China president in Pakistan to ink $46 billion in investments; subs, infrastructure top agenda

McClatchy DC
19 April 2015

ISLAMABAD — Chinese President Xi Jinping arrives in Pakistan on Monday to seal deals for $46 billion in economy-transforming investments in the country’s crumbling infrastructure, a move that will extend Beijing’s commercial and military reach to the mouth of the Persian Gulf and allow China to supplant the United States as Pakistan biggest investor.
U.S. investment between 2010 and 2014 in Pakistan totaled $5 billion.
The lion’s share of China;s 15-year investment program, $34 billion, will be go commercial power generation projects that by 2018 could bring an end to the crippling electricity shortages that for the last five years have cost Pakistan about 2 per cent in annual gross domestic product growth.
A further $12 billion will be invested in the Pakistan-China Economic Corridor, a network of highways, railways and pipelines that would link the Chinese province of Xinjiang to a Chinese-financed and -operated commercial seaport at Gwadar, near Pakistan’s border with Iran.
The corridor is an extension of China’s $40 billion Silk Road initiative, a flagship project of President Xi’s administration intended to provide an overland link to Europe and to expand already existing sea lanes to Asia, Africa and the Middle East through Chinese-run ports already operating in Bangladesh, Burma and Sri Lanka. The initiative also aims to reduce China’s reliance on the Malacca Straits, near Singapore, as a conduit for its westbound trade, and make it less susceptible to a possible naval embargo on its Pacific coast.
China would use the pipelines to import crude oil and petroleum products from Persian Gulf producers. Prior to the 2011 imposition of U.S. and international sanctions on Iran, China was one of the largest importers of Iranian oil and is keen to reinvigorate energy trade with Tehran, in anticipation of the lifting of the sanctions as a result of a proposed deal on Iran’s nuclear program.
China has offered to finance the construction of Pakistan’s stretch of a pipeline to carry Iranian natural gas imports that would fuel the generation of 3,500 megawatts of electricity.
“It is difficult to overestimate what these planned Chinese investments and assistance mean to Pakistan. These are projects of truly strategic nature that serve both the interests of China and Pakistan,” said Arif Rafiq, president of Vizier Consulting, which offers advice on political and strategic risk in South Asia and the Middle East.
The planned Chinese investments dwarf American efforts, which included about $2 billion to help finance the installation of 1,500 megawatts of electricity generation capacity. China plans to invest $15.5 billion to supply 10,400 megawatts from mostly coal-fueled power generation projects by 2018, and a further $18.3 billion to add 6,600 megawatts capacity more after that.
“China is a filling a void left by a departing U.S., which never quite had the interest, aptitude, or political support at home to pursue projects of strategic significance in Pakistan,” said Rafiq, who’s also an adjunct scholar at the Middle East Institute, a Washington think tank.
Xi will also finalize the sale of eight conventionally powered Chinese submarines to Pakistan, at a cost of between $5 and $6 billion, and may sweeten the deal by offering to build a submarine refueling and maintenance station at Gwadar that would also be available to the Chinese submarines.
China has yet to approve Pakistan’s request last year to acquire four nuclear-powered submarines capable of launching ballistic missiles carrying nuclear and conventional warheads.
The Chinese investment in Pakistan is viewed with concern by neighboring India, which has fought wars with both countries.
“The submarine and Gwadar port deals are intended to contain India and help China project powers in the Indian Ocean, which is increasing critical for Chinese maritime ambitions. The close defense relationship with Pakistan not only constrains India’s options, but also allows China to achieve its strategic aim in the region,” said Harsh V. Pant, a professor of international relations at King’s College London, a British university.
India has begun trials of a domestically-developed, nuclear weapons-capable submarine, which would complete its triumvirate of air, land and sea-based strategic forces targeting China and Pakistan.

China is playing its cards cautiously, ahead of a May visit by Indian Prime Minister Nirender Modi because “many in Beijing believe the Modi administration is their best bet to achieve a lasting solution to their vexed border disputes,” Pant said.
“Balancing its all-weather partnership with Pakistan with a stable major-power relationship with India will be a priority for Beijing,” he said.

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