India and China competing for Malacca Straits in Burma

Great Game of the 19th Century was played between empire builders Britain and Russia, using Afghanistan as their football in seeking control of central Asia. Today, there is a new great game under way between two very different competitors – China and India. But this time the ball is Burma.

In much Sea Route Chinathe same way that Afghanistan was a poor and undeveloped but strategic piece of territory, so Burma now fits that role for the two burgeoning economic giants.

The coastline of Burma provides naval access in the proximity of one of the world’s most strategic water passages, the Strait of Malacca, the narrow ship passage between Malaysia and Indonesia.

The Strait of Malacca, linking the Indian and Pacific Oceans, is the shortest sea route between the Persian Gulf and China. It is the key chokepoint in Asia. More than 80% of all China’s oil imports are shipped by tankers passing the Malacca Strait. The narrowest point is the Phillips Channel in the Singapore Strait, only 1.5 miles wide at its narrowest. Daily more than 12 million barrels in oil super tankers pass through this narrow passage, most en route to the world’s fastest-growing energy market, China or to Japan.

If the strait were closed, nearly half of the world’s tanker fleet would be required to sail further. Closure would immediately raise freight rates worldwide. More than 50,000 vessels per year transit the Strait of Malacca. The region from Burma to Banda Ache in Indonesia is fast becoming one of the world’s most strategic chokepoints.

Controlling the strategic sea lanes from the Persian Gulf to the South China Sea, the United States has been trying to militarize the region since September 11, 2001 on the argument of defending against possible terrorist attack. The US has managed to gain an airbase on Banda Ache, the Sultan Iskandar Muda Air Force Base, on the northernmost tip of Indonesia. The governments of the region, including Burma, however, have adamantly refused US efforts to militarize the region.

Since it became clear to China that the US was hell-bent on a unilateral militarization of the Middle East oil fields in 2003, Beijing has stepped up its engagement in Burma. China is officially Burma’s third-largest trading partner after Singapore and Thailand and the largest foreign investor in Burma, though the size of this investment is not recorded and not visible in international statistics.

China is also Burma’s most important defence ally, supplying most of its military hardware and training. In recent years Beijing has poured billions of dollars in military assistance into Burma, including fighter, ground-attack and transport aircraft; tanks and armoured personnel carriers; naval vessels and surface-to-air missiles. This has made the Burmese military – the second largest in Southeast Asia after Vietnam – much more technically sophisticated. It has enabled the army to expand from 180,000 men to more than 450,000 today.

In 1992, China and Burma agreed that China would modernise Burmese naval facilities, in return for permitting the Chinese navy to use the Small and Great Coco Island. Since then, Chinese experts have built an electronic intelligence station on Great Coco Island, vastly improved and militarised the Burmese port facilities in the Bay of Bengal at Akyab (Sittwe), Kyaukpyu and Mergui, and constructed a major naval base on Hainggyi Island near the Irrawaddy river delta.

China is currently building a deep-sea port in Kyaukpyu, which is located on the route connecting South-Western China’s Kunming city with Burma’s Sittwe, in Arakan. The port has a water depth of 20 metres and is capable of accommodating 4,000 TEU (20-foot equivalent units) container vessels. A feasibility study for the seaport and road construction, outlined as Kunming-Mandalay-Kyaukpyu-Sittwe, was made in 2005. Once the 1,943 km Kunming-Kyuakpu road is completed, it is expected to facilitate transit trade and provide job opportunities for Burmese workers and others in the region.

China assists in constructing a naval base in Sittwe (Akyab), a strategically important seaport close to eastern India’s largest city and port, Kolkata.  It also funds road construction linking Rangoon and Akyab, providing the shortest route to the Indian Ocean from southern China. It has also built an 85-metre jetty, naval facilities and major reconnaissance and electronic intelligence systems on the Great Coco Island, located 18 kilometers from India’s Andaman and Nicobar Islands, giving China capabilities to monitor India’s military activities, including missile tests. Access to Burma’s ports and naval installations provide China with strategic influence in the Bay of Bengal, in the wider Indian Ocean region and in Southeast Asia.

In fact Burma is an integral part of what China terms its “string of pearls,” its strategic design of establishing military bases in Burma, Thailand and Cambodia in order to counter US control over the Strait of Malacca chokepoint. There is also energy on and offshore of Burma, and lots of it.

As a result of increased Chinese influence in Burma, as well as arms-trafficking occurring along the Indo-Burmese border, India has sought in recent years to strengthen its ties with Burma. India’s interest in Burma is largely motivated by the country’s importance to its main economic and political rival, China. India is afraid of China’s influence in Burma.

India’s interest in and involvement with Southeast Asia has been growing steadily over the past decade. New Delhi would like to use the country as a trade link to the fast-growing ASEAN region. In 2004, an agreement was signed in Yangon by the foreign ministers of India, Burma and Thailand to develop transport linkages between the three countries. This included a 1,400 km highway connecting North-Eastern India with Mandalay and Yangon, and on to Bangkok, which would contribute to opening up trade between the countries and give India access to Burmese ports. India is also spending $100 million to fund a deal linking Burma’s Sittwe port with an Indian one, perhaps Calcutta. A planned deep-sea port in Dawei, together with a new highway connecting it to Kanchanaburi in Thailand, would no doubt contribute further to commercial links.Sittwe_Kolkotta

Dawei, the capital of Tanintharyi division, is on the long, narrow coastal plain of southern Burma. Building Dawei port also has a direct security angle for the Indian navy, which is now in the process of sorting out the technical and financial details of its ambitious Far Eastern Naval Command (FENC) project at Port Blair, the capital of the Andaman Islands. FENC is intended to extend the Indian navy’s nuclear/strategic combat capability. Dawei is located across the Andaman Sea on the Burmese coast, almost facing FENC. Indian analysts worry that the Chinese base on Great Coco Island poses a threat to the Indian tri-services command in Port Blair, which is only about 190 nautical miles (300 km) away. The Coco Island base lies only 22 nautical miles from Landfall Island, the northernmost of the Andamans. The Coco Island facility is also seen as a significant ELINT (electronic intelligence) and SIGINT (signal intelligence) threat to India’s missile-testing range, Chandipur-on-Sea and the Sriharikota Island Launching Range, which are designed to assemble, test and launch Indian multi-stage rockets.

According to Indian security analysts, the Chinese presence on Coco Island should be seen in connection with the Sino-Pakistani defence project and cooperation on the Gwadar Port facilities, which give China access and basing facilities on the other side of the Indian subcontinent, near the Strait of Hormuz. What is especially worrisome from the Indian perspective is the ‘maritime encirclement of India’, with the Chinese based at Gwadar to the west of India and on Coco Island to the east. In addition, Burma’s experiments with a nuclear research reactor are worrisome from an Indian perspective, especially since China, Pakistan and Russia have all been involved. Indian analysts fear that China’s naval presence in Burma may allow it to interdict regional sea lanes of communication. On this account, Burma is emerging as the ‘single largest threat to Indian strategic interests in South East Asia’. In an effort to check this state of affairs, India has started its own campaign to woo the Burmese regime by providing military training and selling it arms and military hardware.

Offshore natural gas has become the major source of income for the Burmese military regime, and will become increasingly important in the years to come. India and China have both engaged in acquiring Burmese oil benefits.

In 2004, Burma exported natural gas to Thailand for nearly US$1 billion, which is claimed to be at least twice as much as Burma could have earned from trade with the USA and the EU if they had not applied sanctions. The oil and gas sector continued to grow in 2005, owing to Chinese, Thai, South Korean and Indian investments. Thailand’s imports from Burma, mainly consisting of gas from Yadana and Yetagun, rose by more than 50% that year. Gas is now by far the most important source of income for Burma, and one-third of foreign direct investment (FDI) in Burma is in the oil and gas sector. The combined FDI in Burmese oil and gas since 1988 is approximately US$2.5 billion, 33% of all of Burma’s FDI. From the newly discovered Shwe field alone, the Korean Daewoo International has predicted at least US$86 million in net profit annually for 20 years from 2010, while Burma is projected to earn a minimum of US$800 million a year, and potentially up to US$3 billion.

In 2004 a large new gas field, Shwe field, off the coast of Arakan was discovered by Daewoo International. There are preliminary plans to explore for gas in several blocks in the Bay of Bengal, but so far test drilling has only been made in Shwe’s blocks A-1 and A-3. The A-1 block is the largest, estimated to contain between 2.88 trillion and 3.56 trillion cubic feet of natural gas. Partners in the project’s international consortium are Daewoo (60%), the state-owned Korean Gas Corporation (10%), and India’s ONGC (20%) and GAIL (10%). Production from the Shwe field is planned to start in 2009. Natural gas from Shwe has become a contentious issue in relations between India and China, and an obstacle to Sino-Indian energy cooperation.

In December 2005, Burma signed a Memorandum of Understanding with Petro-China to supply large volumes of natural gas from reserves of the Shwe gasfield in the Bay of Bengal.

The contract runs for 30 years. India was the main loser. Burma had earlier given India a major stake in two offshore blocks to develop gas to have been transmitted via pipeline through Bangladesh to India’s energy-hungry economy. Political bickering between India and Bangladesh brought the Indian plans to a standstill.

Burma exemplifies the difficult balance between competition and cooperation between China and India over oil and gas resources in third countries. India and China’s proximity to Burma provides an opportunity for both countries to enhance their energy security by diversifying fuel-supply sources while avoiding the need for expensive LNG (liquid natural gas) transportation.

For China, Burma also represents a possible overland supply route for oil and other commodities bypassing the Malacca Strait, a sea-lane that is vulnerable in the event of an attack or embargo. Access to Burmese ports and overland transportation routes through Burma are seen as a vital security asset for China. This has become increasingly important with the growing Chinese dependence on imported oil, 80% of which is shipped into China via the Malacca Strait. A key Chinese objective is thus to import oil through Burma. According to a recent report, plans for an oil pipeline linking Burma’s deep-water port of Kyaukpyu with Kunming in China’s Yunnan province were approved by the National Development and Reform Commission (a department of the Chinese State Council) in early April 2006.

China took advantage of the stalemate. China simply trumped India with an offer to invest billions in building a strategic China-Burma oil and gas pipeline across Burma from Burma’s deepwater port at Kyaukpyu in the Bay of Bengal to Kunming in China’s Yunnan Province, a stretch of more than 2,300 kilometers. China plans an oil refinery in Kumming as well.

What the Burma-China pipelines will allow is routing of oil and gas from Africa (Sudan among other sources) and the Middle East (Iran, Saudi Arabia) independent of dependence on the vulnerable chokepoint of the Malacca Strait. Burma becomes China’s “bridge” linking Bangladesh and countries westward to the China mainland independent of any possible future moves by Washington to control the strait.

From a perceived China fear and with an objective to compete with China, India has been building up its military strength. India has worked to close the gap with China by spending heavily on modern arms. And under the threat perception, India has been pursuing the closer relations with the United States, something that worries China.

Themistocles, a Greek writer, once said that, “he who commands the sea has command of everything.” It was Alfred T. Mahan, an American naval strategist who said in 1911: “Whoever controls the Indian Ocean dominates Asia…. in the 21st century the destiny of the world will be decided on its waves.” Both China and India’s growing military ambitions and maritime power building-up in seeking the control of Indian Ocean have the potential to destabilise the region. Of all the Southeast Asian states, Burma occupies the most sensitive position between India and China, giving rise to routine descriptions of a ‘Sino-India rivalry’ over the country.

By Aman Ullah


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