On April 20, Chinese President Xi Jinping visited Pakistan with investors, bankers and businessmen to launch the Pakistan-China Economic Corridor project. This project would allow China to transport energy resources such as petroleum from Middle Eastern countries to China via a land route through Pakistan.
The deal is particularly significant amid the escalating military tensions unleashed by the Obama administration’s “Pivot to Asia,” designed to checkmate China. It would allow China to largely circumvent the threat of a blockade of Chinese energy imports from the Middle East by US and allied navies.
China, the world’s biggest oil importer, imports 60 percent of its oil from the Middle East and transports 80 percent of that through the Indian Ocean, the Strait of Malacca, and the South and East China Seas.
China signed 51 Memorandums of Understanding with Pakistan worth $46 billion as part of this project. These are to be financed by Chinese banks such as the Industrial and Commercial Bank of China Limited, Exim Bank of China, and China Development Bank Corporation.
As Pakistan’s biggest arms supplier, China is also supplying eight diesel-powered Yuan class attack submarines of Type 039A or Type 041 to Pakistan. Prime Minister Nawaz Sharif and the Pakistan National Security Committee have approved the deal, part of a broader effort to modernize Pakistan’s submarine fleet and give it nuclear-missile capability.
The corridor project consists of oil storage facilities at the port of Gwadar and a 3,000 km network of pipelines, railways, and motorways from Gwadar, through Pakistan, and directly across the mountainous Pakistani-Chinese border to Kashgar in western China. It also entails technical cooperation on air transport, rail infrastructure, wind and hydro power, and fiber optic communications.
Gwadar is strategically located on the Arabian Sea coast of Baluchistan, one of Pakistan’s poorest and most volatile provinces, near the oil-rich Persian Gulf region and the Strait of Hormuz.
Oil exports from the Persian Gulf, amounting to approximately forty percent of the world’s internationally traded oil, must pass through the Strait of Hormuz.
Under the terms of the deal, Gwadar port has been handed over to China for 40 years starting this year, as the Chinese Harbour Engineering Company begins construction work.
Kashgar is one of the major cities in the Xinjiang Uyghur region of north-western China. The inland area is also much poorer than the bustling export centres of China’s Pacific coast and faces rising ethnic tensions between Uyghurs and Han Chinese, who make up the majority of China’s population.
The proposed economic corridor would thus open up new trade routes that cut 16,000 kilometres from the distance travelled by goods traded between China and the Middle East.
China’s $46 billion investment is almost three times the total foreign direct investment that Pakistan has received during the last seven years and far exceeds US spending in Pakistan. Washington has reportedly given $31 billion to Pakistan since 2002, with two-thirds of that funding devoted to the “war on terror.”
On April 19th, the New York Times reported, “That effort was a ‘dramatic failure’ because the resources were scattered too thinly, and had no practical or strategic impact, said David S. Sedney, a former senior official at the Pentagon responsible for Pakistan during that period.”
As they move ahead with the deal, the Chinese and Pakistani regimes also face the social and ethnic conflicts inside Baluchistan that decades of bourgeois rule in Pakistan have only intensified.
President Xi Jinping met with Pakistan’s Joint Chiefs of Staff and heads of armed forces to discuss defence and security of the project. Pakistani officials, including Prime Minister Nawaz Sharif, agreed to deploy a new special division totalling 10,000 Pakistani troops to protect Chinese construction workers in Pakistan.