China takes Operational Control of Gwadar Port

On 18 February 2013, Pakistan and China signed an agreement to hand over control of the strategic Gwadar port to a Chinese company, 'China Overseas Port Holding Company' (COPHC) from the Port of Singapore Authority (PSA). Under the agreement for transfer of concession rights, the deep sea port will remain the property of Pakistan but will be operated by this Chinese state owned company which will share profits from its operation with the Pakistani State. As per one of the  Pakistani publications, 'the state of Pakistan used to rent its “strategic assets” to Americans and other foreign powers and now, a new chapter begins with China having control of a strategic port - Gwadar. The State of Pakistan seems to be perpetually condemned to being a tenant in its own house'.

Background and the Chinese Involvement

The development of the major deep water seaport at Gwadar was approved in 1994 and the project was finally launched in March 2002. Phase I of the Gwadar port was completed with Chinese help in 2005/06 at a cost of USD 248 million, 50 million of which was contributed by Pakistan and the rest by the Chinese government.  This phase included the construction of three multipurpose berths with capacity for handling bulk carriers of 30,000 dead weight tonnage (DWT) and container vessels of 25,000 DWT. Thereafter, on 1 February 2007, the Government of Pakistan signed a 40-year agreement with PSA International for the development of phase two and operation of this tax-free port and duty-free trade zone. As part of the agreement, the government of Pakistan had committed to ensure the connectivity of the port through the construction of highways linking it not only to the rest of the country but onwards to Afghanistan, China, Iran and the Central Asian Republics, but it failed to do so. The government also failed to provide 2,250 acres of land to the PSA for the development of an industrial zone as per its commitment. Thus, although nominally open for business for nearly three years, the port had attracted little trade. In December 2010, the Supreme Court of Pakistan issued a stay order against the allotment of land belonging to the Gwadar Port Trust Authority. The court had directed that the land measuring 600 square km must not be transferred to the PSA until the final verdict of the case is delivered. Also, it allowed the Baluchistan government to become a party to the case in an attempt to assuage the aspirations of local provincial government.

PSA was to spend USD 525 million in the project in five years, but since the government was barred from transferring immovable property to it, which in essence denied the PSA’s demand for allotment of land worth Rs 15 billion for development, it made no further investments. Finally, PSA abandoned the project on the plea that Pakistan failed to meet obligations under the 40-year port-handling agreement signed in Feb 2007. Almost at the same time, in Dec 2010, China had offered the provincial government of Baluchistan, to construct 20 more berths and make the port fully operational if the port was handed over to it.  Apparent Chinese Energy Security Interests are:

• Gwadar has strategic importance for China as around 60 per cent of its crude oil comes from Gulf countries that are close to Gwadar.
• China has learnt at least one lesson from the current US-Iran strained relations and the Syria crisis that without significant naval presence in the Indian Ocean or the Arabian Sea, it will not be able to exercise influence in the oil-rich Middle East. Thus the operational control over Gwadar port affords to China a land-based oil supply port that is not controlled by the superior US naval power.
• It could become a vital cog in the planned Pakistan-China energy corridor as it would bring back to life China’s old idea of constructing an oil refinery in Gwadar and link it to Kashgar in Western China by pipeline which may help it avoid the Strait of Malacca and the dangerous maritime routes through the South China Sea, the East China Sea and the Yellow Sea.
• China’s eastern seaboard ports are 3,500 km away from Kashgar. In comparison, the distance from Kashgar to Gwadar is only 1,500 km. Thus, subject to suitable completion of land route, Gwadar would give western China the much-needed access to the sea, enabling China to transport crude oil imports from Iran, the Gulf and Africa to north-west China over land.

The current ethnic unrest and uncontrolled sectarian violence in Baluchistan could prove its Achilles heels.

 Apparent Chinese Maritime Interests

Though it is being openly stated by the Chinese that Gwadar port will only be a logistics support base for anti-piracy missions, it does serve its overt maritime purposes as under: -

• Strategically, this Pak-China naval nexus could counter balance the domination of Arabian Sea at Persian Gulf by U.S 5th Naval Fleet as also could potentially deny maneuver space to Indian Navy in the Indian Ocean.
• Though China is not an Indian Ocean power, Gwadar will enable maneuvering capability for Chines Navy in the Indian Ocean and a naval presence in its sea lanes.

The Situation in Baluchistan

As of now, the supporting infrastructure of rail road link, industrial capacity, and civic structures at Gwadar is almost non-existent. The ethnic Baloch population is also not supportive of the port with Baloch nationalist parties maintaining that the proposed programmes in Gwadar reflect Islamabad’s intent to upset the demography of the province. The security situation in Baluchistan is also a matter of serious concern. In May 2004, three Chinese engineers were killed and nine others wounded in a terrorist attack in Gwadar. In 2009, China shelved its USD 12 billion oil-refinery and oil-city project here due to security concerns. The security situation has now worsened with the repeated mass killings in sectarian and ethnic violence in the province. The Chinese decision to take operational control of the port thus raises questions about the reasons for their changed intent in the region. Allowing the Chinese to run Gwadar Port gives to the Pakistani establishment a convenient excuse to further militarise the province, ostensibly to protect Chinese personnel and economic interests. This in turn suits Chinese interests as they can leverage this opportunity to maintain a credible force in the area for bulwarking at the mouth of Persian Gulf. Substantial Chinese interest in Reko Diq and Saindak copper and gold projects in the Chagi district of Baluchistan province may also have prompted China to openly take operational control of this strategically located port.

Assessment

As reported by India Today, Islamabad has been seeking a Chinese takeover of Gwadar for some time for two reasons. First, the port is failing to deliver the economic payoff that was expected. Second, it wants to get Beijing to commit itself deeper in the security of Pakistan. Though the security compulsion on part of Pakistan to draw in China openly into this region is well understood, why China has taken on this commitment in the volatile region needs to be pondered. Is it part of the wider Chinese design to encircle India and gain strategic advantage in the region? With the stated Chinese presence in Myanmar, Bangladesh, Sri Lanka, Maldives and now Pakistan, India’s apprehensions that these ports could be used for military purposes are very real. The following also needs consideration:-

• After the drawdown of US forces in 2014, a Chinese naval base in Gwadar could help Beijing to potentially source direct military supplies to Afghanistan, where China is increasing its stakes. But that will call for simultaneous robust development of road and rail link to Afghanistan, which is yet a distant dream, further divorced due to local security concerns.
• It provides future potential to China to base a nuclear submarine or aircraft carrier group operating off Gwadar, which would enable it to monitor US naval patrols and thus expand its regional influence.
• It is a known fact that Chinese establishment is directly involved and physically present in more than 140 infrastructure development projects, running across from Khyber Pass in Pakistan occupied regions of Gilgit–Baltistan to the port at Gwadar. In any likely future direct maritime conflict between India and Pakistan, the ‘overtly placed’ Chinese assets at Gwadar could restrict Indian Naval movement in the area, thus providing indirect security to Karachi harbour.

As a counter point to Chinese presence in Gwadar, India needs to invest in its relationship with Iran and seek to gain presence in the port of Chabahar, in southern Iran. This port outside of the Persian Gulf makes sense from the strategic and logistic viewpoint. India is to construct a 900 km railway line that will connect Chabahar port with the mineral-rich Hajigak region of Afghanistan. It has potential to be connected through rail and road networks to the International North-South Transport Corridor (INSTC), a multinational project involving India, Iran and Russia. It can serve as trans-shipment hub for Zahedan (in Afghanistan), through a 600 km connecting road and also as a transit point for the land-locked Central Asian Republics (CARs). The latter fits well into India’s ‘Connect Central Asia’ policy announced last year in Bishkek, Kyrgyzstan. When completed, this line will throw up both geo-political and economic opportunities for India. In 2012, Iran, India and Afghanistan signed a tripartite agreement to develop the Chabahar port. India further plans to invest up to USD 100 million depending on the expansion of the port including building modern infrastructure and undertaking port operations. India thus will have to keep the region under close watch to see to it that its security and economic concerns are not adversely affected.

 The author is a Senior Fellow at CLAWS.

Views expressed are personal