Does China’s Solution To The “Malacca Problem” Lie In Pakistan?

The “Malacca Problem” has been pervading the economic policy debate in China ever since it came to light in 2003, when Hu Jintao, China’s leader at the time, sounded the alarm over China’s dependence on the supply of oil transported through the troubled strait. That length of sea between Indonesia and Malaysia, with Singapore on the end, is a veritable jugular vein, essential but out of control. It is through this channel that Beijing receives its energy lifeline, loaded onto tankers in the Middle East and sent towards the eastern Pacific. The “Malacca Problem” is related to the resources China would have to field in order to develop a different solution. What becomes immediately evident is that the construction of an alternate means of energy procurement would come at significant cost, and could upset the balance of power in the region. So far, China has been cautious, but not inactive. After the pipeline agreement with the government of Myanmar, another brick has been laid in the foundation of Beijing’s new energy strategy with the acquisition of the Gwadar deep-water seaport in southern Pakistan. Management rights for the port were transferred from the Port of Singapore Authority, or PSA, to the China Overseas Port Holding just last week. In addition to handling its construction, Beijing, through its state-owned holding company, will now assume control over the port. Struck in 2007, the agreement was aimed at increasing the port’s capacity to rival Dubai, on the opposite side of the Arabian Sea, but it never left the starting gate. Bureaucracy and internal clashes led the PSA – known for its efficiency – to back out of the deal, and it was all downhill from there for the Chinese group. The mutual benefits came immediately: Pakistan strengthened the relationship with its traditional ally. India – a common enemy – is being challenged on the sea that bears its name. There are no overt military interests, for now, but the port’s role is still undefined, much like the role being played by the Pakistani navy. Beijing now has an outlet towards warmer waters and, most importantly, an oil tanker anchorage under its control. There are studies underway to plan the construction of a pipeline from Gwadar to the western Chinese province of Xinjiang. Once it arrives at the port and into Chinese hands, crude oil will flow across the entire territory of Pakistan, over the border at Karakorum, and finally into China. This next step towards a solution of the “Malacca Problem,” however, demands caution before embarking on another massive project. The costs are in fact extremely high, and the efforts extremely time consuming, owing to the difficulty of the terrain and the distance the pipeline will need to cover. Gwadar is also located in Baluchistan, where talks of independence from faraway Islamabad are more than just whispers. The entire project is shadowed by the concerns of upsetting the political balance in a region that is critical for both armaments and energy. And so the debate in China rages on, among representatives of the legislature, the military, scholars, and the companies involved. There will be a slow but fruitful outpouring of ideas, a mixed-up but inevitable gestation, because in the end we are talking about finding an alternate solution for a body of water that now sees the passage of 80% of China’s oil.