Wednesday, 13 February 2013

Pakistan Hands Over Development of Gwadar Port to China

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PAKISTAN HANDS OVER DEVELOPMENT OF GWADAR PORT TO CHINA

by Naveed Ahmad (02/06/2013 issue of the CACI Analyst)

Pakistan has handed over the management of its southeastern Gwadar deep-sea port to the China Overseas Port Holdings after failing to turn the strategically located port into a financial success. With an outpost on the entry to the risk-prone Strait of Hormuz, China not only secures its petroleum supply through the shortest land route but also mounts a challenge to the U.S. and India in the Arabian Sea. Pakistan’s reliance on China as a partner has increased significantly during its post-9/11 engagement with the U.S. While Islamabad seems relieved by its belated act, Beijing seems to shift some pressure it has been withstanding in South China Sea.

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BACKGROUND: Located in the heart of the semi-desert coastal region of Makran, Gwadar sits almost like an island resembling the head of a hammerhead shark. Due to its strategic location and deep natural harbors, the region enjoyed a pivotal status in Cyrus the Great’s empire which simultaneously encompassed today’s Bahrain, Oman, Makran and the coastal regions of Pakistan’s Sindh province. In the 15th century, Gwadar was burnt and ransacked by Portuguese invaders. Pakistan successfully negotiated its control of Gwadar with Oman a few years after its creation in 1947. The region long remained underdeveloped and the natural harbors under-exploited, used primarily for traditional fishing and Pakistan’s naval bases.

With the breakup of the Soviet Union and the emergence of the landlocked Central Asian states, Gwadar emerged as the shortest potential route to the sea for their petroleum export and various imports. While the idea of developing a deep sea port in Gwadar was floated already in 1993, the construction would not begin until March 2002, with a planned phased completion.

The work on the port’s Phase I was completed in 2007 with an initial investment from China of US$200 million. Indian and Western concerns increased when Chinese vice Premier Wu Bangguo and General Pervez Musharraf flew to Gwadar for the port’s inauguration. Owing to Pakistan’s political instability under the military government, Islamabad could not embed the mega-project within local communities and failed to develop the necessary logistical infrastructure such as roads and rail links.

Instead, Musharraf allowed paramilitary forces to launch counter-insurgency operations against Baluch militants in some districts of the sparsely populated Baluchistan province. Islamabad blamed the Indian embassy and two of its consulates in Afghanistan for providing military and financial support for the insurgents in order to offset vital development in the rugged but mineral-rich province. Though New Delhi strongly protested the allegation, later reports in Indian media told a different story. However, Islamabad’s own failure to decentralize power and resources is also a major factor.

So far, Pakistan has banned five ethnic militant groups such as the Baluch Liberation Front, the Baluch Republican Army, Lashkar-i-Baluchistan and the Baluch Musallah Difa Organization. Over the past five years, the Pakistan Peoples’ Party-led government has made no significant efforts to curb the militancy except for passing legislation to give more resources and governance rights to provinces. The security situation on the Makran coast and Gwadar in particular has improved over the past few years after several previous attacks on Chinese engineers. Generally, Gwadar’s population of primarily Afro-Arab origin does not subscribe to the aspirations of some Baluch tribes pursing militancy.

Though the port today is linked to Karachi by the 400-mile Makran Coastal Highway, the real value-adding component of an oil refinery with a total capacity of 19 million tons of oil per year remains incomplete following a suspension of work in 2009 due to security reasons.

IMPLICATIONS: Besides reviving the port’s commercial activity, the Chinese company will have to take steps to appease the local population which suffers from poor socio-economic conditions. Pakistani political and security authorities face the challenge of averting any interference by external forces in Baluchistan as well as sabotage by the militants.

Though China maintains a policy of non-interference in the domestic affairs of other countries when pursuing its business interests, Pakistan’s own capacity for conflict resolution is wanting in many respects. Yet, ongoing processes to increase provincial financial autonomy and the creation of employment opportunities would have a stabilizing impact not only on the coastal region of Makran but on several troubled districts of mainland Baluchistan as well. Chinese ships docking at the harbor will bring jobs to local inhabitants and revenue to the provincial and federal government.

The Chinese undertaking for the long-term vital energy supply and export corridor project is obviously huge. Beijing plans to connect the Gwadar port with its western province of Xinjiang via rail and road links. The ancient and historic city of Kashgar is located 2,200 miles from the nearest seaport, compared to 950 miles from the Gwadar port. China would have to invest heavily in the construction of a container capacity highway across the rugged terrain of Baluchistan to the southern Punjab city of Multan. Pakistan’s road network in the Punjab and Khyber Pakhtunkhwa provinces are of international standard and rather secure. The last journey through the Northern Areas and particularly the Hunza region requires additional significant Chinese investment and work is already underway.

The Gilgit-Baltistan region of northern Pakistan, bordering China, has seen severe sectarian clashes, most recently last year when pro-Taliban militants murdered Shi’ite commuters near the Kohistan area. The clashes have damaged trade relations with China as well as the security situation of locals, which has been exacerbated by a presence of external elements including radicals affiliated with Iran and the Taliban, a lack of business opportunities, and government disengagement. Greater cross-border trade in the mountainous north of Pakistan and China’s far west is bound to bring improvements in this regard. While the possibility of a rail link seems too costly in the short and medium term, China is in Pakistan to stay and cash in on the available geographic and political advantages.

After abandoning the Iran-Pakistan pipeline, India has opted to develop the Iranian port of Chahbahar, which may serve as a military base in the long term while serving as an energy hub in the medium term. The Chahbahar project is no less complicated for India than Gwadar is for China. Pakistan is geographically linked with China while Iran is distant from India. Pakistan enjoys access to international trade, investment and banking while Iran is clamped by international sanctions owing to its adventurous security and foreign policy. In a bid to improve Pakistan’s relations with India as a counterbalance to China, the U.S. has unsuccessfully called on Islamabad to ease tensions with India over Jammu and Kashmir and give trade a chance. Islamabad is moving cautiously on trade with India knowing that Delhi could use it for greater access to the Afghan market.

Owing to persistent Chinese lobbying of Pakistan’s business community, military and political parties, Islamabad continues to defy U.S. pressure to moderate its relationship with Beijing. Washington has argued against Pakistan’s handover of the strategic port to the Chinese company as it may “expand the tensions over the Strait of Hormuz to the Baluchistan coastal areas.” India’s Defense Minister recently stated to media regarding the Gwadar handover that “In one sentence, it is a matter of concern for us.” Moreover, China’s presence in the Arabian Sea is problematic for the U.S., not least due to its positions on Iran. However, unlike India, the U.S. has limited its reaction to bilateral diplomatic channels.

CONCLUSIONS: For all practical purposes, Gwadar offers China an ideal and largely reliable route for petroleum supplies from the Arabian Peninsula. Currently, Chinese oil tankers ferry 80 percent of the hydrocarbons imported from the Gulf through the Strait of Malacca, followed by the turbulent waters of the South China and Yellow Seas. Imports via Gwadar will not only reach China sooner and safer, but also at a lower cost.

The oil-exporting Gulf nations including Saudi Arabia are also stakeholders in the success of the Pakistan-China Gwadar venture. With their eyes on Chinese economic growth and increased reliance on petroleum, the Arab nations have occasionally impressed upon Pakistan the importance of improving its control over the Balochistan province. While Gwadar is the most valuable among China’s touted string of pearls ports such as Bangladesh’s Chittagong and Sonadiya, near the city of Cox's Bazar, and Sri Lanka’s Hambantota, the deal not only strengthens Pakistan’s Middle Eastern linkages but may also solidify its connections with Central Asia. 

AUTHOR’S BIO: Naveed Ahmad is an investigative journalist and academic, focusing on security, diplomacy and governance. He is founder of the ‘Afghanistan 2014’ project. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it. ; and Twitter @naveed360.

Read 3105 times Last modified on Monday, 04 March 2013

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