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China, Pakistan team up on energy

A new China-financed port on Pakistan's coast ups the ante in the new 'Great Game' for energy resources in the Middle East and Central Asia.

By David MonteroCorrespondent / April 13, 2007



ISLAMABAD, Pakistan

If China is to become the economic powerhouse it envisions, the road to its new future could run, literally, through Pakistan.

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Or so the two nations hope. Last month, they inaugurated Gwadar Port in Pakistan's Balochistan Province, the first step in an elaborate "energy corridor" that will one day ship Persian Gulf oil from Gwadar overland through Pakistan to China. China bankrolled the $200 million port and plans to put billions more into railways, roads, and pipelines linking Gwadar to China. Pakistan hopes it will generate $60 billion a year in transit fees in 20 years' time.

The deal could point to new fortunes on the horizon. But many observers wonder what price the two nations will pay for such inextricable energy ties.

Gwadar shines a spotlight on a little-studied dimension of the global showdown for the world's depleting oil. Pakistan, with Chinese money, hopes to reinvent itself as one of the region's largest energy players – but it could also become a victim of the new Great Game, some observers say, crushed in the squeeze between the American and Chinese race for influence in volatile, lucrative Central Asia.

As China positions itself as Pakistan's chief patron, that could tilt Pakistan's center of political gravity, observers add, outweighing US influence dollar for dollar – and without the strings of human rights, democracy, and counterterrorism attached.

"The Americans come with a great deal of ideological baggage. There's none of that with the Chinese," says Richard Russell, a professor of national security affairs at the National Defense University in Washington. "[Pakistan's] interactions with the Chinese are not nearly as radioactive as with the US."

Analysts have long fretted over a possible collision course between the US and China over energy. China is now the world's second-largest consumer of oil after the US. Its consumption is expected to double by 2025, with 70 percent coming from the Middle East. Both giants are competing for finite supplies.

"I think most security experts are looking at this very closely because this is the closest access point China has to the Persian Gulf," says Gal Luft, executive director of the Institute for the Analysis of Global Security in Washington. "I don't know that this is something the US particularly likes."

Pakistan could be crucial to China's bid for regional influence. Transporting oil is currently a long, expensive, and dangerous process for Beijing, traversing some of the most pirated seas in the world. For that reason, China is rapidly diversifying its sources, cutting billion-dollar deals from Sudan to Iran and scoping out alternative transport routes through Burma (Myanmar), Thailand, and Bangladesh.

Pakistan is likely to be among the most important routes.

Sitting at the mouth of the Persian Gulf, the Gwadar Port, which becomes fully operational next year, will provide an overland energy corridor connecting the Middle East to Xinjiang, China's future energy base. That will cut transport by 12,000 miles, shaving a month off the journey's time and 25 percent off the fees. Washington speculates that Gwadar could also be part of China's push to protect its growing energy system with a robust Navy.

For Pakistan, Gwadar is a chance to refashion itself a global energy player – a dream in the making for several decades. The potential is rich, given its prize location near the Gulf, at the feet of the energy-rich Central Asian states, and in the shadow of South and Southeast Asia, which houses a third of the world's population and where energy demands are expected to soar.

Given the energy game's high stakes, some wonder if Gwadar will set off alarm bells in Washington. Last April, while hosting the China-Pakistan Energy Forum in Pakistan, President Pervez Musharraf was asked as much by a visiting delegate. But to a roar of applause, he quickly deflected the question: "I do not care about pressure from major powers. If Pakistan suffers pressure from certain major powers, I believe China will come forward to help us apply pressure on the other side."

Still, the opening of Gwadar is indicative of how China's largesse in Pakistan is coming into open competition with the US – and how that could alter the region's political landscape.

China's investment in Pakistan stands at more than $4 billion, with at least 114 projects under way, according to 2004 figures publicized by Pakistani Prime Minister Shaukat Aziz. That's analogous to the more than $6 billion Washington has given Pakistan since 9/11, although Uncle Sam's money is earmarked for counterterrorism, not energy.

Last March, China seemed to one-up the US. It announced that it would invest another $12 billion in Pakistan. There was no mention of human rights, democracy, or terrorism. The Democrat-led Congress, meanwhile, is threatening to pull funds if Mr. Musharraf doesn't deliver more.

The contrast in policy objectives is telling, analysts say. The more money China dishes out, the more Pakistan is likely to gravitate toward Beijing as a countervail to US influence, given that Islamabad is increasingly pummeled to do more in the war on terrorism.

"[It's] a no-brainer," says Mr. Russell. "[Pakistan's] winning ticket over the long run is the Chinese."

It's a drift that Washington will certainly monitor, but ultimately may not mind, Russell adds. "India is going to play a greater role in democracy in the region and the Middle East," he says. "The US has more vested interests in India than Pakistan."

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