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Pakistan cedes strategic pipeline contract to China

Chinese investments are known to be predatory and opaque in nature, with terms that are heavily skewed against the recipient country. These investments, though advertised as catalysts for development cooperation, are actually laced with strategic objectives for China. The strict confidentiality clauses that bar the recipient country from even acknowledging the existence of investments create a problem of “hidden debt” for the recipient country.

China often additionally demands collateralization of official lending, which means that in the event of default, repayment is secured by ceding some other asset, usually of strategic significance for Beijing. Instances are galore including the Hambantota Port in Sri Lanka; Chinese acquisition of majority control over Laos’ national electric grid; Tajikistan having to cede disputed territory to Beijing in lieu of debt forgiveness; Chinese acquisition of strategic islets of the Maldives in the Indian Ocean and of the Solomon Islands in the South Pacific.

It seems Pakistan is on its way to figure in the above list. With international funding drying up and Pakistan Prime Minister’s recent declaration that there is hardly any money left to run the country, Pakistan has started ceding important projects to China as a way out to repay the mountain of debt arising out of Chinese loans. Recently, Pakistan government awarded the contract for construction of 3,021 km of strategic crude oil pipeline from Gwadar port in Pakistan to Xinjiang, China to a Chinese company. The principle company for the project is M/s China Zhenhua Import and Export Co. Ltd. The company will not only finance the construction of the pipeline but also take away the profit generated from the operation of the pipeline. It is also learnt that Pakistan government has agreed that all equity in the pipeline will be owned by China and agreed to grant a 20 years tax holiday for profit and income earned by the Chinese company from the crude oil pipeline. Chinese security personnel equipped with high precision weapon and equipment (unmanned reconnaissance and strike systems and air defence guidance equipment) will be deployed along the pipeline.

Though Chinese side is claiming that the pipeline is for meeting the energy demands of Pakistan, it appears that China is itself planning to enhance Strategic Petroleum Reserve through the pipeline; this will help China in reducing its crude oil import bills. This project is aimed to benefit China more in comparison to Pakistan.
In another incident of China’s disinterest for Pakistan’s benefits, M/s China Great Wall Industry Guangzhou (CGWIC), a subsidiary of China Aerospace Science and Technology Corporation, rejected the offer from Pakistan’s Space and Upper Atmosphere Research Commission (SUPARCO) to pay at unit rate of US$ 2 per square km for high resolution satellite imagery from Chinese satellites. The Chinese company stated that such a low price would undermine the existing and future relationship of CGWIC with other customers. It means China is not in favour of giving any special treatment to its ‘all weather friend’ Pakistan when it comes to business dealings.

The COVID-19 pandemic saw enhanced cooperation between China and Pakistan in terms of medical care and supplies. Pakistan readily accepted Sinopharm, a vaccine developed by China, though its efficacy was around 53% only. But it seems China does not value this gesture from Pakistan. In fact, it is learnt that Chinese authorities, acting on the inputs from Chinese intelligence, are investigating suspicious activities of a Pakistani company which imports Sinopharm for Pakistan. An employee of the company, who was in China for materializing vaccine import deal for the company, was questioned by Chinese authorities about the dealings of the company. Meanwhile, China has halted the export of consignment of Sinopharm vaccine to Pakistan. The consignment will only be allowed to be exported to Pakistan after the relevant information is provided by the CEO of the company.

On its part, Islamabad too seems to have become wary of being identifying too closely with Beijing. Pak authorities were recently reluctant to agree to China’s and Iran’s request for endorsing the Joint Statement on the decision to be adopted in the forthcoming Conference of the States Parties (CSP) on Central Nervous System Acting Chemicals.

It is time that Pakistan does introspection whether it wants to continue putting up with China’s excesses and bullying tactics or raise its head against the dragon that has already entered in its backyard.