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The geopolitics of Shwe Gas

by Michael last modified 2006-11-12 12:53

The geopolitics of Gas: The battle of Arakan

O & G blocksPeoples of Burma, renamed Myanmar by its ruling military regime in 1989, have endured the world’s longest civil war and one of the world’s most notorious military dictatorships. Outcry over the Southeast Asian country’s human rights record and its continued detention of democracy leader and Nobel Peace Prize laureate Aung San Suu Kyi has amounted to a series of actions by the international community including United Nations General Assembly resolutions, moves to highlight Burma as a security threat at the UN Security Council, and economic sanctions by the United States and European Union. Regionally, even countries from the Association of South East Asian Nations (Asean), of which Burma is a member, have started to criticise the State Peace and Development Council (SPDC). The junta, however, has two important means of resisting this pressure: abundant natural resources and a strategic geographic position.

Shwe, the Burmese word for gold, and the name of gas reserves recently discovered off the coast of western Burma, aptly describes what lies under the sea and its significance to the military regime ruling the country. With a conservative total market value of US$37 billion , it will be the largest single source of income to date for the SPDC.

The junta has become adept at "resource diplomacy," giving neighbours a substantial slice of the country’s natural wealth through trade and investment in return for revenue and political support. Located between China, India, and Thailand, Burma is able to play its neighbours against each other in their race for resources.

Being positioned between two of the world’s largest and most energy-hungry countries and now holding one of Asia’s largest gas reserves has raised the stakes in this “diplomacy.” India and China rely on crude oil imports for 70 percent and 40 percent of their needs respectively and are both engaged in a competitive global search for gas and oil. China has often come out on top, with India’s Oil and Natural Gas Corporation (ONGC) losing to Chinese companies in Kazakhstan, Ecuador and Angola, and most recently Nigeria.(a) Discovery of the Shwe gas has made Burma the site of another competitive scramble between the two countries.

For China, Burma represents not only an opportunity to diversify its supplies of oil and gas, but also an alternative transportation route for its current imports . Over 80% of China’s imported oil passes through the Straits of Malacca (b) The Straits are one of the most important shipping lanes in the world, but are threatened by security threats from piracy and international naval disputes. Reports have emerged that China is interested in developing a deep sea port and connecting pipeline(s) in Kyauk Phru, Arakan’s second biggest port. Kyauk Phru could then be used as a transfer point for Middle Eastern oil to China’s inland provinces, thus providing an opportunity for China to reduce its dependency on the Straits.(c) Pipelines could also transport oil and/or gas extracted in Burma itself.

India is also looking for alternative energy sources, as a gas deal with Iran and proposed pipeline through Pakistan has many diplomatic hurdles to overcome. Working with Burma presents several advantages to India beyond the gas itself: a land route through Burma to broader Southeast Asia would advance its “Look East” policy; gaining Burmese assistance in cracking down on armed separatists in northeast India would facilitate opening that area up to mineral exploration; and a gas deal would help mitigate China’s growing influence in the region. India’s increased trade and recent arms sales to Burma are an indication of its shift toward working with the regime.(d)

In developing its plans to transport gas from Burma, however, India has had to contend with the third party of Bangladesh. Since 2004, India has promoted a pipeline that would run from Burma’s Arakan State through Bangladesh to bring gas to Kolkata. Bangladesh rejected India’s offer of an annual US$125 million transit fee and other one-off grants, proposing instead additional demands such as a reduction in trade-deficits with India and the development of trade corridors to Bhutan and Nepal. In addition, some Bangladeshis became concerned that the pipeline might be connected with a domestic grid and that Bangladeshi gas would be exported to India. Bangladesh has its own history of successful domestic gas production which is now filling a major part of its electricity generation and cooking needs. This was only made possible following a hard-fought battle by Bangladeshi movements prioritizing their peoples’ basic needs above exporting the resource to India. Bangladeshi peoples’ movements are also resisting the Shwe pipeline in solidarity with the people of Burma.

After two years of negotiations, Indian consortium members now appear to have given up on Bangladesh and are instead advocating a pipeline around Bangladesh through India’s northeast states of Tripura and Mizoram. This would make the pipeline 40% longer than originally planned. However, active insurgencies against the central Indian government and widespread suspicion that the pipeline might facilitate further natural resource exploitation and militarization in the northeast make this route a questionable solution.

In addition to the huge energy resources at stake, regional power politics are also a key factor as neither China nor India wants the other to exert too much influence in Burma. Underlying India’s economic and political interests in Burma are a desire to counter China’s growing influence on the country. In some ways, the Shwe project can be seen as a microcosm of the contest for global resources and political clout in the region between the two rising Asian giants. In 2006 Burma signed a Memorandum of Understanding with PetroChina for the sale of 6.5 trillion cubic feet (tcf) of gas – gas reportedly from the exploration block where Indian corporations are operating. Indian diplomats only found out about the deal after it was done. This prompted an Indian presidential visit to Burma in March 2006 which included the signing of additional gas sales to India.

The tussle for energy resources and political influence between the two powerful countries has overshadowed the real stakes in the development of gas in western Burma – the impacts it will have on the people living there. In addition to human rights abuses and denial of livelihoods, relocation could increase internal displacement and cross-border refugee flows.Meanwhile, Burma’s military generals continue to cash in on their neighbours’ competitive fray and the Shwe gas project could well turn out to be the most infamous chapter in the chronicle of regional foreign investment propping up Burma’s military regime. 

From the report "Supply and Command," by the Shwe Gas Movement


(c) Studies by the Chinese government in 2004 led to two alternative routes: one from ports in the Indian Ocean through pipelines in Pakistan and another from Burma into China. A favoured option appeared to be unloading cargo at an Arakanese deep sea port and sending oil by pipeline into Yunnan province. Although a decision has yet to be made, the Arakan coastline could become a key factor in China’s energy plans. See
(d) “Paranoid junta strengthens air defenses,” The Irrawaddy, June 1, 2006.

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