China's Okinawa in Indian Ocean Region

" The Chinese, who are already involved in an imbroglio with Japan, the Philippines, Vietnam and the US over their power projection attempts in the East and South China Sea, do not want to get involved in a similar imbroglio by giving evidence of a similar power projection exercise in the Indian Ocean area."

by B.Raman

(September 19, Chennai, Sri Lanka Guardian) A commentary published by the "News" of Pakistan on September 15,2010, says as follows: "The news that Gwadar port is all set to be taken away from the Port of Singapore Authority (PSA) and is likely to be given to the Chinese may have repercussions that go much beyond its white sand shores. Official sources confirm that “an understanding to that effect has already developed at the highest levels but it will take a while before the legal and administrative constraints are removed.” The biggest constraint remains the agreement with the PSA, which was given the right to run the port for 40 years. However, official sources are confident that the PSA had given them sufficient grounds to revoke the agreement. Apart from its failure to bring a single commercial ship to the Gwadar docks, the PSA has not invested even a fraction of the $525 million it had committed to spend in five years. .......The move to hand over Gwadar to China, among other things, may just be the first step to replace the erstwhile IPI (Iran-Pakistan-India gas pipeline) into a new reality - Iran-Pakistan-China (IPC). The acronym already stood dissolved after India backed out of the Iran-Pakistan gas deal.....It will mean much more than the transfer of power at the Gwadar port. The Chinese will build Gwadar as tax-free industrial hub which may include oil and gas refineries and a network of roads and railways from Gwadar to China through the ancient silk route. An ambitious deal to build railways along the Khunjrab pass has already been signed between Pakistan and China. The Chinese are more suited to develop the Gwadar port and the network of rail and roads in Balochistan as they have experience and the muscle to work in the troublesome part of Pakistan. ....The Chinese have the capacity to not only make Gwadar port viable but can complete the expansion plan, which includes increasing the existing three berths to 18 by 2014. The volume of the Chinese trade is so much that Gwadar can beat regional giants like Dubai hands down if China could divert only a fraction of its trade to pass to its burgeoning western regions through the mighty Karakorams......The project is bound to arch lots of eyebrows in India on our east and NATO forces, read the US, sitting on our right flank. China has capitalised on India’s loss. Beijing and Islamabad had set up an agreement whereby China would import most of this Iranian gas left by India. Islamabad hopes to make a billion dollar a year just from transit fee. "

While there is likely to be some exaggeration in the report, some recent developments tend to lend some credence to it. Among them is the unhappiness of the Pakistani authorities with the way the PSA has managed the port, which has failed to come up to expectations even more than three years after it was commissioned. The port has failed to attract international shipping partly due to the security situation in Balochistan and partly due to the failure of the Pakistani authorities to develop road and rail infrastructure in the area. Instead of admitting their own failures, they have been blaming the PSA for the poor management of the port, which is now being used only to meet part of the requirements of Pakistan's external trade by providing incentives to Pakistani companies which use Gwadar for their exports and imports.

A report prepared last year by a Task Force of the Pakistan Government's Planning Commission on the working of the Gwadar port stated inter alia as follows: "Both the Government and the PSA are in default.No commercial vessel has arrived at the Gwadar Port in the last
three years and there is no possibility of the arrival of any commercial vessel for many years to come. The Gwadar Port was supposed to be connected by construction of road links. It is also to be connected through the establishment of a rail network with the rest of the country as well as with neighboring countries especially Afghanistan, and through Afghanistan to the Central Asian Republics (CARs) as well as China. The rail connectivity would take some 10-15 years to complete. Till date, some 72 ships brought government cargo via Gwadar Port and the Federal Government had to subsidise such imports by giving subsidy to the tune of Rs 2,000 per tonne. Apart from subsidising cargo imports, the Government has also paid PSA Rs 220 million as subsidy. Under the Gwadar Port operation agreement, the Federal Government is required to purchase 2281 acres of land on water front and transfer this land free of cost to PSA for 40 years. There is no possibility of land purchase in the near future and the cost of land that the Federal Government would be required to pay is estimated at Rs 15 billion. On the other hand, without getting free of cost land the PSA is unwilling to make further investment in Gwadar Port.The PSA had earlier committed to making investment to the tune of $525 million in five years. It has not invested during the first three years, and it is not likely to spend any during the next two years.The Government will have to subsidise the GPA (Gwadar Port Authority) for many years to come. On the political side, the Balochistan Government has strongly opposed the present Gwadar Port Concession Agreement with the PSA as the Baloch people are not gaining anything from it. The Gwadar Port will not be viable for transshipment and transit until the political and law and order situation in Afghanistan stabilises and Western China is connected by road and rail with Gwadar."

It has been apparent for over a year now that though the PSA was originally recommended to Gen.Pervez Musharraf by Beijing. the Government of President Asif Ali Zardari has been disenchanted with it and has been considering other options.No company---either in Pakistan or abroad--- is prepared to take over the responsibility for the management of the port. It is in this context that the Pakistani authorities have been pressing the Chinese to take over the responsibility for the management of the port through one of their companies---- private or State-owned. This issue figured in the talks during the visit of Mr.Zardari to China in July last.

Mr.Zardari once again took up with the Chinese the pending Pakistani proposals for the upgradation of the Gwadar port, the construction of an oil refinery and an airport in Gwadar and the construction of oil/gas pipelines from Gwadar to Xinjiang. While the Chinese have readily responded in a positive manner to various proposals for projects in the Gilgit-Baltistan area, they are still hesitant regarding new projects in the Balochistan area. While they do not anticipate any security problems in the Gilgit-Baltistan area, they are still worried about the security situation in Balochistan.

Mr.Zardari’s disappointment over the Chinese hesitation in the Balochistan area became evident in his reported remarks to Prime Minister Wen Jiabao that Pakistan desired that “China should take maximum benefits from the Gwadar Port.” From this it was evident that while Pakistan is keen for the quick implementation of the Gwadar-related projects, security considerations still inhibited the Chinese response.

Pakistan has reached a deal with Iran in respect of the Iran-Pakistan gas pipeline. While Iran will finance and construct the pipeline on its side, Pakistan has agreed to do so on its side, but it does not have the money. Will the Chinese give the money and help in the pipeline construction in return for a supply of part of the gas from Iran? This is a question which Pakistan has repeatedly raised with Beijing. China has been reluctant so far. According to reliable sources, Mr. Zardari raised this issue once again in Beijing, but there was no positive response from the Chinese. ( Please refer to my article of July 11,2010, titled "PAKISTAN AS CHINA’S FORCE-MULTIPLIER AGAINST INDIA")

in an interview over the State radio on December 28, 2009,on the need for a naval base in the Indian Ocean region, Rear Admiral Yin Zhou, an expert of the Chinese Navy, said: “I believe that a relatively stable, relatively solid base for resupply and repair would be appropriate. Such a base would provide a steady source of fresh food, along with facilities for communications, ship repair and recreation. Any definite decision to establish such a base would have to be taken by the Communist Party. Supplying and maintaining the ( Chinese) fleet off Somalia was challenging without such a base. Other nations were unlikely to object.”

Subsequently, the Chinese authorities denied any interest in acquiring a naval base in the Indian Ocean region. Despite this, the debate continues in academic circles in China about the ultimate need for a base to make the anti-piracy patrols of the Chinese Navy effective. It is in this context that Pakistan has renewed its pressure on China to take more interest in the development of Gwadar as an international commercial port and oil/gas transhipment facility to meet the external trade and energy requirements of Western China and as a major naval base to meet the Indian Ocean anti-piracy patrol requirements of the Chinese Navy.

The Chinese, who are already involved in an imbroglio with Japan, the Philippines, Vietnam and the US over their power projection attempts in the East and South China Sea, do not want to get involved in a similar imbroglio by giving evidence of a similar power projection exercise in the Indian Ocean area. They have been trying to project their present interest in the Indian Ocean area as meant to ensure the safety of their external trade and energy supplies and nothing more.

At the same time, the temptation for a permanent Naval presence in the Indian Ocean area with a strategic naval base available for use by the Chinese Navy is likely to grow stronger despite their present denials of any such interest or intention. If and when that happens and if they accept the Pakistani offer to take over Gwadar for commercial and naval purposes, Gwadar could emerge as China's Okinawa in the Indian Ocean region.

( The writer is Additional Secretary (retd), Cabinet Secretariat, Govt. of India, New Delhi, and, presently, Director, Institute For Topical Studies, Chennai, and Associate of the Chennai Centre For China Studies. E-mail: seventyone2@gmail.com )