On a state visit to Islamabad this week, China's President Xi Jinping put his name to almost US$30 billion of deals that will help transform Pakistan’s energy supply and infrastructure as China’s western neighbour aims to modernise its economy and avoid crippling power cuts.
But the background to the deals is primarily strategic and rooted in geopolitics in a region close to the Middle East's huge oil and gas production.
An expanded port could also help China transport its huge resources of metals, minerals and cotton more cheaply.
Xi’s visit to Pakistan had generated a sense of nervous anticipation as previous plans were postponed last September in the wake of prolonged anti-government protests in Islamabad, and Pakistan’s government wanted proceedings to go more smoothly this time around.
As well as signing a raft of energy, trade and investment agreements, the Chinese president inaugurated Balochistan’s Gwadar port, part of the 3,000 km long strategic China-Pakistan Economic Corridor (CPEC) which could radically alter the regional dynamics of trade, development and politics in the region.
Gwadar, once part of Oman before it was sold to Pakistan in 1958, is one of the least developed districts in Balochistan province. It sits strategically near the Persian Gulf and close to the Strait of Hormuz, through which 40% of world’s oil passes.
The construction and operation of this multi-billion dollar deep-sea port at Gwadar was contracted to a Chinese company in 2013. Some analysts argue the port could become China’s naval base in the Indian Ocean and enable Beijing to monitor Indian and US naval activities.
Chinese premier Li Keqiang proposed establishing the China-Pakistan Economic Corridor (CPEC) during his visit to Pakistan in May 2013. “Our two sides should focus on carrying out priority projects in connectivity, energy development and power generation,” Li said at the time.
Pakistan’s strong political relations with China may mean this initiative succeeds where other regional energy projects have become mired in security problems and political disagreements, says Vaqar Zakaria, energy sector expert and managing director of environmental consultancy firm Hagler Bailley Pakistan. “The Pak-Iran pipeline is on hold, the World Bank-backed Central Asia South Asia Electricity Transmission and Trade Project has to contend with security of passage through Afghanistan, and importing power from India has to wait for core issues between the two countries are resolved,” he said.
Energy-poor Pakistan certainly seems to have found a saviour in China, which has promised to stand by the country in its (literally) darkest hour (parts of the country suffer power cuts for most of the day). So overwhelmed was the Pakistani president that he has predicted the economic corridor will be a “monument of the century” benefitting “billions of people” in the region.
Zakaria believes projects conceived under CPEC will ease Pakistan’s energy shortages and make a “substantial difference in the long term with both generation and transmission covered.” However coal figures prominently and Chinese money is “timely and useful” for cash-strapped Pakistan struggling to finance energy projects from western donors.
The CPEC project will include building new roads, a 1,800-km railway line and a network of oil pipelines to connect Kashgar in China’s western Xinjiang region to the port of Gwadar in southwest of Pakistan. The project also includes an airport at the port and a string of energy projects, special economic zones, dry ports and other infrastructure.
The estimated cost is expected to be US$75 billion of which US$45 billion will ensure the corridor is operational by 2020. The remaining investment will be spent on energy generation and infrastructure development.
China’s new silk roads
While the trade and energy corridor may be ‘monumental’ for Pakistan, for China it is part of more ambitious plans to beef up the country’s global economic muscle.
Chinese officials describe the corridor as the “flagship project” of a broader policy, “One Belt, One Road,” which seeks to physically connect China to its markets in Asia, Europe and beyond.
This initiative includes the New Silk Road which will link China with Europe through Central Asia and the Maritime Silk Road to ensure a safe passage of China’s shipping through the Indian Ocean and South China Sea.
“China is not building the corridor as an act of charity for Pakistan,” says Michael Kugelman, senior associate at the Washington DC based Woodrow Wilson Center. “It will happily fund and build any structure that plays into this goal–whether we’re talking about roads or ports.”
Some experts argue this initiative can bring greater cohesion in South Asia, one of the world’s least economically integrated regions. Adil Najam, dean of the Boston University Pardee School of Global Studies, believes anything that binds the region together is “a good idea” since countries tend to focus on “zero-sum geostrategic posturing” rather than recognising the benefits of integration.
India, US worried
At the same time, the new silk roads are bound to intensify ongoing competition between India and China–and to a lesser extent between China and the US–to invest in and cultivate influence in the broader Central Asia region, says Kugelman. “India has long had its eyes on energy assets in Central Asia and Afghanistan, even as China has gobbled many of these up in recent years. The US has announced its own Silk Road initiative in the broader region,” he said.
India is concerned about China’s growing investment in Pakistan, particularly its recent decision to fund a new batch of nuclear reactors. Pakistan plans to add four new nuclear plants by 2023, funded by China, with four more reactors in the pipeline (adding up to a total power capacity of 7,930 MW by 2030).
Many argue that China is supplying nuclear technology to Pakistan in defiance of the Nuclear Suppliers Group (NSG) guidelines, which forbid nuclear transfer to Pakistan as it has not signed the Nuclear Nonproliferation Treaty. China argues that these projects were agreed with Pakistan before it became a member of NSG in 2004.
Conflict in Balochistan
However, the economic corridor is unlikely to be successful unless there is peace in Gwadar. The district is embroiled in conflicts with militant organisations, like the Balochistan Liberation Front, who are highly suspicious of foreign-funded investments. These groups have not only vehemently opposed the development projects but have even attacked Chinese engineers working on the port.
It is the reason given by experts for the change of route to pass mostly through Punjab, thereby avoiding some of the country’s most strife-torn areas in both Khyber-Pakhtunkhwa and Balochistan provinces much to the chagrin of local legislators.
At the same time China has concerns about the growing influence of radical religious groups in Pakistan in its own Xinjiang province, which has a significant majority of Muslim Uighurs.
For now the Pakistan military plans to train over 12,000 security personnel and form a “special division” to provide security to Chinese working on the economic corridor. Some 8,000 security personnel have already been set out to protect over 8,100 Chinese working on 210 projects across Pakistan.