The Sino-Pak Trade and Energy Corridor -An Assessment-
The 8th Pan – European Conference on International Relations Institute of International Relations Warsaw Economic University, Poland
18~21 September 2013 Dr. Cherng-shin Ouyang, Advisor Chung-Hua Institution for Economic Research 75 Chung-Hsin St., Taipei, Taiwan
[email protected] ABSTRACT The planned “Trade and Energy Corridor” (TEC) linking Gwadar port with Kashi is a land-based transport alternate to the conventional sea route spanning Persian Gulf to China’s coastal regions. This paper examines the backgrounds, issues and outlook this megaproject evokes from a multiplicity of strategically crucial perspectives as seen from Islamabad and Beijing. Clearly, the task at hand is more than simply bridging landlocked western provinces of China with the Indian Ocean via massive infrastructural investment in space. To carve out a corridor traversing the landmass formed of the “arc of instability” in between –i.e. the Central South Asia and Middle East-- there is the need to plan and invest in other objects. The latter comprises work featuring breakthrough in transport logistics, energy economics and geopolitics. Keywords: TEC, Gwadar Port, KKH, Pipeline
The Sino-Pak Trade and Energy Corridor -An AssessmentI. Introduction More than half of the world's proven oil reserves are located in the Middle East, the top region-based supplier of crude oil to China. In 2012, China imported 5.4 million bbl/d or 56% of its daily consumption in crude oil, of which 48.1% originated from the Persian Gulf (see Fig.1). Up to now all volume have been moved by seaborne oil tankers hauling over some 10,000 nautical miles to terminals along the east and southeast coast of China [1]. Each journey is beset with one of the world's most perilous chokepoints - the Strait of Malacca[2]. This leaves Beijing with tough choices in guaranteeing security in energy supply, practically because nearly 60% of annual oil consumption of this emerging economic powerhouse has to be imported and is still growing. Moreover, superior naval advantage possessed by the U.S. may be able to impede oil traffic heading for China through the waterway extending from the Persian Gulf to Malacca Strait. To meet this challenge Beijing has to strengthen its blue water navy policing its rapidly expanding maritime trading routes. Alternatively, Beijing’s development planners have to build overland pipeline infrastructures in collaboration with upstream transit countries and crude producers[3], bypassing possible blockade along the shipping lanes over India to the South China Sea. This is best exemplified by the Sino-Pakistan “Trade and Energy Corridor” (TEC) and the Sino-Myanmar oil and gas pipelines. Main features of this new initiative are unraveled next in the context of China’s overture in sourcing overseas energy via continental land routes through Gwadar, the transshipping hub. Section three shows how the tripos formed of railroad, highway and a pipe shape the pivotal north-south crossroad in Eurasia. Section four reasons that the “Iran-PakistanIndia” pipeline may be merged with TEC. A selective assessment is given in Section five.
II. Out into the Sea The planned “Trade and Energy Corridor” is formed of one transshipment node –the Gwadar Port - and three legs: a pipe, a highway and a railroad. This
three-in-one triple corridor carries not only oil but also dry cargos moving to and from Gwadar as a regional hub east of the Persian Gulf. Formation of this system has taken a number of years.
Souce: Overseas Investment by Chinese National Oil Companies, IEA Information Paper, International Energy Agency, Feb., Jiang, Julie & Jonathan Sinton(2011), p.30.
Fig. 1 International Shipping Lanes: Persian Gulf and Africa to the West Pacific Background: As early as 1954 the United States Geological Survey (USGS) conducted a survey of Pakistan’s coastline thereby identified Gwadar a suitable site for a seaport. Notwithstanding, Oman had exercised legal and actual suzerainty over the port of Gwadar, which until September 1958, was an alien enclave in Pakistan on the Makran Coast over 200 years. Islamabad purchased this enclave from Sultanate of Oman for $3 million and it officially became a part of the Pakistan territory. In 1964 the Pakistani Government decided to transform this small and undeveloped finishing village of only a few thousand inhabitants into a deep sea port. Successive governments had drawn up plans for developing Port Bin Qasim (BQ) in Sindh and Gwadar in Baluchistan as alternate ports because of the need to dilute the country’s dependence on the Karachi port, which now handles over 80 percent of Pakistan's international trade. Framed within the transport plan of Pakistan’s 8th Five Year Plan (1993-94) a technical and financial feasibility study on Gwadar Port was conducted by Gifford & Partners & Technecon of Southampton, U.K., jointly with the Karachi-based
Pakistani firm, Techno-Consult International. Their efforts made construction of the Gwadar port project a priority evaluated from a multiplicity of causes ranging from logistic, geostrategic to the imperatives of regional development.[4] But actual execution of this undertaking had been postponed until 2001 when Beijing agreed to provide financing and technical assistance. Phase-1 construction work began upon the signing of bilateral agreement on aid and development in March 2002 which took three years to complete (Table 1). On 18 February 2013, Chinese Overseas Port Holdings Ltd. took over the port managing rights from PSA of Singapore.
Beijing’s Development Assistance: Premier Zhu Rongji was the first Chinese leader to offer development aid to Pakistan since the new century[5]. His five-day visit to Islamabad in May 2001 not only cemented traditional Sino-Pakistan ties but also resulted in the offer of an aid package to finance the physical infrastructures and other projects to the tune of $1,106 million (Raman , 2001). The bulk of this package (in million $) was catered for the modernization of railway (200), construction of the Karachi to Pakistani Punjab pipeline (120), building of the deep-sea Gwadar port (240) and construction of a coastal highway connecting Karachi with Gwadar (200). At this stage Beijing refrained from pledge to assist Pakistan in improving the country’s domestic transport facilities along the Chinese-aided Karakoram Highway (KKH)[6]. Instead their main efforts were directed to Gwadar port. As a new window to the south, this project was designed by “The Fourth Harbour Engineering Investigation and Design Institute”(FDHI）and implemented by “China Harbour Construction Corporation. Both units belong to the state-owned
flagship
in
public
infrastructures
“China
Communications
Construction Company Ltd.” (CCCC). Of the planned budget $248 million for the Phase-1 construction work, 80 percent was commissioned by China. It was set in motion attended by the Chinese Vice-Premier Wu Bangguo on 22 March 2002 and completed in December 2005. The port began to receive merchant ships since January 2003 when work was still in progress.
Phase-2 is a
continuation and expansion of the infrastructural buildup of Phase-1 on BOT basis, attaching greater importance in coordinating the more ramified network of transport facilities, given also handsome aid from China. Phase-2 facilities were expected to be ready for operation around 2015~17 (Table 1). To complement
this effort, the Asian Development Bank (ADB) provided $300 million for building a link between the Gwadar port and BQ as well as the Karachi port. Altogether, a lump sum of $3.2 billion of ADB funding have been earmarked during 2005~07 to help improve the country’s physical infrastructure and alleviate poverty (Dawn, 2005). A more comprehensive account detailing the strategies for six subregional trade and transport sector development up to 2040 focusing upon Central Asian is given in ADB (2012). Table 1 Gwadar Deep Sea Port Construction Plan Phase 1：2002,3,22~2005,3,23 (original date) Beijing and Islamabad signed agreement in assisting Pakistan building the the Gwadar Deep-Sea Port on 10 August 2001; construction work took place in May 2002 completed in December 2005. China agreed to participate in the Phase-2 construction. Budget：$250 million(14.9Rupee) China provided $198 million , to be partitioned into Pakistan：$50 million donation (18)、new development aid (31)、new interest-free loan (31)、government preference loan (58)、buyer’s credit (60) Manpower (personnels involved) China：450 Pakistan：512 Facilities 3 -multipurpose berths — each 200 meters long. 1 -RO-RO berth 1-100 meter service berth 4.7 km long approach channel dredged to 15.5 m inner harbour and 12.5 m outer harbour Width of channel-206 m Port Basin and Turning Area- 595 m diameter Related port infrastructure and port handling equipment & pilot boats, tugs, survey vessels, etc. The port, currently, has the capacity to handle 50,000 DWT bulk carriers and 25,000DWT containers Designed by：The Fourth Harbour Engineering Investigation and Design Institute” （FDHI）of CCCC Implemented by : China Harbour Engineering Company Ltd. of CCCC CCCC: China Communications Construction Company Ltd. Phase-2: commence after Phase-1, expected to complete in 8~10 Years In 2007, Gwadar Port Authority (GPA) singed contract with the Concessional Holding Conpany (CHC) of the Port Authorty of Singapore (PSP), CHC took over the construction and management business of the operation of the Port duty-free and the FTZ for 50 years by adopting a BOT model Budget：$524 million BOT、BOO Berth for Containers：4 Bulk carriers：1(up to 100,000DWT) Bulk grain carrier: 1 Ro-Ro：1 Tankers：2 (up to 200,000 DWT) Basic Installations：Warehouse and EPZ、Industrial site for crude storage/refinary/petrochemicals Space for development：18,600 hectare, containing
-Wharf (1,2 phases)：400 hectare -Export processing zone (adjacent to the East Bay)：74 hectare -Exclusive industrial site (city north)：4,000 hectare -Refinary units (NE of city with pipe linking with crude oil port terminal)：1,000 hectare -Residential area (city west, north to the Bay)：400hectare Contract 1. Corporate income tax: free for 20 years 2. Materials and equipments imported for port construction: duty free 3. Vessels and fuels：tax free for 40 years 4. Tax of Balouchistan and local government on CHC: none 5. Bonus：GPA and PSA are entitled to draw bonus out of both the annual commodity tax income and port service fees (9%) and the FTZ revenue(15%) Sources：http://www.skyscrapercity.com/showtheread.php?t=392948 1. Rana, Pervaiz Ishfaq (2007), “Government Indecisive on Role, Status of Gwadar Port,” Dawn Feb., 6. 2. Sabri, Rabeah (2009), “Balochistan: Af- PAK’s forgotten Frontier,” May. 4.
Gwadar Port: On 20 March 2007, Gwadar port (Phase-1) was officially inaugurated by President Pervez Musharraf, along with Chinese Minister of Communication Li Shenglin, he promised a fourth port to be built at Sonmiani in the Lasbela district. Once completed, it will rank among the world's largest deep-sea ports and serve as the mother-port at the junction of traditional trade routes opposite the Strait of Hormuz. The port began cargo handling from 15 March 2008. The first ship carrying 64,000 tonnes wheat from Canada docked and unloaded, the largest vessel ever called at Pakistan. However, since first handed over to the Singapore Port Authority (SPA) in 2007, this highly prized asset has been a commercial failure, due to the lack of investment in the port facilities and internal as well as external transport linkages. Concurrently, Baluchistan's instability and local political opposition have scared investors away. In December 2007 the Government of Pakistan approved a plan to build two new large sized shipyards at Gwadar in Baluchistan Province ("Gwadar Shipyard") and Port Qasim near Karachi in Sindh Province ("Qasim Shipyard") on a fast track basis. The Gwadar Shipyard is planned to be set up at Gwadar East Bay (Shamba Ismail area), on an area of approximately 500 acres (ca 2 sq. kms). Initially planned to carry out ship repairs, it shall end up with shipbuilding of up to Very Large Crude Carrier (VLCC) and Ultra Large Crude Carrier (ULCC) size and will have at least two dry docks of approximately
600,000 DWT. On 18 February 2013. Pakistan handed over management rights of Gwadar seaport to China upon expiration of the PSA contract [7].
III. The Spatial Setting and Transport Logistics Located 75 km east to the Iranian border closing to the mouth of the Strait of Hormuz and 460 km west of Karachi, Gwadar port witnesses twenty percent of the world’s traded oil and about thirty-five percent of the oil traded by seaborne freight with every passing day. This port and Pakistan at large lie rightly also at the traffic juncture of three regions traditionally lacking direct communication in between: the South, Central and West Asia. Superbly located geostrategically, it commands together with the prospect to become a world class deep-sea port have attracted increasing attention. Essentially, Gwadar may turn into a pivotal habour city, comparable to Singapore, Hong Kong, Colombo and Dubai. Liquid fuels reaching Gwadar by tanker/pipelines would flow to Kashi of China’s Xinjiang Uyghur Autonomous Region (XUAR), therewith cut thousands of kilometres off the distance to ship oil from Middle East and Africa to China Spatially, all three legs drawn to Gwadar Port is an engineering setup which looks like a “funnel”. The top of the funnel is this wide area of Central Asia and also China's western region. It gets narrowed down through Afghanistan and Pakistan and the end of this funnel is Gwadar port (Noor ul Haq, 2005). Master Plan of the megaproject would see oil being imported from the Middle East, stored in refineries at Gwadar and re-exported to China via roads, pipelines or railway. KKH: The first half-leg --literally the unpaved 1,300 km KKH setting off from Kashi to Hasan Abdal (NW of Islamabad) - was built from 1959 to 1978. A time-honoured achievement, notwithstanding, this lofty spectacle, often referred to as the "eighth wonder of the world” (Naim, 2010:342), remained short of accessing the Arabian Sea from China’s landlocked western region (Starr, 2005)[8]. It has to be upgraded and expanded to full length; namely, to pave KKH to the sea so as to catch businesses through Gwadar as a regional hub in international trade and shipping. As of 30 June 2006, work is on to widen the KKH. This six-lane highway will increase its operating capacity for heavy vehicular traffic some threefold.
Railway: The Kashi-Havelian rail link will be constructed by the Chinese Dong Feng Electric Company and will traverse a distance of 700 kms, from the Khunjerab Pass to link with the Pakistan rail network at Havelian, near Rawalpindi. Kashi is being made into a special economic zone (SEZ), and the Chinese plan to establish a consulate in Gilgit. Pakistan is keen on laying both this and the Quetta-Kandahar (Afghanistan) railway tracks (Fig.2). Gwadar will be connected to Pakistan Railway network at an expected cost of $1.25 billion (Anwar, 2012: 98). For the trading partners at the two ends of the TEC, by extending the Kashi offshoot of ECB (Eurasian Continental Landbridge, Lianyungang-Rotterdam) to Peshawar in Pakistan's northwest, China and Pakistan can benefit enormously from it along the shortest route, i.e. from Karachi to Peshawar. The rail network could also be used to supply oil from the Persian Gulf to Xinjiang. Actual cost of this second leg is yet to be determined, but 2005 estimates showed it over $10 billion (Rana, 2013). Gilgit Pipeline: To activate energy trade in full China now focuses also on the 1,750- km pipeline that will trace the KKH railroad alignment. Technically, it is a pipe built on 1 metre in diameter with a flow rate of 8 m/second and one pumping station every 120 km. This would give it a capacity of 543,000 bbl/d (around 27 million tonnes/y) or an ability to carry virtually 10.7% of China’s oil imports (at 2011 figures). This pipeline from Gwadar to Xinjiang, trailing “Awaran - Pir Muhammad – Khuzdar - Bunjil - Gilgit - Sust” to Khunjerab Pass, would cost around $12 billion (Bakshi, 2012)[9].
* current Pakistan railway system not shown.
Fig.2 TEC-Leg 2 (Planned Railway Stock) IV. Mapping the Future The significance of Gwadar as an alternative exit of traffic to and from greater Central Asia warrants undoubtedly closer examination (see e.g. Kazi, 2007:90, 95). According to ADB’s Ports Master Plan studies this new transport hub excels both Karachi and PQA in terms of proximity to the main international shipping routes and superior habour conditions, including draft and turn around time of large bulk carriers [10]. Together with the interconnected domestic traffic network it evokes the whole system has been designed to overcome the harsh and complex terrain blocking century-old north-south flow of goods and services, on and off the Pamir peripherals. ADB errs nevertheless in maintaining from the viewpoint of Central Asian Regional Economic Cooperation Program (since 1997) that "Gwadar is for Central Asia, not for Pakistan” (2013). Evidently, it is both for Pakistan and China, as the minimum To expedite the sequence of development projects envisaged the Ministerial Committee Meeting of the Pakistan government dismissed, on 1 October, 2008, Karachi and PQA as the candidates for establishing shipyards and transshipment trade. Instead, Gwadar was chosen for it is “a place of great strategic value, enhancing Pakistan's importance in the whole region, extending from the Persian Gulf through the Indian Ocean to Southeast Asia and the Far East” (Anwar, 2012: 98,99) As shown above, the triple-corridor linking Kashi with Gwadar is not the sole viable path that can bridge oil-rich Middle East and Africa with China via Pakistan. There are two other options in the making which, whether to build or not, would transform directly or indirectly the Indian Subcontinent and Middle East (ISME) energy landscape: the TAP/TAPI and IPI/IPC (Fig.3). Within the space mapped by the crescent-shaped ISME the role of China may be spared for TAP but not for IPI. TAP/TAPI (Turkmenistan-Afghanistan-Pakistan-India Gas Pipeline): Already in 1984 and early 1990s, Moscow nurtured the prospect in building a south-bound pipeline exporting Turkmenistan gas through Afghanistan to energy-deficient consumers banking the Indian Ocean （ Ibrahimi & Nasarat, 1999. However tentative in nature, this plan failed to take off because of the Soviet invasion of Afghanistan (1979~88). Similar proposal revived again first under a CentGas consortium headed by Unocal – a California oil major acquired by Chevron in
2005 – and with strong political backing from the Bush administration in the 1990s, and secondly by TAPI governments coordinated by the ADB after Taliban regime was swept aside in the new century (Ouyang, 2011: Chap.3-III). It is also
Source: The Proposed Iran-Pakistan-India Gas Pipeline: An unacceptable Risk to Regional Security, The Heritage Foundation (2008), May. 30.
Fig.3 TAPI and IPI named as Trans-Afghanistan Pipeline because main section of this so-called Druzhba Pipeline runs from the Caspian basin, through Afghanistan to Pakistan and the Indian Ocean. The quadruple partnership stemmed originally from the 15 March 1995 inaugural memorandum of understanding signed between the governments
of
Turkmenistan
and
Pakistan.
An
“inter-governmental
agreement” was inked as the latest between Pakistan, Turkmenistan, Afghanistan and India over the $7 billion gas pipeline project on 11 December 2010. But no further progress is in sight. [11] If TEC is built, transit revenues of $300 million yearly are estimated to benefit the Afghan economy in addition to the vast employment opportunities and support to local industries that would accrue (Huseyinov and Karasar, 2005). China opted out from the very beginning for two reason: first, the“Turkmenistan-China gas pipeline”began pumping gas to XUAR already since December 2009, and second, as a competitor in the world energy market Beijing does not want to antagonises New Delhi. As such whether TAP/TAPI succeeds or not China would not be marginalised in terms of the energy intake from Amu Darya.
IPI/IPC (Iran-Pakistan-India/Iran-Pakistan-China Gas Pipeline): Known also as Peace pipeline, the 2,753-km long tube built on a diameter of 1.422m and 40 bcm in annual delivery, represents the international extension of ITGS-7 (Iranian Gas Trunk Lines). IPI was planned to set off from the South Pars offshore gas field in the Gulf through Pakistan to India. Original idea of this project was drawn from an article published by a young Pakistani civil engineer in Risalpur—a Military College of Engineering, in the 1950’s. Two different routes have been proposed: Route-1 starts from Asalouyeh - Iranshahr- (Iran–Pakistan border) - Khuzdar, therefrom a branch would spur off to Karachi, while the main pipeline towards Multan with the possibility to extend to Delhi; Route-2 moves from Iran to the maritime boundary between India and Pakistan off Kutch (a district of Gujarat state in western India). The governments of Iran and Pakistan started negotiations in 1994 and signed a preliminary cooperation agreement the next year. Iran and India repeated the protocol in 1999. It has been estimated that Pakistan would gain a total of $14 billion in 30 years from building the IPI-Pipeline (Pandian, S. G. (2005: 314). However, India withdrew from the project over pricing and security issues, and after striking a civilian nuclear deal with the United States in 2008. Teheran switched instead to Beijing for partnership the latter agreed to seriously study this invitation. On 11 March 2013, Presidents of Pakistan and Iran jointly witnessed the groundbreaking ceremony of the final construction phase of the Pakistani section of the pipeline. Three months later the newly elected prime minister of Pakistan Nawaz Sharif stated that his government is committed to the fulfillment of the project and targets the first flow of gas from the pipeline in December 2014. So despite the U.S. pressures to head off the project .and warning to New Delhi, IPI may be kicked off anytime;. It became increasingly clear that, allowing for the withdrawal of India and growing involvement of China in TEC, IPI may reemerge in the from of IPC in the mid-term[12]. In February 2013 Iran announced plan to set up a $4 billion oil refinery in Gwadar with an estimated capacity of about 400,000 bbl/d. According to this plan, Tehran will lay an oil pipeline from its territory to Gwadar to transport
crude oil for processing (Kiani, 2013). Former president Pervez Musharraf, likewise, coined the idea of constructing a strategic pipeline from Gwadar to China’s border for supply of oil from Saudi Arabia (Bhutta, 2013). China has also announced to invest $12 billion in multiple projects in Gwadar and other parts of Pakistan including a refinery with the processing capacity of 60,000 bbl/d (Bhutta, 2013). Also set motion is the Iran-Pakistan gas pipeline project on March 11 on their border. Following the official visit of Li Keqiang, PRC’s newly elected premier to Rawalpindi (where the old KKH ends), Pakistan, on 22 May 2013, the megaproject-TEC received a further boost. More importantly, China signed a pact with Pakistan in Islamabad which will connect Gwadar Port with western China via rail, road and air routes[13]. At the reception President Asif Ali Zardari underscored the need for improved connectivity between the two countries and the region at large. The Gwadar project, he said, was central to the programme for improving connectivity as it held great promise for the creation of a regional economic and trade corridor
[14]
.
V. An Eclectic Digression Post-911 world economy has entered a new phase of geopolitical tensions and turbulences across the globe. The so-called “arc of instability” stretching all the way from ISME to North Africa comprise paradoxically also countries within the “arc of opportunities”. Against the dichotomy of risks and reward, TEC surfaced as a co-development agenda over a wide range of strategic investment opportunities Islamabad proposed to China. It occurred at a time when the world’s highest “Tsinghai-Tibet railway” began performance debut. This amazing achievement undoubtedly was instrumental in Beijing’s decision to confront the natural topographical barriers bordering the Karakorum and construct the Kashi--Havelian rail link.
In modern day’s calculus, the Malacca
passage from Iran or Africa takes 16-25 days for the tankers to complete (ADB, 2005: 30). Once the revamped KKH, rail and energy pipeline corridor come through, this could be done in just 48 hours from the port of Gwadar, although destinations of shipment differ from each other in the two cases. The Gilgit pipeline, sidesteping balkanised Afghanistan, fits closely into the grand strategy to open China’s western-most provinces to the sea and to bypass Malacca. This is
dictated by the compulsion of China’s energy security strategy to avert a naval blockade that could stop the flows of life blood – liquid fuels - to China, save voyage time and distance, Secondly, As expected, continuous injection of Chinese capital would benefit the resource-rich but impoverished regions, especially the long-neglected Baluchistan and pockets of Pashtun inhabitants. Pakistan will also receive a transit fee for energy and goods passing through its territories[15]. During the new century, Chinese development aid to Pakistan are no longer confined to infrastructures, defense, regional security against narcotics, Uygur separatism and terrorism, but extended also to trade and investment in minerals, energy, power, communication, and other regional development programmes. The pivot exercised by TEC heralds the growing all-weather Sino-Pak ties in a new dimension where two converging trends meet. For China it is accounted for by the exodus and transplantation of the motor of the “great western development” model in alien soil; further, if the Pakistan corridor is developed it will reduce the traffic overload now shouldered by ports in China’s coastal region, integrate the western regions into the world market, and balance regional socioeconomic wealth gap. For Pakistan this endeavour is due to revive the less developed southwest region and the national economy. Thirdly, viewing transport logistics, to import oil from the Gulf region and Africa by land route to China there are two transshipping gateways: Gwadar (Baluchistan, Pakistan) and Made Island (Rakhine State of Myanmar). Separated by continental India in between the two windows on the south are complementary to each other in conducting forward delivery business in oil [16]. However, the Nay Pyi Daw government has been undergoing internal political reform since 2011 and thus might be yielding to the pressures of the U.S.-led anti-Beijing alliance to disrupt the Myanmar-China oil trade. Absent of interference as such, total capacity throughput at the 2011 statistics of the two diversions together, could reduce the share of China’s annual maritime oil import from 80% to some 62%. Other than that the three pipelines – TAPI, IPI, and TEC – dealt with in this paper Pakistan is the only transit partner that cannot be left out. The unique geostrategic location it exhibits in all partnerships, combined with Tehran’s
strong desire to break out of isolation through energy trade and Beijing’s perceived vulnerability to the sea route in importing oil, would make TEC a more promising undertaking relative to TAPI or IPI. Assume India stays out of IPI and that China is interested in having a pipe from Iran [17][18], it follows that IP can be merged with TEC which necessarily creates IPC, a variant of IPI (see Fig.3). Separately, Iranian crude oil would still take the land route off and on from the Gwadar port. Lastly, on international relations, the pipeline infrastructures are known to be more costly in construction, especially for the Gilgit-Baltistan section – some $30 million/km - but less risky in operation, compared to seaborne transportation. Beijing as a patron is indispensable in building TEC. Islamabad, on the other hand, is desperate to lease both its territory and port facilities, including Gwadar as a naval base, to China. For Beijing, strengthening of Sino-Pak ties is a card for diplomatic manoeuvre on the crossroad through Afghanistan after 911, in contradistinction to the deteriorating Islamabad-Washington relation. In fact, continuous and brutal intrusion of NATO forces into the sovereign Islamic republic, culminating in the U.S. raid that killed bin Laden in Abbottabad in 2011 is merely symbolic. To benefit from the expected magnifying impact of TEC interests of Pakistan will continue to be the crucial determinant the U.S., China and Russia weigh discreetly against those of India in the design and implementation of geopolitical game, with Iran, Syria and other proxies acting as rebalancing parameters. TEC may be comprehended therefore not merely as a symbol of all-weather partnership between Beijing and Islamabad, but rather a lumpy and multifaceted interest-sharing auctioneer for tracing and shaping future path of regional cooperation within the ISME.
Endnotes [1].
Distance between Middle East and China in maritime shipping varies, depending on the location of
terminals the journey begins and ends. For example, the distance “Shanghai-Kharg Island”(largest export terminal of Iran) totals 9,540 nautical miles (=17,668km). [2]
Flows through the Hormuz Strait in 2011 were roughly 35% of all seaborne traded oil, or almost
20% of oil traded worldwide. More than 85% of these crude oil exports went to Asian markets. At its narrowest point, the Strait is 21 miles wide, but the width of the shipping lane in either direction is only two miles, separated by a two-mile buffer zone. On the other hand, the Strait of Malacca, at its narrowest point, is only 1.7 miles wide creating a natural bottleneck, as well as potential for collisions, grounding, or oil spills. Over 60,000 vessels transit the Strait of Malacca per year. If the strait were blocked, nearly half of the world's fleet would be required to reroute. See “World Oil Transit Chokepoints”, EIA, Updated: 22,08,2012, http://www.eia.gov/countries/regions-topics.cfm?fips=wotc&trk=p3 [3]
In all, five overland international oil and gas pipelines have been built linking China with upstream
suppliers in three directions: north west, north east and south east. The 960-km border crossing pipeline (at Khorgos) began to carry Kazakhstani oil to China first on 15 December 2005, marking the beginning of the use of unconventional transport route. The 1,833-km“Turkmenistan- UzbekistanKazakhstan–China” gas pipeline was inaugurated on 14 December 2009. On 1 January 2011, Transneft and Russian oil giant Rosneft started supplying crude oil to China on the“SkovorodinoDaqing” spur of the “East Siberia Pacific Ocean" (ESPO) pipeline. Most recently, a 870-km gas pipeline connecting western Burma to Yunnan Province in southwest China is expected to be operational [4]
in July 2013. A parallel 770-km oil pipeline is due for delivery in September 2013.
Pakistan lacks strategic depth and ports with maritime security especially for Karachi, the
largest metropolitan as well as naval headquarter of the country . It lies close to the Indian order and hence vulnerable to successive blockades by the Indian Navy. By contrast, the strategic location of Gwadar port, 460 km west of Karachi, in the Arabian Sea could facilitate electronic surveillance. For a differentiation, it may be discerned that Karachi is a commercial port, Port Qasim is an industrial port, Gwadar would logically be a logistics port. [5] [6]
For a scholarly research on China’s development aid to Pakistan, see Vertzberger (1983). Dating from 19993, border trade between Pakistan-occupied Northern Areas of Kashmir (Gilgit and
Baltistan) and China's Xinjiang province through the KKH has been carried out on the basis of an exchange of letters on an annual basis, given specific items and ceilings for trade. Prior to Zhu’s visit actual trade volume never exceeded 1 mill$, lower than the 3 mill$ ceiling. See Ramon (2001). Since 2006, work is on to widen and upgrade the KKH. This will increase its operating capacity for heavy vehicle traffic some threefold. The six-lane highway is being complemented by a railroad built in parallel. [7]
Three reasons are held to have led to cancellation of the PSA contract: land right issue (supreme
court order against the allotment of Gwadar land to a foreign company), lack of Pakistani investor lobby, and inability of the port to attracting significant traffic. See Sakhuja Vijay (2012). According to PSA's Gwadar website, no ship has called on the port since November 2012. Recently, Pakistan Navy has agreed to vacate hundreds of acres of land at Gwadar Port to be used for the development of backup area, an old stumbling block in complete operationality of the country’s seaport. [8]
For decades, Beijing’s decision makers were pregnant with the idea in building a transport outlet
from China’s western region to the Arabian Sea. There were four components in the blueprint: the
Karakorum Highway since 1960; the project to connect Almaty, Bishkek, Kashgar, and the Karakorum Highway from the early 1990s ; the recently opened road across the Kulma Pass linking southwest Xinjiang with the old Soviet trans-Pamir military highway; and lastly the construction of the port facilities at Gwadar on the Pakistan-Afghan border and the related project to build a highway from Gwadar to Kandahar and Islamabad. [9]
An alternative scenario of this pipe: “length, 1,750km, diameter, 0.76 m, volume per annum,
12 million tonnes, estimated building cost, $4 to 5 billion”. See Ouyang (2012, Table 3.10). [10]
ADB studies considered Gwadar to have the most advantageous location for such an
alternative port in the region since, by design, it could handle mother ships and large oil tankers with comparative ease than other ports in the Gulf states. See GLO (2013). [11]
On 16 May 2012, the Afghan Parliament, approved the agreement on a gas pipeline and the
day after, the Indian Cabinet allowed state-run gas-firm GAIL to sign the Gas Sale and Purchase Agreement (GSPA) with TürkmenGaz, Turkmenistan’s national oil company. [12]
For a timeline of the schedule of the IPI pipeline, see “Project Focus: Iran-Pakistan-India Gas
Pipeline”, downloaded 2 Aug. 2013 from http://www.gulfoilandgas.com/webpro1/projects/3dreport.asp?id=100730 . [13]
http://www.ndtv.com/article/world/pakistan-s-gwadar-port-to-be-connected-to-china-via-
road-rail-and-air-370211, downloaded 3 Aug. 2013. [14]
See “Global changes not to dampen Sino-Pak ties”, downloaded 2 Aug, 2013 from
http://www.newsbharati.com/Encyc/2013/5/23/Global-changes-not-to-dampen-Sino-Pakties.aspx. [15]
It has been estimated that Pakistan would gain a total of $14 billion in 30 years from building
the IPI pipeline. See Teymur and Hasanali (2005) [16]
The Myanmar section of the gas pipeline was completed on June 12, 2013 but gas wil l not
flow to China until October. The oil pipeline is expected to be finished in September . See "Burma Gas Pipeline Complete but Cites China Delays" . the Irrawaddy. 12 June 2013. [17]
“See “PN agrees to vacate land at Gwadar Port”, 6 July, 2013, downloaded on 5 Aug. 2013,
http://www.pakistantoday.com.pk/2013/07/06/news/profit/pn-agrees-to-vacate-land-at-gwadar-p ort/ [18]
China is ready to join Pakistan and Iran in building a natural gas pipeline, provided that India
does not move ahead with its own plans to do so, Pakistan's Daily Times reported Feb. 11, 2013, citing unnamed sources. The reasons are easy to read: China, however, has the cash, capabilities and political will to make a “replacement” Iran-Pakistan pipeline happen. See Stratfor (2013) . *The Central Asian states are hindered by dependency-oriented, unidirectional Soviet transportation infrastructures and the lack even of international awareness of the possibility of renewing traditional communication routes through southwest Asian ports in Pakistan and Iran. As Norling and Swanström (2007) argue “[i]f the full potential of continental trade could be
harnessed, primarily across the South and Central Asia divide, Afghanistan would find itself in the middle of a continental market stretching east-west from Lianyungang to Rotterdam and north-south from Moscow to New Delhi” (356,357).
*
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