Thursday, 8 June 2017

China-Pakistan Economic Corridor--Impact on India

       On 7June 2017, I delivered an address at the National Police Academy at Hyderabad on the subject of "China-Pakistan Economic Corridor-Implications for India". Main text is as below:


 To understand the raison d’être of the China-Pak Economic Corridor, it is essential to first have an idea of the Sino-Pak relationship and where it stands today. We know quite well what Pakistan wishes from this relationship, but I will trace the evolution of Chinese interest in Pakistan to indicate what Pakistan means for China. The popular conception is that the basis of this relationship, indeed the fulcrum, is the mutual desire to keep India under duress and strategically unbalanced. While this might be the correct prognosis, yet it would be a fallacy to assume that this is the sum total of the Sino-Pak relationship. There is much more and much that is often not discussed or spoken about in public debate. Perhaps we wish to reduce this relationship to simplistic terms for convenience.
     Soon after the Second World War two very cataclysmic and important events took place in Asia. The first was the independence of India from Britain in August 1947 and the second was the formation of the People’s Republic of China in October 1949. In the first case while independence of India was indeed very welcome and a joyous occasion, yet it was accompanied by the tragedy of partition. In place of British India that stretched from the Khyber to the Bay of Bengal, arose the two newly independent states of India and Pakistan on the sub-continent. The real tragedy of partition was not only that the formidable power of the Indian Army was reduced; with nearly 2/5ths of it going to Pakistan, but very soon the two states were at each others throat; with a raging conflict in Kashmir. 
    On the other hand for the first time in nearly a century, a united China emerged under a strong central government that was determined not only to unite all former Chinese ruled territories under the control of the People’s Republic, but were conscious of the role of China as great power in the power matrix of Asia. Tibet that had been enjoying quasi independence was soon to bear the brunt of a Chinese invasion as they incorporated Tibet in the larger family of the Chinese nation. The magnificent barrier of the Himalayas that separated the Indian sub-continent from Central and East Asia, would now be in contention and would no longer keep India safe and immune, as a strong, vigorous and a reunited China projected its power all along the northern frontiers of India. The fact that the two new states of India and Pakistan were at logger heads, with visceral hatred towards each other was not lost on the sharp political mind of the new rulers of China. They knew that that the South Asian power calculus had turned inward and against itself; thus making it easy for any potential rival to play the two states against each other.
     The main Chinese concern has always been to negate and neutralise any pressure on their position in Tibet. The Chinese realised that there was only one state that could make their position in Tibet untenable and that was India. The links between Tibet and India were far more than those that existed between China and Tibet. Not only was access to Tibet much easier from India, but Tibet had trade, cultural and religious links with India that China could never match. Therefore it was in Chinese national interest to see that warm relations were maintained between China and India and if that could not be done for various reasons then alternatives had to be found. That alternative in the Chinese mind was Pakistan. Thus you see through out the period of warm friendly relations between India and China that lasted from 1950 to the late 1950s, the Chinese never lost sight of the fact that they might need Pakistan one day to keep India in check. Through out this period although the relations between China and Pakistan were cool because of Pakistan’s links with the western inspired military pacts, the Chinese never criticised or caused any problems for Pakistan. Even as far as Kashmir was concerned, the Chinese very careful never to back India’s position in writing, lest this annoy the Pakistanis. As China’s relations with India worsened, Sino-Pak bon homie increased.
      We all know what happened in 1962, the Indo-Pak conflict of 1965 and 1971; so I will not spend time on that, but move to present times and to assess where the Sino-Pak relations stand at this point in time. 
        A Chinese diplomat once famously described Pakistan as ‘China’s Israel’. Superlatives have been used in the past and are still used with great frequency and often by both Pakistan and China to describe the depth and range of their relationship; the latest one being used by the Chinese President Xi Jinping to state that China and Pakistan are ‘all weather strategic partners’. Further that relations were based not [emphasis added] on ‘common values and systems’ but on ‘same or similar strategic and security concerns’.  There is no doubt that the bilateral relations are firm and that the cement that has held the relationship on a firm footing over the years; the anti- India syndrome, still retains lustre as the main motivating factor. However the concept of common security concerns has been given the added connotation that they encompass global terrorism, maritime security and Pakistan’s support to China’s role in the Indian Ocean region. This collaboration means that both China and Pakistan, as President Xi Jinping put it, are countries with a ‘shared destiny’. 
      In present times, three issues dominate the Sino-Pak political and geo-strategic landscape. These are the situation in Xinjiang leading to unrest and Chinese strong arm methods to control it. The second is the nuclear nexus between China and Pakistan and  the continuing large scale arming and the military supply relationship between China and Pakistan and the third is the CPEC. All the three issues, as they pan out, will have a major and decisive impact in the future. For India these are issues that directly impact its national security and therefore India cannot but take serious cognisance of the developments taking place.
[a] The Xinjiang issue.
      That China is facing increasing dissidence in recent times in its minority areas is a statement of fact that the Chinese themselves readily admit. In recent times Chinese official media has consistently reported continuing violence. For example, that more than 10 members of the Xinjiang ‘separatist forces’ knifed to death more than 29 civilians at Kunming Railway station; seriously injuring another 130. This occurrence was labelled as a ‘terrorist’ action and the Chinese also admitted that such violent attacks have been increasing in Xinjiang since 2009. The Regional Public Security Bureau reported that about 190 such attacks have taken place in 2012, admitting to an increase over 2011 by a ‘significant margin.’ It has also been admitted that Uyghur ‘separatists’ have changed tactics and have started attacking civilians as well as the ‘symbols’ of governmental authority such as police stations, police vehicles, railway stations and regional party and government offices.
    To keep Xinjiang, which is about 1/6th of the Chinese landmass, under tight control is an absolute strategic necessity for China. It brooks for no laxity. Strategically located Xinjiang is the home of China’s nuclear testing facilities [Lop Nor]. It is also China’s largest gas-producing and second largest oil-producing region, with one of the largest networks of pipelines in the country and if China is to access the vast Central Asian oil and gas reserves, a network of pipelines would have to traverse through this region to reach the markets of eastern China.
     In the main the fulcrum of Chinese policies towards Xinjiang has rested on two pivots. Firstly they have flooded Xinjiang with Han Chinese migrants from mainland China in a bid to change the demographic profile of the province. From barely constituting 6 per cent of the population at the time of the founding of the People’s Republic in 1949, the Han Chinese are now about 44 percent of the population.    Secondly, the Chinese have tried to assimilate the Uyghurs into the mainstream; but this has only led to complaints of discrimination, restrictive religious practices and the suppression of Uyghur language education. Many madrassas continue to be hubs of radical ideology. Similarly in their bid to ‘modernise’ the ancient city of Kashgar, the Chinese have destroyed large parts of the city in order to develop modern shopping malls and housing complexes with running water and electricity; much to the chagrin of some Uyghurs who see this as yet another attempt on the part of the Chinese to destroy their cultural heritage and identity.    
        Xinjiang has international borders with India’s Ladakh, Pakistan Occupied Kashmir [POK], Afghanistan, Kyrgyzstan, Tajikistan and Kazakhstan. In 2002, Pakistani forces captured 22 Uighurs crossing the border, suspecting them of preparing to carry out a terrorist attack in China. This was followed by the assassination by Pakistani forces of Hasan Mahsum, head of the East Turkestan Islamic Movement, which China has classified as a terrorist organisation for its activities in Xinjiang and is based in Waziristan [Pakistan]. China has aimed at maintaining a positive image in the Muslim world to avoid attacks on its soil and its interests abroad, and it has sought more support from Pakistan on its policies towards Xinjiang after 9/11.  
   For China the support provided by Pakistan is vital, for not only does Pakistan a major Muslim state, wipe out Chinese high handed ness in Xinjiang, but provides cover in the Muslim world against any criticism of China.
[b] The Nuclear Issue
         Chinese analysts insist that it was not China that initiated nuclear co-operation between the two countries. They maintain that:
           Fundamentally speaking, Pakistan developing its nuclear program is to safeguard its own national security, as its conventional military power is much weaker than India and India has been secretly developing nuclear weapons much earlier. Seeking cooperation with the outside power is an important way to develop its nuclear weapons. Due to the increasingly close China-Pakistan political relations, Pakistan opens the door of the China-Pakistan nuclear cooperation at the beginning of the start of its nuclear program, and China is also willing to carry out cooperation with Pakistan in the nuclear area.
 As to when this nuclear co-operation began, Chinese analysts maintain that:
 It is a difficult thing to confirm the specific starting nuclear cooperation time between China and Pakistan, but the last will and testament of Zulfikar Ali Bhutto reveals that the China-Pakistan nuclear cooperation began in 1976 and he has made 11 years of efforts to work it out prior to this.
       However Chinese analysts insist that China-Pakistan nuclear cooperation was mainly focused on the nuclear reprocessing technology rather than on uranium enrichment technology. The key factor is the official China-Pakistan nuclear cooperation agreement signed in 1986; it is the agreement that underlines the basic relationship of nuclear technology transfer between China and Pakistan. 
     The Chinese do not buy the thesis that nuclear co-operation cannot be extended to Pakistan on the same basis as India because ‘India and Pakistan are different countries with different histories and different needs.’ China has criticized the ‘discriminatory’ nature of the NSG waiver given to India and has demanded the same treatment for Pakistan. China stands for equivalence between India and Pakistan and stresses that cooperation between the United States and India has become an important motivation to strengthen nuclear relations between China and Pakistan. The evolution of US-India civil nuclear agreement and the United States positively helping India look for special NSG waiver to permit nuclear trade with India has led to the ‘discrimination’ of international nuclear regime towards Pakistan. As a key friend of Pakistan, China cannot fail to take into account Pakistan’s nuclear cooperation requirements [emphasis added].
       As far as civilian nuclear co-operation is concerned, the Chinese openly admit that they supplied the first nuclear power station in 1992 that was built at Chashma and became operational in 2001. The contract for the second nuclear power plant was signed on 5 May 1004 [Chashma-2] on the eve of China joining the Nuclear Suppliers Group [NSG]. As the contract per-existed China’s date of joining the NSG, it was exempted from NSG requirements of full scope safeguards. In October 2008 China contracted to build two more nuclear power plants [Chashma-3 and Chashma-4]. In February 2010 China also agreed to finance these two nuclear power plants by providing a loan to Pakistan, but also acknowledged that these plants would be under IAEA safeguards. China, in what was seen as significant back-tracking, however claimed in September 2010 that these two plants were based on the ‘contracts of 2003’ and therefore not subject to full scope safe-guards that NSG membership mandated. Further press reports indicated that China is expected to build two more nuclear power plants at Karachi for which it is expected to extend a loan of US $6.4 billion to Pakistan. Similarly other reports indicated that China and Pakistan are discussing building three new nuclear power plants at Muzaffargarh estimated to cost US $ 13 billion. In the future also China will continue to play a key role in the efforts of Pakistan to increase its nuclear energy output from 770 megawatts to 8000 megawatts by 2030. 
       As for the future, the Chinese are working assiduously towards helping Pakistan gain a special NSG waiver on the same basis as was granted to India [emphasis added]. It follows therefore that corresponding to the Indo-US nuclear deal, a similar civilian Sino-Pak nuclear deal is perhaps on the anvil with China waiting for an opportune moment. The Chinese feel that this would considerably reduce ‘anxiety’ of the international community about the present nature of Sino-Pak nuclear co-operation. There is no doubt that the Chinese would like to restore the equivalence between India and Pakistan in the nuclear field and to ensure that Indian nuclear ambitions remain confined within the ambit of South Asia. 
[c] The Sino-Pak Military Supply Relationship
       The military supply relationship between China and Pakistan had modest beginnings. From a base of US $ 250 m arms supplied in 1966, it rose to about US $ 7 billion for the period 1978-2008.  However in the five year period 2008-12, Chinese arms exports world-wide rose by an unprecedented 162 per cent, with China’s share of global arms exports rising from 2 per cent to 6 per cent. Thus China has overtaken Britain to become the world’s fifth largest exporter of arms. Of China’s world- wide exports nearly 55 per cent goes to Pakistan. Thus China today is the most important source of arms supplies to Pakistan and according to Pakistan its most reliable partner.
       Apart from being Pakistan’s principal supplier of arms, China has also helped Pakistan with joint projects that produce armaments ranging from fighter jets, to Al-Khalid tanks that China granted license production and tailor made to modifications based on the initial Chinese Type 90 and/or MBT-2000 tanks; to guided missile frigates, such as the F-22P frigate. Negotiations are reportedly taking place for the supply of 6 new Chinese submarines to Pakistan. China is supplying its most advanced homemade combat aircraft, the third-generation CAC J-10 fighter jet, to Pakistan in a deal involving the supply of 36 fighter jets worth around US$6 billion. Pakistan received 42 JF-17 fighter aircraft and has since started co-production of the JF-17 Thunder jets in Pakistan that can be used for delivering nuclear weapons. China supplied 4 Air- borne early warning [AWACS] 2DK-03 aircraft and allied control systems. In 2011 China launched a communications satellite [PAKSAT-IR] for the Pakistani Army. Pakistan is also reportedly hosting at Karachi a Chinese space communication facility. 
     However it is in the field of missiles that China’s help has been most potent. China has helped Pakistan to manufacture solid propellant medium range ballistic missiles [MRBMs]. The Pakistani Shaheen series of missiles, both mark-1 with a range of 750 kilometers and the mark-II version with a range of 1,500-2,000 kilometers manufactured at Fatehjung are nothing but complete replicas of the Chinese M-9, M-11 and the M-18 missiles. These missiles can be used for delivery of nuclear warheads and are capable of hitting population centers in India. Reportedly the Pakistani built Babur cruise missile has dimensions that exactly match the Chinese built Hong Niao cruise missile. 
            It is nevertheless clear that as for the future China’s continued support for Pakistan is based on its long-term strategic perspectives. These would primarily be in three broad areas: [a] to continue to augment Pakistan’s military capabilities and prowess by persistently playing a pivotal role in the military supply relationship, since this enhances Pakistan’s value to be able to contain India’s power and influence. Indeed, over the past five decades China has regarded Pakistan as a useful counterweight to India in South Asia. The relationship with Pakistan has enabled China to pursue an India strategy without any major military investment, thus enabling it to pay attention to other areas of more immediate interest. Little empirical evidence exists to suggest that China might abandon this approach anytime soon, but there is some reason to believe that the strategic relationship with Pakistan might actually be tightening. [b] Pakistan’s strategic location remains vital for China as it serves the purpose of being a ‘gateway’ to the Middle-East and a link to that region’s fossil fuel resources.[c] China also realizes that to contain unrest in Xinjiang and to prevent ‘terrorism,’ from spreading to other parts of China the co-operation of Pakistan is necessary. It would indeed be a major strategic default for China if the Pakistani state were to collapse or be incapable of taking military action against Uyghur jihadi elements. Chinese strategic analysts often reiterate that China has always ‘respected’ Pakistan’s security concerns and supported Pakistan to the maximum extent, consistent with its own resources. They aver that as far as China is concerned Pakistan will always play an important role in China’s neighbourhood policy due to its strategic position.  
    For Pakistan, the support and friendship with China will remain an absolute necessity for the fulfilment of its foreign policy objectives. China’s continued support is also necessary for the promotion of Pakistan’s vital national interests vis-a-vis India. China is today its largest benefactor in the economic, strategic and geo-political spheres that has effectively bolstered Pakistan’s regional strategic capabilities. Pakistan would continue to need Chinese support in counterbalancing India’s regional dominance in the near future. The need for continued Chinese support would become even more necessary as the US withdraws from Afghanistan and as its interest in this region wanes. As the prime source of jihadi terrorism, the Pakistani state is likely to become even more unwelcome within the western security establishments and thus likely to lose valuable funding for its armed forces.
   Now let me turn to the CPEC. At its very conception the CPEC is designed to stabilise Pakistan. China with its very deep and varied investments in Pakistan cannot afford for the Pakistani state to collapse for whatever reasons. It represents a consolidation of Sino-Pak political, economic and geo-strategic interests. As a project the CPEC links the Pakistani port city of Gwadar on the Arabian Sea with China’s Urumqi located in Xinjiang Province. Included in the CPEC are a series of projects valued at US$51 billion that would expand and upgrade Pakistan’s infrastructure as well as strengthen economic ties between China and Pakistan. It includes building railway lines, roads and pipelines to carry oil and gas. An unstated objective, but clearly an important one is an attempt to stabilise the Pakistani economy. The proposed project would be financed by the heavily subsidised loans that would be disbursed to the government of Pakistan by Chinese banking giants such as the Exim Bank of China, China Development Bank and the Industrial and Commercial Bank of China. About 90% of the total funding is by Chinese Banks and the rest by Pakistan. Reports in Pakistani press claim that this project will add about 7 lac new jobs between 2013 and 2030 as well as add about 2-2.5 percentage points to the Pakistani GDP.
     According to the Chinese President’s statements the CPEC would have four separate sections. These are: Energy, Gwadar, Infrastructure and Industrial Co-operation. Under CPEC energy projects will over 16GW capacity at a production cost of US$34b. About 75% of energy mix will be generated by coal which Pakistan would be contracted to buy from Chinese companies. These will be very profitable for Chinese companies for Pakistan has agreed to offer 34.5% annual profit on equity invested in these projects. Once the projects are completed Pakistan would become a surplus energy country.
     Although Gwadar as a commercial port is suspect because of its low depth, lack of rail connectivity and its considerable distance from commercial navigation routes; yet with its proximity to Hormuz it could accommodate naval warships and submarines and serve as a hub for weapons replenishments and logistics. With its airport it could become an ideal point for surveillance and as a interdiction point. Pakistan has ceded control of Gwadar for 40 years to China and this suggests that it may become a Chinese naval base much sooner than expected.
    All along the CPEC numerous SEZs are expected to be formed. Chinese companies will be granted long term leases at concessional rates along with a 20 year tax holiday. There are already 20,000 Chinese working on CPEC projects and this number could swell to thousands once the SEZs are setup.
      But there are economic implication for Pakistan too. Some financial estimates suggest an outflow of US$ 2-5.3b per year with Pakistan paying upto US$ 90b over a span of 30 years. Does Pakistan have this kind of financial viability? Pakistan may end up with swapping its for equity and thus compromising its sovereignty. The case of Sri Lanka is there before you.
      The Indian position has been that it has never been officially consulted on the OBOR. The assumption in India is that the China-Pakistan Economic Corridor [CPEC], is an important component part of the OBOR. There is no doubt that the CPEC presents a geo-strategic challenge to India. It effects India’s security and presents a direct two front challenge. In December 2014, the Indian External Affairs Minister stated in Parliament that ‘the government was aware that China’s involvement in the construction of or assistance to infrastructure projects, including hydroelectric and nuclear projects, highways, motorways, export processing zones and economic corridors in Pakistan. Government has seen reports with regard to China and Pakistan being involved in infrastructure building activities in Pakistan Occupied Kashmir [POK] including construction of CPEC. Government has conveyed its concern to China about their activities and asked them to cease such activities’. While the External Affairs Minister was expressing her concern, a Press Trust of India [PTI] report quoted the Indian High Commissioner to Pakistan, as saying that ‘India has no worry over construction of the CPEC, as an economically strong Pakistan would bring stability to the region’.
      This dichotomy of approach still remains to be reconciled for it seems that it stems from the policy of strategic ambiguity. If the past is any guide then after the 1962 conflict with China, India at the instigation of US?/UK was pushed into talks with Pakistan to discuss the ultimate fate of Kashmir. Implicit in the Swaran Singh-Bhutto talks was the partition of Kashmir at approximately the CFL; with some more areas going to Pakistan. In 1965 at Tashkent, India agreed to restore the 1949 Cease Fire Line [CFL] and withdrew from areas it occupied across the CFL in the 1965 conflict. Similarly, the whole ethos of the Simla Agreement in 1972 was that Pakistan would accept and at an appropriate time convert the CFL [now called the Line of Control] into an international border. In 1999 as well, India maintained the sanctity of the Line of Control, never crossed the line militarily and used force to oust Pakistani troops and pushed them back and beyond the Line of Control. Thus it seems that India was quite prepared to give up its claims to Pakistan Occupied Kashmir [POK], if Pakistan accepted the Line of Control as an international border. India has been quite clear that it would give up its claims to POK, only in the event that Pakistan recognised the Indo-Pak international boundary at the LoC.  On the other hand, PM Modi recently reiterated in his 15th August Independence message that POK was indeed sovereign Indian Territory. The question is which of the two strategic modules would India prefer to pursue on long term basis?
    Thus if the CPEC is indeed a vital component of OBOR, then it violates Indian Territory and for India to accept CPEC is a matter of national territorial integrity. On the question of the CPEC traversing POK, a Chinese Foreign Ministry spokesperson Hua Chunying prevaricated on the issue and stated that ‘with regard to whether the economic corridor passes through [Pak] Kashmir,….. but I can tell you that we hope the Kashmir issue can be resolved through consultations and negotiations between India and Pakistan’. Clearly the Chinese were hoping to obfuscate the issue of POK and the fact that the CPEC passed through this region. Recent Chinese press reports have also taken the same view, calling upon India and Pakistan to settle the matter amongst themselves. 
     Thus what policy should India follow with regards to the CPEC? At present the choices before India are but three. One it can continue to boycott any participation in CPEC. Secondly, it can actively “sabotage” it by encouraging dissidence in Balochistan or thirdly open discussions with the Chinese with a view to start thinking of some kind of participation. The first two options do not make much for foreign policy options, with the second option decidedly risky, for China in retaliation can easily activate the Ladakh front. 
       At present, India does not have sufficient economic resources or the political heft to put in place either a competitive or an alternative connectivity networks, on a scale that can offer an alternative option to the CPEC. India has chosen to join the Chinese sponsored Asian Infrastructure and Investment Bank [AIIB] and the National Development Bank [NDB], but is presently not having any discussions with the Chinese having officially boycotted the BRF summit in Beijing. What if India were to suggest serious talks with the Chinese on the CPEC? 
     The first point for discussion would be the passage of the CPEC through sovereign Indian territory in Gilgit-Baltistan and how to resolve this issue. While diplomats are adept at obfuscating any issue, this would merit considerable discussions at length with the Chinese government. Secondly, the CPEC as presently envisioned would require considerable modifications; if India were to join. Firstly a suitable new name would have to be configured that did not upset any of the participants. And most important of all not only India, but Afghanistan should also be invited to join.
    If you look at the map of the CPEC at a point near Rawalpindi, a branch would have to turn eastwards towards Amritsar on the Indo-Pak border and similarly a branch would have to turn westwards towards Peshawar and the Afghan border. The key point would be can goods be exported from India to Xinjiang in China as also to Afghanistan by utilising the new corridors? If that were so it would open up for India not only a land link to Afghanistan, but also to Central Asia. Similarly Afghanistan could export its products not only to China, but also to India through this land link. Would China be interested? The question is moot. The only sure way to find out is if we open discussions with the Chinese government. What I have suggested is, at present, only speculation; but nevertheless we need to think of a out of box solutions.   

    In conclusion therefore the CPEC presents a direct challenge to Indian interests, it consolidates the Sino-Pak nexus with all its military and nuclear components and furthermore limits our options with regard to Pakistani intransigence and open meddling in Kashmir. Our military option also will be limited further, since in the CPEC area a large number of Chinese personnel would be present. An emboldened Pakistan with Chinese support will surely test our diplomatic skill and military prowess. 

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