When Chinese President Xi Jinping went to Pakistan on an official visit in April 2015, he brought with him a $46 billion gift that potentially could have very significant benefits for that country, as well as have a major impact on the region. And although there remain a number of unknowns on how this massive Chinese investment package will be implemented over the next 15 years or so, it is certain that it will pull Pakistan even deeper into Beijing’s geostrategic orbit. Even though China and Pakistan have had a long and fruitful relationship for well over 50 years, if all the projects associated with this deal are ultimately implemented, it will be a game-changer for the region—equal to all the foreign direct investment inflows into Pakistan since 1970 combined and dwarfing the $7.5 billion US aid package passed by Congress in 2009.
This $46 billion deal, known as the China-Pakistan Economic Corridor (CPEC), is essentially a package of major projects that fall into two domains: transportation and energy. On the transport side, there are about $12 billion in plans to build, among other things, a rail link connecting Gwadar, a Chinese-built deep-sea commercial port on Pakistan’s southern coast, to the western Chinese city of Kashgar, some 2,000 miles to the north. Other projects include widening the treacherous Karakoram highway, itself previously built with Chinese help; upgrading Gwadar airport; building a 125-mile tunnel linking the two countries; and upgrading a number of existing highways, including the critical Karachi-Lahore section.
A number of energy projects, about $34 billion in total, are also on the drawing board, including pipelines to transport oil and gas to Kashgar; the completion of the Iran-Pakistan gas pipeline; and a number of coal, wind, solar, and hydro energy plants that would add some 10,000 megawatts to energy-starved Pakistan by 2018.
But the jewel in the crown for China is the development of Gwadar, which would give Beijing a firm and reliable long-term beachhead in the Indian Ocean and close to the Persian Gulf, effectively making it a two-ocean power.
The CPEC deal grants the Chinese 40-year operation rights to the port. This is hugely significant for Beijing because it will allow China to ship some of its oil coming from the Persian Gulf to that port and pump it through the pipelines to western China. Accordingly, with a transport route some 6,000 miles shorter, China will be able to save billions in transport costs and saved time. Indeed, Pakistan in general and Gwadar in particular will be playing a critical role in China’s joint plans for a Silk Road Economic Belt and a Maritime Silk Road linking China to Europe and beyond.
At the moment, Gwadar is being developed as a commercial port and not as a facility for the Chinese Navy—yet it could potentially be made into one in the future. Such a development would without any doubt exponentially increase Sino-Indian maritime competition in the Indian Ocean, in keeping with China’s first official defense white paper, published in early 2015, which makes quite clear that the “traditional mentality that land outweighs sea must be abandoned, and great importance has to be attached to managing the seas and oceans and protecting maritime rights and interests.”
In a move that will strengthen the defense of Gwadar, Pakistan is negotiating with China the purchase of eight diesel-powered, conventionally armed attack submarines. This acquisition, which is reportedly part of the CPEC package, would be one of Pakistan’s biggest weapons purchases ever, at about $6 billion. Pakistan’s possession of such submarines, which are very quiet and lethal, would seriously complicate any Indian attempt in blockading Karachi or Gwadar. This sale would also further entrench China as Pakistan’s principal arms provider. In 2010 alone, Pakistan was the destination for 60 percent of China’s total arms sales.
China’s economic and military involvement in Pakistan began in the wake of the short 1962 Sino-Indian war, when Pakistan felt that the US had been too quick to sell arms to India without getting any concessions from the Indians on the Kashmir issue. That is when Pakistan started to look elsewhere for international support, notably to China. But the bilateral Pakistan-China relationship really took off during the 1965 Indo-Pakistan war when the US terminated all military aid to Pakistan (and India), while China openly sided with Pakistan and threatened military action against India. Although China’s support for Pakistan during the 1971 Indo-Pakistan war was lukewarm at best, the relationship nevertheless continued to grow in the 1970s, especially in the wake of India’s 1974 underground nuclear test. In the 1980s, China’s relationship with Pakistan deepened with its significant financial support for the Pakistan-based, anti-Soviet Afghan fighters, the mujahedin. In the 1990s, the bilateral military relationship significantly deepened, especially in the field of nuclear weapons and missiles. Today, among other things, China and Pakistan jointly manufacture the JF-17 fighter jet, which will eventually become the Pakistan Air Force’s main combat aircraft.
This steadily developing bilateral relationship has been intensified by the effective end of major Western, and in particular American, military presence in Afghanistan at the end of 2014. Beijing has quickly seized this opportunity to bolster its long-term economic and strategic interests in Pakistan, making it more than ever the critical land bridge in the development of China’s Silk Road. Accordingly, Chinese leaders have been willing to invest substantially in the development of Pakistan’s decrepit infrastructure, particularly in its roads and energy sector.
Beijing knows that because of Pakistan’s domestic instability, the CPEC is a huge gamble. But if the project does not come to complete fruition—and there are a number of reasons why it may not—the bilateral relationship will nevertheless be more solid. And if the CPEC does meet all its targets, then China will have opened a cornucopia of advantages, including a link to its already very significant economic interests in neighboring Afghanistan, particularly in copper and oil.
The election of President Ashraf Ghani in Afghanistan in September 2014 has also influenced the timing of the Pakistan proposal. Since the departure of President Hamid Karzai from the political scene, Afghanistan has turned away from India and has instead embraced China and Pakistan. Significantly, the first capital that the new president of Afghanistan visited was Beijing, not Washington, let alone New Delhi. Under Karzai, who had very poor relations with Pakistan, Afghanistan was drawn more and more into India’s orbit. By the time he left office, Afghanistan had signed the Bilateral Security Agreement with New Delhi, Afghan military cadets were being trained in India, and India was about to provide weapons for the Afghan National Security Forces. To Karzai’s deep chagrin, Ghani put a stop to all these India-friendly activities and instead turned to Islamabad and Beijing.
This was an intelligent and pragmatic move that made much more sense geostrategically than looking to India for protection. By snuggling up to Islamabad, Kabul is putting pressure on Pakistan to crack down on the Taliban and their allies, who are far from a spent force in Afghanistan. Put differently, Ghani is calling Islamabad’s bluff about its repeated declarations that the Pakistan military would pursue all terrorists without exception or compromise. Ghani knows that Beijing, too, will be putting pressure on Pakistani leaders to deliver on that promise because terrorism, a lot of it originating from Pakistan, is now an issue also affecting China.
While obviously not publicly stated, the third reason for the CPEC project is to counter the US-Indian rapprochement, which has accelerated since Narendra Modi was elected as prime minister of India last year. It was a process that had already begun under President Bush, who had stated back in 2005 that the US wanted to help India become a great power. But now it has become more insistent. During his visit to India in January 2015, President Obama finalized the July 2005 US-India nuclear deal and renewed the 10-year military cooperation agreement of 2005. Defense Secretary Ashton Carter also signed a defense framework agreement during his visit to New Delhi in June 2015. Much of this rapprochement between the United States and India is driven by China’s aggressive behavior in the South and East China Seas. And this latest Chinese venture in Pakistan will no doubt fuel concerns about China’s military intentions in the Indian Ocean.
In addition to the enormous construction, logistical, bureaucratic, and manpower challenges, the China-Pakistan Economic Corridor will require the two countries to address two significant security challenges. One is the activity of insurgents in Baluchistan, the large southwestern province where Gwadar is located, and the other is the continued presence of the Taliban and their allies in the country’s northwest. China will demand forceful action on both fronts.
Baluchistan has been in the throes of a low-level insurgency since the early part of this century. Chinese workers and other non-Baluch have increasingly been the targets of Baluch insurgents opposed to large development projects. For example, three Chinese engineers were killed by a car bomb at Gwadar in May 2004. Also, the insurgents regularly sabotage oil and gas pipelines. In addition to the several Baluch insurgent groups that seek greater autonomy from Islamabad, there is also a very active terrorist group, Lashkar-e-Jhangvi, which targets principally, but not solely, Pakistani Shiites, especially the Hazaras. The group sometimes works with ethnic Baluch groups in coordinating attacks.
China shelved several Gwadar-related projects a few years back because of security concerns. Presumably Beijing has decided to go ahead now because it believes the Pakistan security forces will be able to contain these insurgents. Confirming Islamabad’s determination to prevent future attacks, the Pakistani government has promised to provide 10,000 troops, including 5,000 trained specifically in counterterrorism, to protect Chinese workers. And although there will be a lot of pressure on Islamabad to ensure that new pipelines are safe from sabotage—now that they will be transporting oil and gas to China—this will not be an easy task.
The second security challenge, the semi-autonomous Federally Administered Tribal Areas (FATA) in the northwest along the border with Afghanistan, will be even more difficult to address because of the number of disparate actors present and their differing political agendas. There are three broad groups hiding in that frontier region: the Afghan Taliban, the Pakistani Taliban, and all the non-locals, which include the Muslim Uighurs from China’s western Xinjiang Province. The Chinese leaders have been putting pressure on Pakistan to ruthlessly pursue all these groups, in particular the Uighurs of the al-Qaeda–linked separatist East Turkestan Islamic Movement (ETIM).
Many of the ETIM fighters fled to Pakistan along with other al-Qaeda and Taliban fighters following the ouster of the Taliban from power in Kabul in 2001. While the actual number of Uighur operatives in the tribal areas is probably not very high, they have managed to launch raids into Xinjiang Province from those lawless areas. This has deeply upset the Chinese leaders, and they have indicated their displeasure very publicly, especially after the deadly attack in the western city of Kashgar (future destination of those new pipelines) in July 2011. In the wake of these attacks, Beijing is reportedly interested in establishing bases either in FATA, which border Afghanistan in the northwest, or in the Federally Administered Northern Areas (FANA) to the east, which border Xinjiang Province. This straw in the wind has drawn the close attention of an already edgy India, which is uncomfortable with the alleged presence of 7,000–11,000 Chinese soldiers in FANA.
In the wake of a terrorist attack on Karachi’s international airport in June 2014, Islamabad ended its unsuccessful negotiations with the Pakistani Taliban, and ordered its armed forces to launch a military operation in North Waziristan and later in the Khyber Agency in FATA. Reportedly, Beijing—like Washington—had been pushing for this course of action. While the Pakistani military has successfully hunted down many of the terrorists, including the members of the ETIM, many of them have found refuge across the border in Afghanistan. Nevertheless, the year-long operation, which has brought the total number of Pakistani troops in FATA to some 200,000, has managed to degrade, disperse, and disrupt the terrorists’ capabilities and networks.
Importantly, following the horrendous terrorist attack on a school in Peshawar that killed 148 people, principally children, in December 2014, the military has repeatedly stated that it was targeting allterrorist groups. Presumably, this means that the military no longer differentiates between the “good” Taliban, who do not attack the Pakistani state and who could potentially be useful to have as a bargaining chip in Afghanistan, and the “bad” Taliban, who attack everyone, including Pakistani targets.
If the CPEC deal becomes a reality, it would be very good news for Pakistan. It would certainly help the country deal with some of its major developmental issues, including upgrading some of its decrepit infrastructure and correcting its significant energy shortage.
Reportedly, Pakistan’s economy loses up to 6 percent of GDP because of power and infrastructure bottlenecks. That well over 1,000 people died in Karachi alone in June because of the lack of electricity to power air conditioners is an indication of how dire the energy situation is in Pakistan.
Beijing is keenly aware that Pakistan’s domestic problems make it a problematic ally and partner. However, China also knows that, unless something is done to very significantly assist Pakistan, this nuclear-armed country of 200 million could collapse as a functioning state in the near future. Beijing knows it would not be spared if such a nightmare scenario ever became reality. So, in addition to its potential economic benefits, the CPEC represents China’s best hope against regional chaos.
For CPEC to move forward, China will undoubtedly require that the Pakistani military continue to relentlessly hunt down the Taliban and all its ideological fellow travelers, including in particular the ETIM, in the tribal areas. Pakistan should undoubtedly have its own reasons for wanting this as well, having suffered some 50,000 dead and billions in lost revenue as a result of terrorist activity. The degrading of the Taliban et al. in the tribal areas would also hurt the Afghan Taliban’s ability to wreak havoc in Afghanistan, allowing the government to get on with the job of reconstruction after 30 years of war. If such a process does not occur, the Taliban will dominate Kabul and the ETIM would have a friendly rear base from which to potentially launch attacks into Xinjiang Province. This is why China hosted exploratory peace talks between the Taliban and the Kabul government, with Pakistani army intelligence present, in Urumqi, the capital of Xinjiang, in May.
But if the new economic corridor succeeds there will be losers as well as winners. Although India is protesting about CPEC because some of the infrastructure traverses contested Pakistan-administered Kashmir, it’s not making too much of a fuss about Gwadar, not just yet. That could change quickly, however, if Gwadar becomes a full-fledged facility for the Chinese Navy.
Nor would the US see its national interests served by such an upgrade, which would effectively make Beijing a two-ocean power. The big question for Washington is how will this huge Chinese investment affect the Obama administration’s “rebalancing” of American assets to the Asia-Pacific. Initially, it will probably be minimal, given that Washington’s “pivot” is really focused on the western Pacific and the South China Sea rather than South Asia and the Indian Ocean. However, if Gwadar does develop into a Chinese naval facility in the future, Washington will need to recalibrate its response accordingly, as this would have a direct bearing on China’s ability to deploy naval assets in the Indian Ocean.
US relationswith Pakistan today are good, and it is important they remain so in the future. Although the US has for all intents and purposes been displaced by China as Pakistan’s major patron, it is critical that Washington remain profoundly engaged with Islamabad. Pakistan is simply too important and too vital strategically to be shoved to the back or even to the side. Accordingly, Washington will need to be supportive of Islamabad’s counterterrorism efforts while at the same time monitoring closely China’s growing military and economic presence in Pakistan. Not to do so could otherwise lead to nasty surprises down the road—a road that will increasingly be paved with Chinese power and money.