Geopolitics


The strategic position of Burma between India and China, Asia’s most energy-hungry nations and the world’s two fastest growing economies, and gas-reliant Thailand, the current chair of the regional Association of Southeast Asian Nations, give the Shwe Gas Project and China-Burma Oil Corridor particular geopolitical significance.

China

As China’s GDP grows an average of 10 percent annually, its quest for oil, gas, and other natural resources around the globe has increased to sustain its soaring economy and to meet its energy consumption. China is the world’s fastest-growing importer of oil, yet currently an estimated 80 percent of China’s imported crude oil – coming mainly from the Middle East and Africa – is transported through the Malacca Straits (see map). The development of a deep sea port on Burma’s western coast would provide China a new transit point for oil and gas imports and easy access to the Indian Ocean while a pipeline across Burma would reduce the Malacca voyage by 1,200 kilometres. The pipelines therefore present China with much needed natural gas supplies while also saving roughly seven days of shipping-time from its African and Middle Eastern crude oil source points.

Burma’s resource diplomacy has reaped effective results with China. In January 2007, China vetoed a draft UN Security Council Resolution calling on “Myanmar’s Government to cease military attacks against civilians in ethnic minority regions and begin a substantive political dialogue that would lead to a genuine democratic transition.” Just three days later, a Production Sharing Contract was signed between China National Petroleum Company (CNPC) and Burma’s junta, the State Peace and Development Council, for exploration, drilling and production rights in three additional blocks. Just months later, the junta announced that it was selling the entire gas finds in blocks A-1 and A-3 (the Shwe gas) to China for a below market price. This caused the consortium of Indian and South Korean companies developing the gas fields to protest loudly. Indian media reports quoted Indian company officials as unhappy about the Chinese sale and reconsidering any further investments in western Burma’s gas.

India

India had considered itself the primary final purchaser of the Shwe gas and had developed plans for various transport routes, including investments in surveying pipeline and shipping options. After years of research and negotiations, however, they were suddenly cut out of the equation when the gas was sold to the Chinese.

Keen to regain lost ground, India dispatched its Oil Minister to seal new contracts in additional exploration blocks in September 2007. The visit came in the midst of unprecedented and peaceful demonstrations protesting the high price of fuel in Burma. India’s Minister promised an additional US$150 million in investment to the junta despite a violent crackdown on the monks leading the demonstrations (see Saffron Revolution section).

Beyond oil and gas, India has invested millions of dollars into the development of the port in Sittwe, the Kaladan transit transport multi-modal project, and roads linking the two countries. India has made multi-million dollar weapons sales to Burma as well.[1] These are all part and parcel of India’s “Look East” policy, one strategy for reducing the influence of China on its neighbor and in the region. In addition investment interests and geopolitical counter-balance, India is seeking to garner Burmese assistance in cracking down on armed separatists in northeast India.

World energy projections predict that by 2030 the world’s energy needs will be over 50% higher compared to 2007 and that China and India alone will account for 45% of the increase in demand.[2] The two countries are engaged in a global competitive search for gas and oil; the struggle for the Shwe Gas is a microcosm of that struggle as Burma is currently the leading alternative supplier for the world’s two fastest growing and energy-hungry economies.

Russia

Russia also has resource interests in Burma, including production contracts in three oil and gas blocks and mining interests. Russia has sold arms and military equipment to the junta and has announced plans to build a nuclear reactor in the country. Not surprisingly, Russia is opposed to “attempts to internationalize the internal situation in Myanmar” and complied with China’s veto of the UN Security Council resolution in 2007.[3]

ASEAN

Thailand, the current ASEAN chair, relies on natural gas from Burma for twenty percent of its electricity supply and in 2008 was a leading investor in Burma. Singapore is also a lead investor in Burma, and Singaporean, Malaysian, and Vietnamese companies have stakes in oil and gas exploration blocks in Burma.[4] Several Burmese businesses run by tycoons aligned with top military generals are also registered in Singapore. Access to resources and trade interests, along with ASEAN’s traditional non-interference policy, has in the past resulted in muted criticism of Burma’s junta from the regional body.


[1] In addition to the Shwe Gas, the Indian oil company Essar has been conducting exploratory drilling in Arakan State since December 2008, following a recent discovery of oil reserves in northern Sittwe Township.

 

[2] World Energy Outlook: China and India Insights, Executive Summary, International Energy Agency, 2007.

[3] June 21, 2009 Itar-Tass (Russia) Moscow hopes for an unbiased trial of Suu Kyi

[4] It is interesting to note that within ASEAN, Vietnam. Malaysia, and Indonesia are all large producers of oil/gas but don’t have strong standards that include social and environmental safeguards.