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The energy ties that bind India, China

By Ramtanu Maitra
From Asia Times
April 12, 2005
link to this article.

Myanmar newspapers have reported that India will soon start a feasibility study on building a deepsea port in Dawei, in Myanmar's southern Tanintharyi division. Subsequently, the Myanmar Ministry of Transport made clear that the Dawei deepsea-port project stands as one of the priorities among future programs of BIMST-EC, the Bangladesh, India, Myanmar, Sri Lanka and Thailand-Economic Cooperation grouping (which was also joined by Bhutan and Nepal last July).

Earlier, a Myanmar Foreign Affairs Ministry official was quoted by the Myanmar Times saying the shipping route from southern India to Myanmar's deepsea port at Dawei would help reduce the travel time of cargo between India and Thailand that now goes through the Malacca Strait and around the southern tip of the Malay Peninsula to reach Bangkok.

Though Indian External Affairs Minister K Natwar Singh's careful "suggestions" about democracy got all the press play during his recent visit to Myanmar, the Dawei deepsea port and other measures to strengthen India-Myanmar economic relations were no doubt discussed. They are part of a series of important developments taking place just below the radar in Asia that are knitting the region together. As both India and China move to secure their energy and economic futures, they are developing infrastructure that opens significant new potential for economic cooperation and security.

India and China converge on the Andaman Sea
India's interest in and involvement with Southeast Asia has been growing steadily over the past decade, and its concern for development of the Andaman basin has grown accordingly. Last year, an agreement was signed in Yangon by the foreign ministers of India, Myanmar and Thailand to develop transport linkages between the three countries. When complete, the 1,400-kilometer road corridor will be a highway of friendship linking the peoples of South and Southeast Asia.

The planned deepsea port in Dawei, together with the new highway connecting it to Kanchanaburi in Thailand, will no doubt contribute further toward closer trade and commercial links between the two regions.

Dawei, the capital of Tanintharyi division, is on a long, narrow coastal plain (bounded by the Andaman Sea in the east), which runs to Kawthaung, the most southerly point of Myanmar, and which then continues to the Malay Peninsula. Its location affords both economic and security benefits. Building Dawei port has a direct security angle for the Indian navy, which is now in the process of sorting out the technical and financial details of its ambitious Far Eastern Naval Command (FENC) project at Port Blair off the Andaman and Nicobar Islands coast.

FENC will extend the navy's nuclear/strategic combat capability and aid in getting it "blue water" status. Dawei is located across the Andaman Sea on the Myanmar coast almost facing the FENC. India has another, more specifically economic interest in Dawei port. Last January, India reached agreement in principle with Myanmar and Bangladesh on the construction and operation of a pipeline that will bring natural gas from Myanmar to India via Bangladesh, according to reports by the Alexander Gas & Oil company newsletter.

The pipeline, which is likely to cost more than US$1 billion, will carry natural gas from the Shwe fields in Myanmar's Rakhine or Arakan state, through the Indian states of Mizoram and Tripura, then into Bangladesh before finally crossing back into India, all the way up to Kolkata.

Despite an initial positive response from Dhaka, it is likely that Bangladesh will drive a hard bargain to let Myanmar gas flow through its territory to India. Reports indicate that New Delhi has already begun to consider two land routes bypassing Bangladesh. According to one of the proposals, the pipeline can run directly from Myanmar to India through Tripura and Mizoram, circumventing Bangladesh. But two other standby plans involve importing the gas via offshore routes, which will also skirt Bangladesh. The gas could be ferried in ships as compressed or liquefied natural gas.

The Myanmar gas deal: A break for India
The Myanmar gas deal helped to impress on New Delhi that India has no choice but to build up its capabilities to secure the Andaman Sea and transform it into a major conduit for regional economic cooperation.

China, for its part, has been involved over a long period building up infrastructure in Myanmar to gain direct land access to the Southeast Asian nations and the Andaman Sea. China is reportedly engaged in building a deepsea port in Kyaukpyu, in the western coastal Rakhine state. This port would facilitate transit trade through the country to the Andaman Sea, and beyond. One report indicates that the Kyaukpyu port will serve as a transit trade center for goods destined to the port cities of Chittagong (Bangladesh), Yangon (Myanmar) and Kolkata (India). Kyaukpyu, which has a water depth of 20 meters and is capable of accommodating 4,000 TEU (20-foot equivalent units) container vessels, may turn out to be a very useful port.

Importantly, Kyaukpyu also stands at a point on the land route connecting southwestern China's Kunming city with Myanmar's Sittwe. Once the 1,943km Kunming-Kyuakpu road is completed, Myanmar will begin to draw economic benefit from the transit trade as well as job opportunities for Myanmar workers and others in the region. Construction of the seaport and the road link, outlined as Kunming-Mandalay-Kyaukpyu-Sittwe, is under feasibility study, the Myanmar Ministry of Construction was quoted as saying recently.

China's long-term perspective
Beijing's move to get access to the Indian Ocean via Myanmar and the Andaman Sea is based on long-term perspectives. A number of forecasts about China's future make it evident that China will need more and more oil, gas and coal to drive its massive economic engine. But China's east-coast infrastructure is already getting jammed up, and it must develop other inlet points to feed southern and western China.

While developing a deepsea port is a step toward getting energy resources into vast southern China, Beijing is already moving quickly to get direct imports into western China. Some of it will come from Central Asian sources by land. But it is surmised that as China grows economically, it will also need Arabian oil and gas to develop western China.

China is involved in developing Gwadar Port on Pakistan's southwestern Makran coast of Balochistan. Gwadar is almost at the mouth of the Persian Gulf, 72km from Iran, and about 400km from the Strait of Hormuz. The Gwadar project commenced in March 2002, and reports claim that China has contributed a significant amount to the estimated $1.16 billion cost.

In addition, China is also planning to extend the Karakoram Highway to bring oil and gas by road into western China. Since the area is sensitive for geostrategic reasons and India is involved in two major land disputes in the general area - one with Pakistan on the ownership of the state of Jammu and Kashmir and the other with China on the disputed status of Aksai Chin, New Delhi is watching these developments carefully. It is evident that the Chinese military is getting prepared to provide full protection to Gwadar Port, in cooperation with Pakistan.

Significantly, the anti-China crowd in Washington and New Delhi have begun beating the drums that Gwadar Port is a "forward deployment" of the Chinese navy. The claim is that in addition to attack submarines, the Chinese are planning a major listening post in Gwadar (both to monitor US activity in the Persian Gulf and to track shipping in the Indian Ocean). That may well be true, but to protect its vital oil and gas imports, wouldn't any major nation be expected to take similar measures?

The prospect for cooperation
While neither India nor China would be willing to be subjugated by the other, or adopt the other's culture and way of life, there is plenty of evidence that they would like to cooperate to make each other's life a bit easier.

Indeed, this process has already begun in Sudan, where China and India have come together to exploit Sudan's oil and gas resources. Many claim that the cooperation did not exclude competition. Addressing the issue, a high-level adviser in the Energy Research Institute of China's National Development and Reform Commission, Zhao Fengqi, pointed out to Lahore's Daily Times recently that "although there is competition, both sides share a common aim". A similar view was expressed by India's energetic petroleum minister, Mani Shankar Aiyar, who pointed out that both countries "are always pitted against each other to the advantage of the third country".

In Sudan's Greater Nile Project, India and China are partners. India's Oil and Natural Gas Commission Videsh has stakes in Sudan's oil and gas projects, as well as in countries such as Russia, Libya and Australia. China has also gone out and bought stakes in oil and gas fields around the world. China's state-owned oil giant CNPC has invested billions of dollars in projects in countries such as Azerbaijan, Syria, Algeria, Ecuador, Peru, Chad and Kazakhstan.

As both countries reach out to ensure their oil and gas supplies for the future, they will compete and they will cooperate. Myanmar is one country in the region where this convergency of interests may be demonstrated. China's oil and gas from Arabia can come through the Andaman Sea to Kyaukpyu and Dawei, reducing traffic that otherwise must go through the Malacca Strait. Besides the jamming of tankers in the Malacca Strait, which would delay passage of ships and create environmental hazards, the Indian Ocean port-highway connection to China would preclude use of the strait as a choke point to teach China a lesson. India's contribution to minimize the threat to China's oil imports could be a foundation stone on which trust between these two nations can be built.

Chinese Prime Minister Wen Jiabao is in India on a four-day visit. The pro-Washington faction within India's political spectrum and India's not pro-US but down-to-earth pragmatists have already charged that Nepal King Gyanendra's irrational behavior is China-instigated. There is no doubt that such issues will be brought up, as much to slow down, if not undermine, the developing Indo-Chinese relationship as to clarify matters.

Both prime ministers will have to tread through these landmines carefully to lay the foundation for building up a meaningful relationship based on mutual benefit and trust.


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