China’s investment in the construction of the Port of Gwadar in western Pakistan has fueled speculation for nearly a decade that the Pakistani port is a keystone of China’s political, economic, and military ambitions in the Indian Ocean—similar to Singapore’s position in Southeast Asia at the height of the British Empire.1 Coupled with investment in Gwadar is the possible construction of a 1,500-mile oil pipeline running from the port to western China, which ostensibly would reduce China’s dependency on vulnerable oil imports transported through the Strait of Malacca.
On the surface, the argument is compelling and appears strategically sound. In 2001 China agreed to contribute funds to the construction and development of a modern deepwater port at Gwadar in the Baluchistan region of western Pakistan. Construction of the first phase of the project began in March 2002, with China providing $198 million in funding and Pakistan providing $50 million.2
Pakistan views a modern port at Gwadar as key to developing the Baluchistan region of Pakistan and as a regional hub for the shipment of goods to and from Pakistan and to and from landlocked nations in Central Asia.3 Memories of India’s blockade of Karachi during the 1971 Indo-Pakistani War and Gwadar’s position 450 miles west of Karachi also have led some in Pakistan to view Gwadar as strategic depth for Pakistan’s navy in the event of a conflict with India.4
A Port—or a Naval Base as Well?
China’s investment in the development of Gwadar and its close political and military relationship with Pakistan have led to a significant amount of speculation about Gwadar’s future as a base to support operations by the People’s Liberation Army Navy (PLAN) in the Indian Ocean. In May 2001, shortly after China committed to investing in the first phase of Gwadar’s construction, a Pakistani journal triumphantly reported that a Chinese naval fleet was to be stationed in Pakistani waters.5 From there the issue was seized on in both the United States and India: A 2004 contractor study for the Department of Defense titled Energy Futures in Asia lists Gwadar as a large commercial and naval port on a map of “China’s String of Pearls” while asserting that Gwadar is the centerpiece of China’s investment in Pakistan.
While the report did not say that Gwadar would be a Chinese naval base—rather, just that China was helping Pakistan build a commercial and naval port and that Pakistan could grant Chinese warships (including submarines) access to the port—it is still used as the primary evidentiary base for saying that China is either building or has built a naval base at Gwadar.6
Energy Futures in Asia has since been consistently cited in articles, academic papers, and official reports as credible evidence of China’s long-term intentions in Gwadar. Those include official U.S. government reports from the Congressional Research Service and U.S. Joint Forces Command. Indian references to Gwadar’s future as a Chinese naval base in official and unofficial sources are too numerous to count, but again, most cite Energy Futures in Asia as a primary source for their assertions.7
Speculation Clashes with Reality
For all the talk about Gwadar’s future as a Chinese naval base, the reality does not even come close to matching the speculation. First, despite Chinese investment in the construction of the port, management of the port was awarded to Port of Singapore Authority (PSA) in February 2007, calling into question just how involved China will be in the future of the port.8 The fact that Beijing notified Islamabad in August 2009 that China would not provide funding for the construction of an oil refinery at Gwadar further reinforces that point.9
Second, for all the talk regarding the future of Gwadar as a regional maritime hub, it is clear that little progress has been made on the expansive second phase of the project, which was to be completed sometime in 2010 after the port opened in 2007. Third, the Pakistani press reports that much of the equipment at Gwadar, including gantry cranes, navigation lights, refrigerated container stacking facility, and harbor tug boats are in dilapidated condition due to a lack of regular maintenance.10
The press in Pakistan further reports that a mere three years into the deal, the 40-year port management contract with PSA has been a disaster, with PSA refusing to invest the $525 million for further development it had promised to contribute in the first five years of the contract. Also according to Pakistani news accounts, in the first three years of the port’s operations, the government has had to subsidize all cargoes delivered and Gwadar will have to continue to rely on government subsidies for several more years to maintain any degree of viability.11
Fourth, while Gwadar’s future as a commercial hub appears to be questionable, its military utility is even less certain. The port itself occupies a small peninsula connected to the mainland by a landbridge about half a mile wide, making it an exposed and vulnerable target that would require significant investment in air defense, weapon storage, command and control, and hardened structures to make it even minimally useful as a naval base.12
In addition to conventional military threats, unconventional threats also make Gwadar an unlikely operating base for Chinese warships. The Baluchistan region of Pakistan is rife with separatist activity. In 2004 three Chinese engineers were murdered in Gwadar, while in 2007 a bus carrying Chinese engineers was bombed in southwestern Baluchistan, killing several policemen.13 Most recently, in July 2010 Chinese oil workers staying at a hotel in Gwadar were subjected to a rocket attack.14 While the conventional military utility of Gwadar is not as much of a problem if the PLAN desires to use it only for basic logistics support, its poor infrastructure and the danger of insurgent attacks make it unlikely the PLAN views it as a viable port for the support of its forces given more attractive options such as Salalah in Oman or even Karachi in Pakistan.
The Promise of an Oil Pipeline . . .
One other element that makes Gwadar an unlikely base for PLAN forces is Pakistan’s economy and politics. Ostensibly the primary reason for development and construction of a deepwater port in what was once a quiet fishing village was to serve as an economic catalyst for further development in impoverished western Pakistan and to enhance Pakistan’s regional economic stature with development of a regional maritime hub. Thus, should Gwadar eventually achieve some level of viability as a key component to Pakistan’s economic growth, it is difficult to envision Islamabad jeopardizing such an important facility by granting basing access to the PLAN or any other foreign navy. That is the argument Pakistan Navy Lieutenant Commander Ammad Hassan developed in his Naval Postgraduate School thesis, in which he wrote that a key element to Gwadar’s future economic viability would be to keep foreign military forces out of the port.15
One final aspect of China’s investment in Gwadar is a much-discussed 1,500-mile pipeline from the port to Xinjiang Province in western China. It is widely reported that the pipeline would permit tankers carrying oil to China to bypass the Strait of Malacca, mitigating a significant strategic vulnerability.
As with the rest of China’s involvement in construction at Gwadar, speculation does not match reality. Chinese experts have talked about the project to some extent, but it is clear interes is far higher among Pakistanis—and as a consequence, in India—than it is in China.16 In May 2006, Pakistani Prime Minister Shaukat Aziz said that Pakistan and China were considering a feasibility study regarding a pipeline from Gwadar to western China.17 Two years later, during a visit to China, Pakistani President Pervez Musharraf personally lobbied Chinese President Hu Jintao to provide funding for an energy corridor through Pakistan to western China.18
Despite high-level attention to the project from Pakistan’s leaders, their counterparts in Beijing did not reciprocate. In fact, Beijing’s decision in August 2009 to withdraw funding for an oil refinery at Gwadar casts additional doubt on China’s interest in building such a pipeline. That Beijing’s decision not to invest in a refinery followed a January 2009 decision by the United Arab Emirates to suspend funding for another refinery in Baluchistan calls into question Islamabad’s designs for a $12.5 billion oil city in Gwadar, further undermining prospects for Gwadar’s economic future.19
. . . And Why It Wouldn’t Work
China’s lack of interest in funding a pipeline from Gwadar to Xinjiang appears to be a realistic assessment from the standpoint of both economics and security. First, running oil through a Pakistani pipeline will not enhance China’s energy security. Despite concern over the security of seaborne oil, pipelines are far more vulnerable to both state and nonstate forces. In a conventional war, an opponent having precision-strike capability or special-operations forces, and who is serious about interdicting a nation’s oil supply, could target any number of vulnerable points on a pipeline in remote areas far from civilian populations. That course of action avoids the environmental consequences of targeting an oil tanker on the high seas or the diplomatic repercussions of attacking a ship with a multinational crew. With regard to nonstate actors, pirates have had very little success attacking oil tankers, while insurgents and terrorists in Colombia, Nigeria, and Iraq have successfully attacked pipelines on several occasions.20
The vulnerability of a pipeline to insurgents is particularly instructive, as the proposed line runs through an area of Pakistan plagued with separatist activity; Chinese workers there already have been attacked, and some killed. Security would thus be difficult during both the construction and operation of the pipeline. Globetrotting journalist Robert D. Kaplan reports that Baluch nationalists told him during a visit to Pakistan, “No matter how hard [the government tries] to turn Gwadar into Dubai, it won’t work. There will be resistance. The pipelines going to China will not be safe. They will have to cross through Baluch territory, and if our rights are violated, nothing will be secure.”21 Additionally, any oil pumped from Gwadar to China still would have to be delivered to the port by sea, so while the pipeline would mitigate some of the perceived vulnerabilities of seaborne oil, the possibility of maritime interdiction would still be an issue.
Economically, a pipeline running through Pakistan and into China makes even less sense. While such a structure ostensibly would reduce the transport distance for the oil by more than 4,500 miles, this is a case where the shortest distance between two points is not a straight line.22 First, oil transported by sea is considerably cheaper than oil transported through pipelines—the latter often imposing transportation costs three to four times greater than those of seaborne transport.23 That fact alone could make pumping oil through a Pakistan-China pipeline more expensive than sea transport.
However, even that does not tell the entire story. A Pakistan-China pipeline would traverse some of the most forbidding terrain in the world, including mountain passes at elevations exceeding 15,000 feet. That would require sufficient power generation in remote areas to pump the oil from sea level through the mountains with possible additional measures taken to prevent the oil from freezing at high altitudes in winter.
By way of comparison, Ecuador’s Trans-Ecuadorian Pipeline (TEP) climbs from an elevation of 1,000 feet above sea level to 13,300 feet in the relatively short distance of 150 miles. On the surface, the success of the TEP suggests that a similar Pakistan-China pipeline is technically and fiscally feasible. However, at 350 miles in length, the TEP covers only about one-fifth the distance a Pakistan-China pipeline would—and the TEP does not transit a region plagued with an active insurgency.24
Then, assuming those obstacles are overcome and oil reaches Xinjiang Province, at least some of it likely would be sent to China’s major population centers—even farther east—imposing additional transport costs. All the aforementioned factors have led some to conclude that overall transport costs for oil pumped through a Pakistan-China pipeline could approach $15 per barrel versus approximately $2 per barrel for oil shipped by sea from the Persian Gulf to Chinese ports.25 Assuming 200,000 barrels per day would be pumped through the pipeline that would lead to an added expense of almost $1 billion per year. Even if the transportation costs of oil pumped through a pipeline were halved, to about $8 per barrel, at 200,000 barrels per day the added annual expense is still almost $450 million.
A Significant Break in the String
Despite almost a decade of speculation from academics, journalists, and government officials, there is no evidence to suggest China plans to base warships at the Pakistani port of Gwadar, or that Pakistan even wants China to base warships there. In fact, China’s lack of investment in the port—beyond funding of the first phase of construction—Pakistan’s failure to further develop the port, the instability in Baluchistan, and the exposed nature of the facility itself, overwhelmingly bolster the conclusion that China will not pursue further involvement in Gwadar, either commercial or military. The fact that PLAN warships have been operating in the Gulf of Aden on counterpiracy patrols since January 2009 but have not made a single visit to Gwadar during that time further underscores that point.
While PLAN Senior Captain Xu Qi, writing in a Chinese military journal, cites China’s investment in the development of a commercial port at Gwadar as key to expanding China’s geostrategic influence in the Indian Ocean, in the same paragraph he also discusses Chinese investment in Russia, Africa, and the Caribbean, as well the importance of China’s membership in the World Trade Organization, as important elements to the development of China’s maritime geostrategic relationships.26 Given the overall context of Senior Captain Xu’s argument, it seems highly likely that he is discussing China’s investment in Gwadar and other ports as economic and diplomatic initiatives, as opposed to military projects.
Beyond the port itself, it is clear that China’s senior leaders are not interested in the construction of an oil pipeline from Gwadar to Xinjiang Province, as it would be costly to construct and operate and would not contribute to China’s energy security. Even if Pakistan were to bring stability to Baluchistan, the project’s lack of economic viability makes it unlikely Beijing will give it consideration in the future.
While China will continue to maintain its positive political, economic, and military relationships with Pakistan, and while Pakistan will continue to be an important market for Chinese weapon systems, it is unlikely that Gwadar will become a base or even an important port of call for PLAN warships. It is even less likely that China will invest in the construction of a costly pipeline to bring oil from Gwadar to China. Thus despite China’s initial investment in the port, Gwadar is and will remain a counterfeit pearl, and a significant break in China’s string in the Indian Ocean.27
1. “Chinese Naval Fleet to be Stationed in Pakistan Waters,” The Newspaper Today, 21 May 2001. (http://www.hvk.org/articles/0501/76.html)
2. LCDR Ammad Hassan, Pakistan’s Gwadar Port—Prospects of Economic Revival, (Monterey, CA: Naval Postgraduate School, June 2005). http://www.nps.edu/Academics/Centers/CCC/research/StudentTheses/Hassan05.pdf
3. Ibid.
4. Soda Ramachandran, “China’s Pearl in Pakistan’s Waters,” Asia Times Online, 4 March 2005. (http://www.atimes.com/atimes/South_Asia/GC04Df06.html)
5. “Chinese Naval Fleet,” op. cit.
6. Julie MacDonald, Amy Donahue, and Bethany Danyluk, Energy Futures in Asia, Booz-Allen Hamilton Report Sponsored by the Director of Net Assessment, November 2004.
7. James R. Holmes and Toshi Yoshihara, “China’s Naval Ambitions in the Indian Ocean,” in China’s Energy Strategy – the Impact on Beijing’s Maritime Policies, (Annapolis, MD: Naval Institute Press, 2008), p. 125.
8. “Singapore Takes Over Pakistani Port,” Asia Times Online, 8 February 2007. (http://www.atimes.com/atimes/South_Asia/IB08Df03.html)
9. “China calls halt to Gwadar refinery,” Asia Times Online, 14 August 2009. (http://www.atimes.com/atimes/South_Asia/KH14Df02.html)
10. “Port Equipments Rusting at Gwadar,” The Nation on Web, 11 March 2010. (http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/Business/11-Mar-2010/Port-equipments-rusting-at-Gwadar)
11. “Gwadar Port Deal With PSA,” Daily Times, 3 January 2010. (http://www.dailytimes.com.pk/default.asp?page=2010%5C01%5C03%5Cstory_3-1-2010_pg5_1)
12. Holmes and Yoshihara, op. cit., pp. 126-127.
13. “China’s Pearl Loses its Luster,” Asia Times Online, 21 January 2006. (http://www.atimes.com/atimes/South_Asia/HA21Df03.html) and “Why are Chinese Engineers Being Targeted?” Daily Times, 20 July 2007 (http://www.dailytimes.com.pk/default.asp?page=2007%5C07%5C20%5Cstory_20-7-2007_pg3_1)
14. “Chinese Engineers Escape Rocket Attack,” Sri Lanka Guardian, 10 July 2010. (http://www.srilankaguardian.org/2010/07/chinese-engineers-in-gwadar-escape.html)
15. Hassan, op. cit.
16. Andrew Erickson and Gabriel Collins, “China’s Oil Security Pipedream,” Naval War College Review, Spring 2010.
17. “Pakistan and China Considering Oil Pipeline From Gwadar,” Daily Times, 24 May 2006. (http://www.dailytimes.com.pk/default.asp?page=2006%5C05%5C24%5Cstory_24-5-2006_pg1_1)
18. “Musharraf Makes Chinese Oil Plea,” BBC News, 15 April 2008. (http://news.bbc.co.uk/2/hi/south_asia/7347799.stm)
19. “China calls halt,” op. cit.
20. Erickson and Collins, op. cit.
21. Robert D. Kaplan, “Pakistan’s Fatal Shore,” The Atlantic, May 2009. (http://www.theatlantic.com/magazine/archive/2009/05/pakistan-8217-s-fatal-shore/7385/2/)
22. Gurpreet S. Khurana, “China’s String of Pearls in the Indian Ocean and its Security Implications,” Strategic Analysis, January 2008.
23. Erickson and Collins, op. cit.
24. LCDR Corey S. Johnston, Transnational Pipelines and Naval Expansion: Examining China’s Oil Insecurities in the Indian Ocean, (Monterey, CA: Naval Postgraduate School, June 2008) http://www.nps.edu/Academics/Centers/CCC/Research/StudentTheses/johnston08.pdf
25. Erickson and Collins, op. cit.
26. Xu Qi, “Maritime Geostrategy and the Development of the Chinese Navy in the 21st Century,” translated by Andrew S. Erickson and Lyle J. Goldstein, Naval War College Review, Autumn 2006.
27. Daniel J. Kostecka, “Hambantota, Chittagong, and the Maldives—Unlikely Pearls for the Chinese Navy” China Brief 10, Issue 23, 19 November 2010. (http://www.jamestown.org/programs/chinabrief/single/?tx_ttnews%5Btt_news%5D=37196&tx_ttnews%5BbackPid%5D=25&cHash=9c98f42516)