China Gambles on Its Own ‘Keystone Pipeline’
Business + Economy

China Gambles on Its Own ‘Keystone Pipeline’

© Alex Lee / Reuters

China is wasting little time gearing up its new Asian Infrastructure Investment Bank in what many analysts see as a direct challenge to the U.S. for global economic dominance in the coming years.

Chinese President Xi Jinping was in Islamabad on Tuesday to announce extraordinary plans for $46 billion of new infrastructure spending in Pakistan that would include new roads, railways and pipelines. With Great Britain, Germany, Australia, South Korea and 42 other countries essentially snubbing President Obama by teaming up with the Chinese, the emerging infrastructure bank intends to pump at least $100 billion into much needed energy and infrastructure project throughout Asia and the Middle East.

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The deal signed yesterday is meant to be a win-win for Pakistan and its Chinese patrons. The idea of building an economic corridor through Pakistan first emerged in the early 2000s, but didn’t get off the ground until President Xi arrived on the scene.

The plans call for construction of a 1,500-mile network of highways, rails and oil pipelines linking the port of Gwadar on the Arabian Sea with Xinjiang Province in western China.  

China and its new bank will invest about $34 billion in energy projects and provide roughly $12 billion in loans for infrastructure projects to be built along the corridor over the next 15 years, according to reports. This would be a huge break for Pakistan’s struggling economy and would overshadow the $7.5 billion that the U.S. pledged over the past five years to help develop and stabilize the region.

The project would be a huge boon for China as well. A critical feature of the plan is construction of a rough equivalent of the proposed Keystone XL pipeline in the U.S. Roughly $9 billion of the $46 billion would go for a massive pipeline to carry crude oil from the port of Gwadar northeast through Pakistan’s sparsely populated Balochistan and Khyber Pakhtunkhwa provinces to the Pakistan-Chinese border — the shortest possible route for bringing Persian Gulf oil to China, according to a recent report from Global Risk Insights. The proposed economic corridor of new roads and railways would also afford China easier sea access to markets in Africa, South Asia and the Persian Gulf. 

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But there’s the one glaring problem with China’s investment strategy: The corridor would run right through one of the world’s most dangerous and unstable regions.

Pakistan’s Balochistan province has been riven by insurgencies for decades and is the site of almost daily violence and killings. The New York Times reported yesterday that separatist rebels were accused of staging an attack near the port of Gwadar just ahead of Xi’s address to Pakistan’s parliament. Ghulam Ali, an analyst for the Central Asia Caucuses Analyst, wrote recently that the Chinese-backed project faces “daunting challenges.” He added that until the insurgency is contained in the region, the project “will remain a dream.”

Security appeared to be very much on the minds of Xi and Pakistan’s prime minister, Nawaz Sharif, who said in a speech that “Pakistan considers China’s security as its own security.” Moreover, the Pakistani military reportedly assured Xi that it would create a special security division to protect Chinese nationals working on the development projects in Pakistan. This is a matter of no small concern to Beijing. In 2004, three Chinese engineers who were assisting in building the Gwadar port were shot to death by suspected insurgents.

It may have simply been a coincidence, but the Pakistani government chose the day of Xi’s visit to carry out the executions of at least 17 prisoners who had been convicted of rape, murder and other serious crimes.

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