Source: Global Times    Published: 2016-2-21

 

China is considering creating a new trade route between the Xinjiang Uyghur Autonomous Region and Iran`s Chabahar Port, bypassing Pakistan, as the country`s political parties and provincial governments vie for a bigger piece of the pie created by the China-Pakistan Economic Corridor (CPEC), the newspaper Pakistan Today reported on January 30.

The CPEC is considered the flagship project of the One Belt and One Road initiative (B&R initiative), which refers to the Silk Road Economic Belt and the 21st Century Maritime Silk Road, two concepts put forward by President Xi Jinping in 2013.

"During the meeting with President Xi Jinping, Iranian President Hassan Rouhani asked his Chinese counterpart to adopt Chabahar Port rather than Gwadar, which would be linked to a secure, beneficial trade route including a pipeline linking Iran and China," the Pakistan Today report said, citing a source that has access to intelligence reports submitted to Pakistani Prime Minister Nawaz Sharif.

In the report, the source quoted intelligence reports that said Iran offered to provide complete national unity and harmony, unlike Pakistan, where the trade route is unsafe.

The report offered political bickering of four Pakistani provinces over CPEC funding as background.

According to media reports, CPEC funding could be as high as $46 billion.

"The Gwadar and Chabahar ports both belong to developing countries, both are in a rudimentary stage of development, and both need infrastructure," Zheng Ping, chief analyst of industry portal chineseport.cn, told the Global Times on Wednesday.

Wang Wen, executive director of the Chongyang Institute for Financial Studies at Renmin University of China in Beijing, told the Global Times that the two ports, due to their close proximity, share a similar geopolitical significance, and there is a certain rivalry, at least to some extent, between the two ports.

The Chabahar Port lies on coast of the Gulf of Oman near the strategically important Strait of Hormuz, and is some 70 kilometers from Gwadar Port, where Chinese companies are working on a free trade zone.

The Iranian government has designated Chabahar a free trade and industrial zone.

The Iranian government plans to link Chabahar to Iran`s main rail network, which is connected to Central Asia and Afghanistan. India has been helping Iran develop Chabahar Port since 2003.

"On the other hand, [Iran and Pakistan] both support the B&R initiative, and China needs both of their support, so it is in the interest of China that an open, fair and market-driven approach is taken toward the two countries` projects," Wang said, noting that on the ground level, the B&R initiative will be carried out by enterprises.

Under the bigger picture of the B&R initiative, the two ports will both be positioned for leapfrog development from their current status, Wang noted.

Concerns, not paranoia

Experts said it is unlikely that the CPEC and Gwadar Port might be bypassed or disbanded.

"Gwadar Port is one of the five key aspects of the CPEC project, and it will be developed into a free trade zone, with an industrial zone currently in the works. This means the Chinese are committed to their plans, so a scenario in which Gwadar Port is bypassed is very unlikely," Zheng said.  

"China and Pakistan have a factor of durability in their bilateral relations. In comparison, China lacks such a strategic understanding over trade and communication with Iran. Though, to an extent, China has learned how to maintain economic relations with India that still perceives China as a strategic threat in the short term and long term," Ejaz Hussain, a CPEC researcher and head of the department of social sciences at Iqra University in Islamabad, told the Global Times on Friday.

However, some experts said it is also possible that China may invest in the Chabahar Port as well, as the Maritime Silk Road is not confined to one nation, or one port.

Currently, China has invested in ports from Myanmar to Sri Lanka and from Pakistan to Africa.

"The concept of the Maritime Silk Road, when translated into reality, boils down to just two tangible things: a massive shipping fleet on the ocean, which China already has, and a string of ports along the route to provide support for the fleet, which China is building," Zheng said.

For the latter, China could invest more now to take advantage of the current depressed values of port assets, which are at a cyclical low, Zheng said.

Zheng believes it is an opportune time to invest in ports as the current downward cycle has been dragging on for almost 10 years and a recovery could happen in the next few years.

Iran joins the game

Since President Xi`s visit to Iran in January, concrete measures have been taken to foster the Silk Road link.

A project of electrifying the railway between Tehran and the holy city of Mashhad, has entered its construction phase, the domestic news portal china.com reported on February 14.

A consortium of Iranian and Chinese companies will complete construction within 42 months and will maintain the railway for five years afterward, the report said.

On February 15, a Chinese cargo train arrived in Tehran, a milestone in reviving the "Silk Road," the Xinhua News Agency reported on February 16.

The train passed through Kazakhstan and Turkmenistan on its 10,399-kilometer journey to Iran. It had left Yiwu, a manufacturing powerhouse in East China`s Zhejiang Province on January 28. More trains will follow at planned intervals of one train a month.

Experts said developments in Iran could benefit ongoing projects of CPEC.

The lifting of sanctions against Iran could help boost the economy and promote stability in Pakistan, in ways such as enhanced regional connectivity, Wang said. So this development should be seen as a positive for the CPEC.  

Another example is the 2,700-kilometer Iran-Pakistan-India (IPI) gas pipeline project. The project`s purpose is to deliver natural gas from Iran to energy-starved Pakistan and further to India. The pipeline is still under construction, even though first deals on the project can be traced back to the 1990s.

"The four countries [Iran, Pakistan, India and China], if they act rationally, can benefit from the CPEC. The IPI gas pipeline was already proposed. It did not materialize due to mutual misgivings between India and Pakistan. Perhaps, with sanctions against Iran lifted, the IPI project can be extended to China and India can also benefit from it. China, in this respect, needs to convince the three powers," Hussain said.

"By extension, China can also be part of IPI. This means the CPEC can be expanded to possibly CPEC+I (Iran). And if India acts rationally, it may take the shape of CPEC+II (Iran + India). In other words, CPEC offers incentives to all stakeholders. However, it is easier said than done," Hussain noted.

 

Wang Wen, the Executive Dean of Chongyang Institute for Financial Studies of Renmin University of China, was quoted in this article.