure building give the balancer influence in the host country by building up a degree of soft power through enhanced economic connections.
In this reading of the situation, Gwadar is a geo-strategic ‘place marker’ or, as Henry Kissinger would have it, a metaphorical weiqi stone: the utility of the ‘stone’ may not yet be clear, but Beijing appears to believe that it is better to seize the opportunity. If China intends to be an actor of significance in the IOR and South Asia, as well as to shore up its existing position, it needs to hedge against Indian activity (for instance investment in Chabahar port along the coast in Iran) as well as the US naval presence in the region (based in Diego Garcia). Given that India and China have not exactly had close relations since the 1962 border war between them, and amid ongoing territorial tensions along their extended frontier, including Indian claims on the Karakoram territory which connects Pakistan with China geographically, China seeks to ensure that it has as many strategic footholds in the region as possible. US intentions in the region have been unclear in recent years, but there is always the chance that the Americans will re-engage: China therefore needs to hedge against that possibility as well.
Viewing China’s port-building programme in the IOR as geo-positional balancing permits a more nuanced understanding of Chinese activity than simple aggression or hard balancing. In essence, China intends to establish a physical presence to enhance its overall long-term defensive security rather than aiming to directly challenge or threaten India, a goal which is currently unrealistic in terms of maritime power projection, particularly given the continuing American military presence in the IOR. The nuclear rivalry between Pakistan and India and the ongoing Sino-Indian border tensions contribute to the assessment that geo-positional balancing in Gwadar is a strategy which is intended to serve China’s long-term security interests in the sense of what China terms ‘active defence’.
In this light, it is of course to be expected that China refutes claims that it is out to ‘encircle’ India. Yet suspicions remain. On the other hand, extended supply lines which stretch for thousands of kilometres from China’s southernmost naval base on Hainan Island mean that China’s People’s Liberation Army Navy (PLAN) is not yet able to rival India’s navy in the IOR. China’s geo-positional strategy takes account of this fact by attempting to gradually build up a network of commercial ports around the IOR while occasional activity from the PLAN, such as a visit by Chinese warships to Karachi in June 2017, remains relatively low-key.
This is not to say that what can be termed China’s port-of-entry strategy has been entirely smooth sailing. Not all efforts by China to incorporate ports in other IOR countries into its so-called ‘string of pearls’ have come to fruition, and even those that have are often controversial. For instance, a Chinese bid to develop a port in Bangladesh was quietly rejected in 2016 by the Bangladeshi authorities (probably due to behind-the-scenes pressure from India, the US and Japan, which had already been developing a port), while two Chinese port construction projects in Sri Lanka, at Colombo Port City and Hambantota, have developed in fits and starts as Sri Lankan governments have come and gone (or changed policy). Concern about Chinese loans being converted into Chinese equity, and ports potentially being used for military purposes have not been eased by Chinese insistence that the investments are purely commercial in nature, as a senior Indian scholar has noted. Stopovers in Sri Lanka by Chinese submarines have understandably led to Indian howls of protest, with a 2017 proposed docking rejected by Sri Lanka under pressure from India. The Sino-Indian geopolitical rivalry in the IOR means that all Chinese port projects stir suspicion on the part of India, as well as other regional actors, most notably the US and Japan. Such considerations explain why India also continues to reject Chinese invitations to join the BRI.
Several observers (Andrew Small, Ye Hailin, Mathieu Duchâtel) who have interviewed or maintain contacts with Chinese foreign policy makers have noted that according to their sources China’s long-term priority in Pakistan has been to prioritise security concerns over economic ones. Duchâtel’s anonymous source, interviewed in 2009, reveals China’s long-term geopolitical strategy with regard to Pakistan and so is worth quoting in full:
If projects progress too slowly or if they are threatened by insecurity, it’s easy: we stall them. The energy-and-trade corridor has only little importance and security costs are high. Pakistan has no resources, no gas, no oil, only a geographical position [italics added]. Pakistan insists that China should invest in this project, but China is now a market economy and seeks returns on [its] investments. China was considering the construction of this corridor under Musharraf because there was a sufficient degree of security and economic growth, but today it is meaningless.
Another area in which China seeks to enhance its security in Pakistan is the aforementioned issue of containing threats to the stability of Xinjiang province caused by possible transnational flows of (or support for) Muslim insurgents. In fact, Pakistan has been playing a key role in actively quelling Uighur separatist elements [such as the East Turkestan Islamic Movement (ETIM)] on China’s behalf for some years already. Thus, a secondary motivation for involvement in Pakistan is to attempt to contain the Muslim separatist threat to China’s northwest security outside Chinese borders as far as possible.
The nature of Chinese investments constitutes another aspect of CPEC which is problematic since they are made up of loans which have to be repaid sooner or later. Used worldwide, China’s ‘debt-based model for infrastructure development’ gives the impression that investment is being used as a tool to promote geopolitical interests as much as economic ones. For instance, by looking to swap debt for real estate down the line, as happened with a Sri Lankan port in 2017, China gains long-term control over physical assets in strategic locations. In this sense, the use of loans as investment instruments is suggestive of geopolitical goals being at least as important as economic ones in China’s long-term strategic approach.
There are also doubts concerning the extent to which Chinese investment projects can progress smoothly and at the expected rate. Scrutiny of the official CPEC website run by the Pakistani government reveals that, as of December 2017, work had not yet begun on more than half of the 67 projects listed. In these cases, individual projects are still at the planning or feasibility study stage and the timeline for substantive progress is unclear. On the other hand, China’s increased pledges of cash for Pakistani energy and transport infrastructure projects in 2017 indicate firm, ongoing commitment to these aspects of CPEC. Nonetheless, it is significant that the possibility of constructing pipelines and railways between China and Pakistan was no longer being discussed in the Chinese media or other official sources in 2017. The notion of Pakistan further adding to its debt by taking on Chinese loans to pay for CPEC infrastructure is a further problem which can only exacerbate the imbalance in economic relations, and is likely to be the source of yet more financial problems for Pakistan in future.
It might be hypothesised that China is genuinely seeking to increase economic ties with Pakistan and to boost Pakistan’s economy. While this may be true, and it would seem to be in China’s interest to ensure that Pakistan’s economy does not completely collapse, it seems unlikely that Sino-Pakistan trade is ever going to constitute a significant proportion of China’s foreign business. Pakistan’s share of Chinese trade compares unfavourably with India, Vietnam and even the Philippines. Pakistan also has a massive trade deficit with China, importing more than six times what it exported in 2015, principally because China is the main supplier of military hardware and nuclear technology to Pakistan. The fact that China’s GDP per capita was lower than Pakistan’s in 1968, but in 2012 was five times higher, further illustrates the growing gulf in economic potency between the partners. The evidence therefore suggests that there is limited potential for Pakistan to become a major trade partner for China and that attempting the Sisyphean task of transforming it into one is not likely to be China’s main goal in promoting CPEC cooperation. Pakistan’s weakness and dependency also play into Chinese hands in geopolitical terms, once the strategy of geo-positional balancing is taken into account. A dependent, needy Pakistan is, in fact, an ideal ally for a China intending to expand its geopolitical interests and hedge via geo-positional balancing against future conflicts with its most significant regional rival, India.
Finally, China’s position regarding the potential for growth in Sino-Pakistani trade and economic interactions is summed up by an anonymous Chinese senior specialist on South Asia interviewed by Mathieu Duchâtel:
Pakistan is a minor market for China. Economic and trade issues have only a marginal influence on the relationship.
In other words, geopolitical considerations are paramount for China vis-à-vis Pakistan, and economic diplomacy is mainly used as a tool to achieve the goal of bolstering China’s position with regard to India in the IOR.
Pakistan’s motivations for encouraging Chinese involvement in Gwadar, and for promoting CPEC generally, can be listed as follows. Above all, there is the desire to continue what it regards as a key partnership which enables it to resist pressure from its historical enemy, India. Pakistani military strategists keenly recall the December 1971 war with India, when the Indian Navy inflicted massive damage on the Pakistani Navy in Karachi port in two attacks. Second, the present government believes it can score points with the electorate by cultivating a Chinese business presence. Third, Pakistan is desperately short of hard currency, so seeks to obtain funds and assistance from China. And fourth, Pakistan’s energy infrastructure needs an overhaul, so Chinese expertise and investment in this area are welcome. All these factors mean that Pakistan’s government is generally enthusiastic about its Chinese connection, even if not all the promised investment materialises.
Overall, then, China’s engagement in Pakistan at present suits both parties and in particular serves China’s geopolitical interests. China gets away with maintaining the partnership through loans which have to be repaid either in cash or equity in the projects constructed by Chinese firms (which thereby benefit), and Chinese strategists see the investment as worthwhile in order to establish a position of ‘active defence’ in the IOR and South Asia. Essentially, China views Pakistan principally as a counter in a larger geopolitical game aimed at geo-positionally balancing other actors in the region such as India and the US. A secondary aim is to contain Islamic fundamentalism, which could threaten China’s internal security, outside its borders. Economic factors, the ‘face value’ aspect of CPEC, are therefore far less significant in reality than geopolitical and security issues.
Conclusion
The evidence presented in this article suggests that China’s intentions with CPEC are primarily geopolitical rather than geo-economic. Geographical difficulties, cost calculations and security problems make further development of the overland connection between China and Pakistan unrealistic and unattractive, particularly with regard to the construction of oil and natural gas pipelines. Rather than taking the stated geo-economic objectives and the Malacca dilemma at face value, viewing CPEC through a geographically-focused lens which evaluates Chinese motivations in terms of geo-positional balancing presents a clearer picture of what CPEC is primarily intended to accomplish. Balancing against the regional rival India via attempts to establish footholds on the IOR littoral can thus be seen as China’s paramount goal, with the rather fanciful notion of economically cost-effective and security-enhancing (rather than insecure) overland corridors fading into the background as geographical and geo-economic realities dawn on Chinese policymakers.
The comparison between the proposed CPEC pipelines and completed Myanmar ones is also instructive. Despite claims to the contrary, Chinese investment in the Myanmar pipeline project has not proved to be particularly profitable nor to have significantly enhanced China’s energy security. Since the empirical evidence reviewed indicates that building pipelines across Pakistan would meet with far more problems, ranging from security issues to geographical difficulties to irrational amounts of money spent on construction and maintenance, it is highly likely that this part of the CPEC project has already been quietly shelved. Indeed, in 2017 official Chinese sources continued to emphasise investment in Pakistani energy projects while mention of pipelines and the overland connection to Xinjiang was conspicuously absent from published material.
Yet the Chinese interest in the port of Gwadar remains, even though the port has not been developed much since Phase I was completed in 2007. This article’s argument is that the Chinese interest in Gwadar, and other IOR ports such as Kyaukpyu and Hambantota, is primarily due to the strategy of geo-positional balancing with regard to India and, to an extent, the US. Converting debt to equity, as China has recently done in Sri Lanka by acquiring a 70% stake in Hambantota Port, gives China a maritime presence which it had previously lacked. In this interpretation, CPEC is more about bolstering China’s position in Pakistan than about economic cooperation, although in fact security goals can be achieved alongside economic ones because commercial ‘facilities could be quickly flipped for military application’.
In the end, the reality of China’s involvement in Pakistan consists mainly of efforts to sustain the footholds in the IOR gained so far as an insurance policy against as-yet-unknown future eventualities, rather than being the tale of large-scale geo-economic expansion that is told by some over-optimistic commentators. In essence, as geopolitical realities confront impractical pipeline fantasies, CPEC is, for the most part, the acceptable face of China’s attempt at establishing a geo-positional balancing act in the Indian Ocean.