By Jumaina Siddiqui – Energy insecurity, terrorism, and transnational crime are part of the threat environment in the Indian Ocean today. The upsurge in attacks by Somali pirates along major shipping routes are increasingly aimed toward larger and more lucrative targets such as a ship transporting tanks, anti-aircraft guns and other heavy weapons, and a supertanker carrying crude oil. Safe shipping routes and ports for the transportation of commodities, oil, and natural gas are more important than ever for international energy security and commerce.
Pakistan sees itself as an emerging energy hub for Asia, in particular, China, whose demand for energy will increase by 3.5 percent in 2009 to 9.1 million barrels per day, up from 8.8 million barrels per day in 2008. To meet these aspirations and demands, the two nations invested in a solution: the development of a deep sea port in Gwadar, Pakistan. Gwadar reflects two quite different trends for the Pakistani state: its emerging geostrategic importance in the region and the socioeconomic impact of further expansion into Balochistan, one of the least developed, but resource-rich provinces in Pakistan.
The city of Gwadar is strategically located on the southwest coast of Pakistan, 285 miles west of Karachi, 45 miles from the Iranian border, and about 250 miles east of Strait of Hormuz. It is a gateway to the landlocked countries of Central Asia and an emerging shipping hub for traffic from the Straits of Hormuz to East and Southeast Asia. Gwadar could become a major center for oil and natural gas shipments to the rest of Asia as well as home to pipelines taking energy resources from Central Asia to the Indian Ocean and beyond. It would also deliver oil and natural gas to China by the shortest possible route.
Construction of a deep sea port in Gwadar has been Pakistan’s goal since the early 1990s. The funding for this project was formalized in Sino-Pak agreement in March 2002. Under the agreement Beijing provided US$198 million and Islamabad provided US$50 million to construct Phase I of the port, completed in June 2006. Official Chinese involvement in the port ended with the completion of Phase I. But President Musharraf announced in March 2007 that China would assist in the construction of a major airport in Gwadar, suggesting continued Chinese involvement in the area.
After the completion of Phase I, Pakistan had two options: directly manage Gwadar, or outsource the management of Phase I and construction of Phase II. Pakistan opted for the latter. Many major companies submitted bids, with contracting ultimately given to the Port of Singapore Authority (PSA), along with substantive concessions: a 40 year lease, fixed share of revenues, and complete exemption from corporate tax for 20 years.
Gwadar’s success and security is hindered by Balochistan’s tenuous relationship with Islamabad. This conflict stems from Islamabad’s action against Baloch militants and a sustained conflict over natural resources, which are extracted from Balochistan without royalties reverting to the province so they can develop infrastructure and provide social services. The Baloch feel that are neither stakeholders nor beneficiaries of the potential economic windfall the port is expected to generate.
The Baloch have 3 major grievances with the development and expansion of Gwadar:
1) Jobs at the port – Unemployment rates remain high in the Gwadar area because locals are not being employed by port operators.
2) Land ownership – Because Gwadar is under federal control, the provincial government is not consulted in port construction projects. One Gwadar Port Authority official noted that “Gwadar’s lands have been seized by state agencies, the coast guards, the navy, the paramilitaries… this is a land grab”[i]
3) Fisheries – The port was constructed on a prime fishing area, the main livelihood for over 80 percent of the town’s population. None of the local fishermen were consulted during the development and construction of Gwadar.
Opposition parties in Balochistan want the provincial government to control the port and have the final say in any future development projects. Balochistan Chief Minister Nawab Aslam Raisani has called for a review of the contract with PSA to ensure it is favorable to Balochistan. Recent statements from Islamabad indicate a policy shift which accommodates this call. Pakistan’s Federal Minister for Port and Shipping Nabeel Gabol announced that the provincial government should control of the port “to end the sense of deprivation among its people.”[ii] He also assured that locals would also be hired at the port.
Gwadar has the potential to become a major domestic, regional and even international port providing Pakistan with increased trade activity and strategic importance, especially in the energy sector. However, the political will to develop the necessary infrastructure of roads and railways linking Gwadar with the rest of the country and further out into Central Asia and China is sorely lacking.
Both Islamabad and the provincial government need to make a concerted effort if Gwadar is to become a significant player in the Asian energy corridor. The two players must work together and try to resolve the tensions between Islamabad and the local population. The stakes are high for Pakistan; to be an important player in the global energy trade, it must both manage instability in a critical province and advance its international goals.
photo credit: Zahid Shahid, http://www.flickr.com/photos/zahidpk/2384986649/sizes/m/in/set-72157604373696417/
[i]International Crisis Group, “Pakistan: The Worsening Conflict in Balochistan,” Asia Report N°119, September 14, 2006.
[ii] Bari Baloch, “Gwadar Port control should rest with Balochistan: Gabol,” The Nation, December 28, 2008.
Jumaina Siddiqui is a Research Associate with the Regional Voices: Transnational Challenges project.