From the Trans-Atlantic era to the current Trans Pacific era, from the United Kingdom to the United States the sea trade domination and sea port possession have unmistakably been powerful and influencing pawns on the board game of world domination.i The civilizations have always developed along the waters that have been used as trade route since ancient times.ii The emergence of Gwadar Port as an economic hub has caused the regional powers to develop strategic and communication infrastructure to reach the energy rich CARs. The port on the Arabian Sea occupies a strategic location between South Asia, Central Asia and the Middle East. It lies near the Strait of Hormuz, gateway for about 20 percent of the world’s oil. Its strategic location at south west of Pakistan into the Arabian Sea yield itself as a gateway for transit trade into the CARs. The contract of operation of Gwadar Port was formally given to China on February 18, 2013 and it is hope that it will enhance trade and commerce in the region. The table below explains the time period of its operation. The Government of Pakistan on Monday 18th February, 2013 formally awarded a multi-billion dollars contract for construction and operation of Gwadar Port to China with the hope that the port’s development would open up new vistas of progress in Pakistan, particularly Balochistan.iii In December 2010, China had offered the provincial government to construct 20 more berths and make the port fully operational if the port was handed over to it.
Transit Countries such as China, India, Afghanistan, Turkmenistan, Kazakhstan, Uzbekistan, Kyrgyzstan and others try to benefit from their geographical location between the Gwadar port and world market by using or promoting trade routes via their territory. Gwadar Port is a flag map of Pakistan for the future as the converging hub of all trade and transit routes. As the figure below depicts trade and transit routes are passing through Central Asia, Russia and China.
Eastern Champion China
China is the world’s second largest energy consumer. Its oil imports have risen slowly over time, now averaging around 1.5- 1.7 million barrels per day, and have between 2 and 4 million b/d in the 2010s. Thirty years of rapid economic growth have raised domestic prosperity and the country’s international economic prominence because of which China has surpassed Japan and increasingly needs to import pipeline gas or liquefied natural gas (LNG) to fuel its economy and moderate adverse environmental impact. China started to play a pro-Central Asian card because of its need for the region’s oil. It has a strong interest in developing Caspian oil and gas fields, particularly of states that are located in its ‘backyard’, west of the province of Xinjiang.iv Beijing’s influence is emanating and expanding from Central Asia to the South China Sea, from the Russian Far East to the Indian Ocean. China is a rising continental power, and, as Napoleon famously said, “the policies of such States are inherent in their geography”.v
Chinese companies signed their first deal in 1997 when China National Petroleum Corporation (CNPC) acquired the rights to the Aktobe field in Kazakhstan which included the Zhanazhol oil and gas condensate field and the Kenyiak oil field. The deal also had a political dimension – China desired closer relations with Kazakhstan in order to increase its influence in Central Asia and to develop its energy security. Beijing has also planned to build a long-distance gas pipeline from Turkmenistan through China to Japan and the Republic of Korea.vi
From a Chinese point of view, its companies were trying to catch up with Western oil companies which had a clear lead in Central Asia. China had missed out on all the big plays in the Caspian: Tengiz, ACG, Karachaganak, and Kashagan. The trump card China holds in face of this established Western competition is a growing market that is contiguous to Central Asia. China also presents itself as an attractive development model and counterweight to other regional powers. In spite of strong government support and cheap loans from state banks, China’s pipeline efforts were challenged by marginal economics due to great distances and low volumes of oil and gas. It then received a major impetus from Russian actions, which once again had unintended consequences.
China signed a 30-year sale and purchase agreement with Turkmenistan to import 30 bcm per year, and then quickly reached deals with Turkmenistan, Uzbekistan and Kazakhstan to put the necessary pipeline in place.vii Underlying China’s strong interest in oil and gas supplies by pipeline from Central Asia—or Russia for that matter—are strategic security concerns over relying too heavily on maritime imports of oil and gas. The strategic motivation helps explain China’s willingness to pre-invest in pipelines from Central Asia before economic volumes of oil and gas are apparent. United States has been seeking diversity of supply to global oil markets; it would plainly prefer that the Caspian region enjoy energy policies free from the influence and control of Russia, Iran and China. Influential American experts have viewed each of these countries as an actual or potential threat to US interests in the region and to some extent globally. China may convert the port into an oil pipeline hub to augment its energy supplies from the Gulf.
The report quoted China Foreign Ministry Spokesperson Hong Lei as saying, “China and Pakistan are neighbors of traditional friendship. Over the years, China and Pakistan have engaged in wide-ranging cooperation in all fields including infrastructure construction with a view to helping Pakistan improve people’s well-being and promote social and economic development.”viii The Port of Singapore is likely to withdraw from the S$920.73 million contract to manage the operations and develop the deep-sea port at Gwadar in Pakistan. The concession period for the operation of Gwadar port was 40 years. However, the project ran into problems when the Supreme Court of Pakistan issued a stay order against the allotment of land in Gwadar. As reported in a national daily, the Pakistan Government has formally awarded a multi-billion dollars contract for construction of more berths and operation of Gwadar port to a state-run Chinese firm namely China Overseas Port Holding Company (COPHC). According to media reports PSA had abandoned the project for the reported reason that Pakistan had failed to meet its obligations under the agreement although it was highlighted in the media reports that PSA failed on its commitment of investing an amount of $525 million in the project in five years on the excuse that its demand of providing land worth Pakistani Rupees 15 billion was not met. In this backdrop, in 2012 the Supreme Court of Pakistan had issued a stay order on the contract of Gwadar Port constraining PSA on transferring immovable property of the Port to a private party.
The Supreme Court also allowed the Government of Balochistan to become a party to the case. New Delhi contends that China is surrounding India with a ‘string of pearls, with ports all around the Indian Ocean, including in Burma, Bangladesh, and Sri Lanka. Of all these development, the establishment of a port in Pakistan, India’s historic adversary, is most distressing to New Delhiix. Trade between China and Pakistan hit an annual $12 billion for the first time last year, as per Pakistan’s foreign ministry, and the two sides plan to raise this to $15 billion in the next two to three years.x Chinese Prime Minister Li on his visit to Pakistan said that China’s desire to boost domestic demand and develop its western region would benefit Pakistan as it seeks to restart its foundering economy.
Russia
The Caspian region states got independence in 1991. Independence to some extent reflected itself in the liberalization of investment regimes of these new states. Azerbaijan and Kazakhstan moved faster than other countries in the region to open their doors to Foreign Direct Investment (FDI), thereby introducing commercial and political counterweights to the traditional relationship with Russia. The opening of some Caspian states to FDI was a focus of all the oil majors which saw the Caspian as a new North Sea and the last region in the world where major fields could still be found. Major FDI were made in Azerbaijan (the Azeri-Chirag-Guneshli fields) and in Kazakhstan, notably the Tengiz and Karachaganak fields, already under development, and the super giant Kashagan field with commercial reserves estimated at between 9-16 billion barrels, where production is expected to start up by 2014.xi The warming of the relations between Russia and Pakistan is the demand of the day due to the coherence of interests of both the countries. After the withdrawal of NATO troops from Afghanistan in 2014, US has decided to establish six permanent military bases in the war-torn country having eye on the energy resources of Central Asia-with multiple strategic designs against Pakistan, China, Iran and Russia. Russia wants to get more involved in regional affairs to counterbalance the growing influence of the US-led west in the region. It knows that Pakistan can play a key role in the Afghan endgame and for Russian interests in Afghanistan.xii The Caspian Sea region contains roughly 17-49 billion barrels of oil. Oil production growth from the region will come largely from Kazakhstan and Azerbaijan in the next decade.xiii The table below explains the status of Caspian Sea Oil Production Growth.
Iran-Pakistan PIPELINE
Iran
Iran being the second largest OPEC oil producer, holds 100 billion barrels of proven oil reserves, about 10 percent of the world’s total. Iran’s current oil production capacity is estimated at 3.9 million barrels a day.xiv Tehran declared that Iran is the logical route (one of the shortest), for transport of Caspian oil to world markets. This declaration is based on Iran’s possession of several well-equipped ports on the coast of the Persian Gulf and Sea of Oman, and well-developed shipping terminals, a technically skilled workforce, and a widespread pipeline network that can be easily reached from Azerbaijan, Turkmenistan, or Kazakhstan. The then President Asif Zardari visited Turkmenistan on March 21, 2013 with a specific agenda, to underlie the potential strategic importance of Pakistan as a bridge between the Central Asian states and South Asia, and shared it with the heads of participating countries, including Turkmenistan, Iran, Tajikistan and Afghanistan. It was indeed important to reiterate Pakistan’s priorities as it has committed to building two key projects: the Gwadar Port and the Iran-Pakistan pipeline.xv
On 21 March, 2012 Nawab Zulfiqar Ali Magsi, governor of the Balochistan Province, the country’s largest province and the future host of the Pakistani part of the pipeline, spoke out against Western pressure and expressed a lack of concern over whether Iran became a nuclear weapons power. One of the aspects of change in the mode of warfare which has come to prominence after World War II is the non-military aggressive tool of ‘economic strangulation’ through which the powerful states try to politically subjugate their target countries. The long-proposed Iran-Pakistan (IP) gas pipeline continues to stall. Although Pakistan is facing an imminent energy crisis, for Islamabad, the project is caught up in the complexities of its relationships with Iran and the United States. Apparently, the reason for imposing sanctions on Iran is to change its nuclear policy; however, as mentioned earlier, nuclear issue can only be ‘a factor’. The IP pipeline will deliver 750 million cubic feet of gas per day (mmcfd) to Pakistan by January 2015. Agreements for opening two more border crossings (Gabd and Pasni) and setting up a $4 billion oil refinery with a capacity of 400,000 barrels per day (bpd) at Gwadar were also said to be signed after the ceremony. The IP pipeline project has strategic and energy security implications for India. First, the pipeline removes all incentives from the TAPI. Pakistan gets its gas from Iran so could Afghanistan along with the oil it imports from Iran. There is the risk, of course, of ending up on the wrong side of American sanctions on doing business with Iran. But the United States-favoured Tapi pipeline through Central Asia and Afghanistan looks untenable given the security situation in the region.xvi Pakistan should formulate its energy and power policies. And it has also an obligation to make the best use of gas from IP-Pipeline.
United States
Washington has abandoned its traditional policy of making energy goals secondary to other foreign policy objectives and of taking energy initiatives as specific crises came out. In fact, Washington has put a special emphasis on securing more oil from foreign sources in order to support U.S. and global economic growth. The role of the United States in the Caspian region has passed through several phases since 1991. The success of the Armenian lobby in convincing the American Congress to impose an embargo on Azerbaijan in the wake of the Nagorno-Karabakh conflict illustrates lack of proactive American policy in the region. However, by 1994-95, American policy was in a stage of transition. The United States has announced that it considers the Caucasus and the Caspian a region vital to US interests. America’s strategic objectives are planned in a way so as to achieve the economic, military and security goals simultaneously.
Two schools of thought regarding the proper way to address U.S. policies in the region: The first preached conciliation and alignment. Conciliation meant bringing Turkey, Israel, and Europe under the same umbrella of interest and general aims despite the differing goals and priorities especially regarding commercial rivalry and favoring the partnership of Azerbaijan and Georgia with Turkey and the United States in what might be called the ‘Baku-Ceyhan bloc’, Washington’s policies of containment and isolation were meant to block Iran’s power in the area and to prevent Russia from reasserting hegemony over the region.xvii
The above-mentioned policies of Washington have been strongly criticized on the ground that they led to a growing polarization of regional politics. Indeed, conventional wisdom has it that alliances bring about the formation of counter-alliances. The growing U.S. engagement in the Caspian region and the high profile and geo-political importance attributed to the Baku-Ceyhan project fuelled, in a way, the rapprochement between Russia, Iran and Armenia while it solidified a strategic alliance among Azerbaijan, Georgia, Turkey and the United States. However, the direction of the U.S relations with Russia is very different from that with Iran. While Russia’s Caspian policy under Putin moved away from trying to contain U.S. expansion in the region in favor of ‘constructive engagement’ with the American government and oil companies, Iran was included in President Bush’s ‘axis of evil’.
The American military presence in the region has affected not only the safety of future energy supply routes but also the power projection from Central Asia into Afghanistan and from Caucasus into the northern Middle East (most notably into Iran). The Islamic Republic of Iran stands as the sole country in the region reinforcing Washington’s sense of vulnerability concerning the spread of radical Islam and nuclear armaments. Therefore, despite the growing pressure from U.S. oil companies to lift the embargo upon Tehran, which wants to be the main export corridor for Central Asian oil and gas, the U.S. administration is reluctant to soften its stance towards any Iranian role in the region.
The military-security-focused relations which are still dominated by regional security dynamics as well as by domestic dynamics in weak states create holes in the fabric of international society because most political and military threats travel more easily over short distances than over long ones. Most governments in Central Asia have been much more forthcoming in supporting American military operations in Afghanistan while, given their domestic constituencies; Gulf leaders (particularly Saudis) have been reluctant to provide strong, unconditional public support to the war on terror. Therefore as the Middle East has been increasingly perceived by the West as an unreliable source of oil and gas to the global market, in the aftermath of 11 September, Central Asia as well as the Caspian Sea states have proven themselves a strategic and reliable partner for the United States. In other words, Washington’s economic-energy considerations, as well as political and strategic ones, are gaining ground in the region.xviii
The competition of oil as The Revival of Great Game
The Caspian region is one of the most important focal points for the world geopolitical game. The strategic value of the region is determined by oil. Oil factor plays an important role in the international relations. It defines the strategic importance of the region and historically determines the political environment there. Great powers are historically involved in the oil rich region and countries to control them. The situation is complicated by the fact that hydrocarbon resources are not renewable and not evenly distributed around the world. The growing energy demands of the countries have made them dependant on the OPEC countries. However, the oil and gas reserves of Caspian Region have provided them with the security but at the same time lead the major players insecure. Each state has planned strategically to gain the monopoly over the region and divert the resources through its land to the international market. US has planned to divert the energy resources through Turkey to the European markets. The Baku-Tbilisi-Ceyhan pipeline is aimed to exclude Russia and Iran from the energy deals. Furthermore US have military presence in the neighboring region of the littoral states to keep a strict watch on Iran Russia and China.
Afghanistan is the shortest and the feasible energy corridor but the instability in Afghanistan does not guarantee the security of any energy deal. This gives a very clear understanding of the US presence in the region is to capture the routes and manipulate the situation accordingly. American objectives in the Middle East are two-fold: Protect Israel, and stabilize the region (and thus protect the free export of oil). Afghanistan and its neighbors are important to the United States for many reasons. The region around Afghanistan is rich in oil and gas, which, if it can be exported, will help the Central Asian states consolidate their independence and develop economically.
Barriers and Bottlenecks for investors
Management of the Gwadar Port, around 600km from Karachi and close to Pakistan’s border with Iran, is being handed over to the state-run Chinese Overseas Port Holdings after previously being managed by Singapore’s PSA International. But according to reports, India fears that the port could be used by the Chinese Navy to jostle for geo-strategic power in the region. Success of Port is essential for the growth of Pakistan’s economy. India and Pakistan are engaged in a “Security Dilemma”. Pakistan needs to initiate positive engagement. Afghanistan is a landlocked country and heavily depends on Pakistan for its economic revival. Pakistan, despite estranged relations, will have to evolve “positive incentives” to keep Kabul “engaged” in order to ensure the safe passage of natural resources of Central Asian States via Gwadar Port.
Strategic interests of all nations necessarily stem from the economic interests. Gwadar, with potential to act as a hub port, can facilitate convergence of interests of all states, bringing peace and prosperity in the area. Today, the entire globe is focused on the Middle East and Asia with the primary concern of protecting economic interests in the form of a free flow of oil from the Persian Gulf region, as well as tapping the natural resources of the CARs.xix Pakistan is likely to face multidimensional pressure for “Gwadar port handed over to China and IP-Pipeline. Pakistan should seek to act as a bridge between the Arabs and Iran. The lesson for all nations contiguous to Pakistan (with respect to the Gwadar port) is that unbalanced power, whoever wields it, is a potential danger to others.
Summation
The world is in need of energy and the regions holding them are focus of attention. The convergence of the interests of great players has led them in a confrontation cum cooperation framework. In other words, both states and companies have a role to play in the development of Port. China is not the only beneficiary of the Gwadar port. Landlocked Central Asian states are also set to make significant gains. Other then Turkmenistan, Uzbekistan can also transport its gas to the world, once the pipeline is extended to the port. For Uzbekistan, Turkmenistan and Tajikistan the shortest possible route to the sea is through Gwadar. And Afghanistan’s gateway to the world has always been through Pakistan. For a stable economy, this land locked country needs an opening to the sea, and Gwadar has the potential to provide that. Pakistan and China will not get the sole benefits of the development of Gwadar. Instead, the whole region will prosper.
While reviewing the progress of work on Gwadar-Ratodero Road, ex-Caretaker Prime Minister Mir Hazar Khan Khoso had said that the government would accelerate the pace of work on the Gwadar-Ratodero Road so that people of Pakistan could reap the benefits of the Port of Gwadar.xx On July 5th, 2013 Pakistan and China signed a bonanza of agreements, including one on a long-term economic corridor, capping a meeting between Prime Minister Nawaz Sharif and his Chinese counterpart Li Keqiang in the Chinese capital.xxi As the world’s dependency on oil resources of the Caspian region is increasing the states will not risk their gain by entering in a conflict. Hence the policies will be conflicting but cooperative measure can be taken. By virtue of geo-strategic location, Gwadar has the potential to become an economic epicenter of the region.
End Notes
ihttp://vishfulthinking.wordpress.com/2013/02/03/string-of-pearls-in-the-indian-ocean-places-or-bases/
iiHasanYaser Malik, Strategic Importance of Gwadar Port, Journal of Political Studies,Vol.19,Issue-2,2012.57-69
iiihttp://www.aaj.tv/2013/02/gwadar-port-formally-handed-over-to-china/
ivEdward C. Chow and Leigh E. Hendrix, Central Asia’s Pipelines: Field of Dreams and Reality The National Bureau of Asian research NBR special report #23 | September 2010
vhttp://www.cnas.org/node/4378,Accessed June 6th, 2013
viH. Amirahmadi, ed., The Caspian Region at a Crossroad: Challenges of New Frontier of Energy and Development, New York: St. Martin’s Press, 2000, pp.187-211.
viiDr.OzdenZeyney American Policies towards the Caspian Sea and the BTC pipeline. Department of International Relations. Yildiz University Istanbul.
viiihttp://tribune.com.pk/story/431304/china-confirms-takeover-of-gwadar-port-report/
ixhttp://blogs.cfr.org/asia/2013/02/07/will-piekos-chinas-port-in-gwadar-another-pearl-encircling-india/
xhttp://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/national/23-May-2013/gwadar-gateway-to-central-asia-trade-li
xiP.T. Hopmann, S. D. Shenfield, and D. Arel, ‘Integration and disintegration in the former Soviet Union:
Implications for regional and global security’, Occasional Paper, No. 9, Brown University, 1997, pp“Security Dilemma”. 35-36.
xiihttp://www.thefrontierpost.com/article/186066/
xiiihttp://www.marcon.com/marcon2c.cfm?SectionGroupsID=51&PageID=374
xivE. Shirley, ‘The Iranian-American confrontation’, The Wall Street Journal, May 23, 1997, p. A18.
xvPresident’s visit important step for regional cooperation, http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/columns/10-Mar-2013/strategic-dynamics-of-gwadar-and-ip
xvihttp://dawn.com/2013/03/12/moment-of-hope-ip-pipeline-inauguration/
xviiEdward C. Chow and Leigh E. Hendrix, Central Asia’s Pipelines: Field of Dreams and Reality The National Bureau of Asian research NBR special report #23 | September 2010
xviiiEdward C. Chow and Leigh E. Hendrix, Central Asia’s Pipelines: Field of Dreams and Reality The National Bureau of Asian research NBR special report #23 | September 2010
xixhttp://pakistanthinktank.org/global-strategic-economic-importance-of-gwader-port-for-pakistan-chinas-security
xxhttp://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/islamabad/30-Apr-2013/work-on-gwadar-ratodero-road-be-accelerated
xxiNawaz’s Beijing visit: Trade corridor tops MoU bonanza” http://tribune.com.pk/story/573220/nawazs-beijing-visit-trade-corridor-tops-mou-bonanza,Accessed July 10th, 2013.
