The economic corridor taking off from Kashgar in Xinjiang to Gwadar is a game changer as far as this region is concerned,” South China Morning Post quoted Pak prime minister Nawaz Sharif ahead of a 6-day visit to China Wednesday.
Beijing and Islamabad plan a series of SEZs, a rail link, and a pipeline running from the Arabian Sea port of Gwadar to the old Silk Road town of Kashgar in Xinjiang’s western border.
Our bid is limited to rebuilding the Chabahar Port in Iran, merely 100 km west of Gwadar. Even these baby steps are much to the discomfiture of the US lobby within our system. last month, Union shipping secretary PK Sinha was in Chabahar, fast-tracking this long-pending $100-million investment.
The Iranian port can serve as our direct entry point to Afghanistan and Central Asia, circumventing Pakistan. Not surprisingly, Beijing recently offered Tehran a matching line of credit of 60 million euros! If there’s sloth on our part, Sharif’s port of good hope is steeped in poor economics.
Typical of Pakistan, all eggs have been stacked with a Chinese entity, the State-owned Overseas Port Holding Company. That’s after PSA International of Singapore, owned by Temasek, the island nation’s sovereign fund, walked out despite the tax breaks. Gwadar’s flawed commercials and Pakistan’s troubled business environment and endemic corruption broke their back.
Surely, Beijing’s plans are more strategic than tiny Singapore’s. A Chinese naval base in Gwadar, just 330 km from the Straits of Hormuz, the chokepoint of 20 per cent of the world’s oil, worries India’s strategic community. Yin Zhon, a Chinese rear admiral, stoked this. “It would be appropriate if we could have a relatively stable, fixed base for supplies and maintenance,” Yin said.
Naval Chief Admiral DK Joshi has steered clear so far. But what Joshi said in December, on the South China Sea, “country’s interests [are] at stake, we will be required to go there and we are prepared for that” might apply to Gwadar.
Joshi’s grand predecessor, Admiral Sureesh Mehta, has been direct. Gwadar would allow China “to take control over the world energy jugular and interdiction of Indian tankers,” Mehta has warned.
“The location provides China a means of keeping an eye on ships moving through Hormuz. In a future conflict this could aid the Pak navy,” concurs Manoj Joshi, distinguished fellow at the Observer Research Foundation.
The counter to Mehta and Joshi is that China’s ‘String of Pearls’ among ports from Port Sudan to Myanmar suffers from financial limitations. Business wise, Gwadar is a dud. China might be able to afford it as ‘place’ but not as a ‘base.’
Beijing’s keenness to invest in sea lanes coming from the Middle East, and her hunger for energy in the western regions notwithstanding, Gwadar means more to Pakistani navy’s pursuit of depth rather than a Chinese need for favourable terms in a number of overseas ports for maintenance, repair and refueling.
Sheer costs and the perils of evoking the world’s suspicions might stop Beijing from splurging $1 billion needed for Phase II of Gwadar. (It has spent $198 million on the construction so far). Given Baluchistan’s insurgency, including attacks on Chinese employees, relative economics of the Karachi port is distinctly superior. Also, to Gwadar’s west, 1,000 km nearer the ‘action,’ China has already cozied up to Oman: developed infrastructure is for the taking at Salah Port.
Sharif and his predecessors market Gwadar as a hub for exporting lNG from Turkmenistan. This is a piped dream. The Pakistani State isn’t credible enough to deliver on long-term commercial contracts that deep investments in liquefaction entail. Even assuming that Sharif or a future regime in Islamabad won’t use the pipes to blackmail the world, infrastructure running all the way from Turkmenistan via Afghanistan’s eastern regions, and Pakistan’s own north-south, is a sitting duck for terrorists. An ocean of Australian lNG, not to mention East Africa, are an added risk to green-field processing in Pakistan.
“Gwadar holds no obvious and immediate economic benefits for Pakistan or China. China has stepped in to help Pak develop an alternative to Karachi, but more because Gwadar will always have more military significance than economic, unless Afghanistan stabilises and Gwadar can become a gateway to Central Asia. That does not seem likely in the near future,” says geo-strategist Sanjaya Baru.
That said, if fears on Gwadar can push us out of slumber, so be it. From available indications, stakes in Chabahar will be routed through Kandla and Jawaharlal Nehru ports, which operate as trusts. Kandla and JNP need their moment of truth without the accompanying domestic constraints. Emulating ONGC Videsh on energy security, a ministerial body needs to resurrect the ‘Indian Ports Global,’ a vehicle we should have had long back, placing overseas bets via state-owned ports on the lines of PSA, DP World Dubai and Antwerp. If that happens, more than Manmohan Singh, we’ll have Nawaz Sharief and Xi Jingping to thank.
(The columnist is CEO & Co-Founder, India Strategy Group, Hammurabi & Solomon Consulting. Tweets @therohitbansal).