China

The real value of the China–Pakistan Corridor

BY

China’s ambitious plan to develop a corridor to the Indian Ocean through Pakistan may be about much more than providing energy security, argues Stephen Szuster

China’s profound dependence on the free flow of resources, goods and people through the Indian Ocean Region is no more evident than in terms of energy security.

As the world’s largest energy consumer and importer of oil, with nearly 90 per cent of supplies reaching it via the Strait of Malacca, primarily from Saudi Arabia, Angola and Iran, Beijing has sought to diversify its sources and transit corridors.

The China Pakistan Economic Corridor (CPEC), integrated into China’s One Belt, One Road initiative, is a $46 billion proposal to connect Pakistan’s southern coast, at Gwadar and Karachi, with Kashgar in far-western China through a series of transport and energy projects.

The final and most consequential aspect of CPEC is the upgrade of Gwadar Port, which Claude Rakisits claims would give Beijing a firm and reliable long-term beachhead in the Indian Ocean and close to the Persian Gulf, effectively making it a two-ocean power’.

On closer inspection, however, such a profound impact is doubtful as the commercial and strategic value of an alternative trade route through Gwadar appears marginal. Rather, its true utility may rest in its ability to serve as a platform to secure China’s Indian Ocean Region assets and personnel.

Justification

The primary justification for CPEC is its ability to mitigate current risks to China’s energy security through the provision of an alternative overland supply route to the Malacca Strait. China’s oil imports will nearly double between 2014 and 2040, from 6.2 to 11.9 mb/d, with domestic production remaining stagnant.

Saudi Arabia, Russia and Angola are presently China’s three largest oil suppliers, followed by Iraq, Iran and Oman. With oil prices remaining low, China has sought to diversify its sources, with Russia gaining substantially. Yet the majority of China’s supply is still derived from the Middle East and Africa, with additional supplies from Latin America. China’s oil investments in Latin America and Sub-Saharan Africa indicate that the majority of future supply will come from sources in, or transit through, the Indian Ocean Region.

However, the utility of CPEC to assure these vital energy supplies reach the Chinese mainland is questionable. Although the touted benefits of CPEC include shortening the transit route for oil imports to China by nearly 10,000km, resulting in substantial transport cost and time savings, the validity of this economic rationale is not apparent.

First, despite intentions to develop China’s west, the vast majority of China’s population and refineries are concentrated in its coastal, urban provinces, to which the cost of transporting oil via the overland pipeline route, according to Andrew Small, would be at least four times that of the sea route via the Malacca Strait.

Despite this commercial unviability, it is argued the Gwadar–Kashgar route will prove its worth in the event of an intra- or interstate conflict that severs trade through the Malacca Strait. But even in these specific circumstances its utility is undermined as Gwadar and the pipelines themselves are not immune from interdiction, while shipments on their way to Gwadar would also be vulnerable, necessitating China secure the entire sea lines of communication between Gwadar and the Persian Gulf, the Red Sea and the coasts of Africa.

Logistics hub

The second basis for CPEC, and Gwadar Port especially, is that it may serve as a logistics hub from which to safeguard Chinese investments in the Indian Ocean Region. In 2014 China’s total overseas foreign direct investment stock amounted to $730 billion, with more than half of this invested in the Indian Ocean Region. These investments are liable to increase pursuant to China’s $40 billion Silk Road Fund, $50 billion Asian Infrastructure Investment Bank and $50 billion BRICS New Development Bank in support of its One Belt, One Road initiatives. Such investments, in ports, pipelines, railways, roads, fibre optics and other infrastructure are likely to grow substantially, especially in Sub-Saharan Africa where China is a likely partner to help remedy a burgeoning infrastructure gap.

China’s increased presence in the Indian Ocean, and the evident function of Gwadar Port as a logistical base from which both China and Pakistan can sustain naval operations in the Indian Ocean will heighten Indian anxiety over strategic encirclement

Such investments, however, involve significant existential risks. This investment in overseas assets and operations could drive a commensurate increase in the threat to those interests, especially in politically unstable countries. It is not just China’s capital at risk either, but also its citizens, evermore of whom live, work and travel throughout the Indian Ocean Region. The number of Chinese expatriates working overseas has increased from 3.5 to 5.5 million between 2005 and 2011, and includes up to a million Chinese workers across Africa.

CPEC’s utility to assure these interests is substantially more evident than its use as an alternative trade route. This is because the corridor’s proximity to the Middle East, North Africa, East Africa, the Strait of Hormuz and Bab-el-Mandeb enables the Chinese Navy to undertake an array of operations, whether to effect a non-combatant evacuation, protect Chinese assets or to aid partner nations.

However, China’s increased presence in the Indian Ocean, and the evident function of Gwadar Port as a logistical base from which both China and Pakistan can sustain naval operations in the Indian Ocean will heighten Indian anxiety over strategic encirclement. With its own strategic interests competing with China’s, India will face an equivalent challenge in assuring its own oil imports, which will double from 3 to 6 mb/d between 2014 and 2040.

Vulnerabilities

As the Indian Ocean is a closed sea which can be dominated through control of the east–west chokepoints—the Malacca Strait, Hormuz Strait and Bab-el-Mandeb—India possesses tremendous operational and strategic advantages over China and thus has little imperative to overtly pursue a deterrence strategy. India already has the capabilities to exploit the vulnerabilities of Gwadar, the lines of communication that connect it to the Middle East, Africa and Latin America, as well as interdict CPEC pipelines themselves. CPEC will therefore redouble New Delhi’s commitment to assure its pre-eminence in the Indian Ocean Region but will not hasten the process of accomplishing this.

In light of this, the grand strategic importance of CPEC should not be overstated and its true utility as a platform to project a limited degree of naval power acknowledged. With this understanding, concerned stakeholders can develop measured, commensurate responses to the national and broader strategic goals of these initiatives.

Featured image
Gwadar Port: China plans to upgrade the port as part of its China Pakistan Economic Corridor project. Photo: Wikimedia Commons

About Stephen Szuster

Stephen Szuster is a graduate of Flinders University and staff cadet at the Royal Military College Duntroon.

Published:
20th April, 2017

Summit a Comment

Your email address will not be published. Required fields are marked *