Energy Geopolitics Iran

Key CPEC City Gwadar opens to Iran

By | Rachel Brooks

December 20, 2020 

Image credit: “Gwadar – West Bay” by wetlandsofpakistan is licensed under CC BY-SA 2.0

Gwadar opens a new border to Iran, a secondary crossing point to the Taftan point of pilgrimage. This economic opening is of great significance to the development of the China Pakistan Economic Corridor, a.k.a. CPEC.

As tensions surmount between China and India, the region looks on in wonder at what will happen next in Far Asian policy. An unraveling fabric of relations between China and the United States shows that the world power trajectory is sliding away from the recognized establishment of post World War 2 era order. As China seeks to explore the new frontier of that changing world order, it invests pragmatically in the regions surrounding it. One of its primary investments is the China Pakistan Economic Corridor, or CPEC. 

Republic Underground interviewed Dr. Frank Musmar, a Middle East Politics research expert and contributing researcher with BESA Center, regarding the importance of the CPEC in China’s revision of its place as an empirical power. Dr. Musmar gives perspective of the importance of Gwadar in the CPEC scheme and China’s Belt and Road initiative, manifest in profound aspects with the CPEC project, seeks to revive the old Silk Road. 

Can CPEC bypass US sanctions against Iran and finance the Chinese espionage in the region? 

China-Pakistan Economic Corridor (CPEC) is part of Beijing’s global Belt and Road Initiative (BRI) that links some seventy-one countries. It is reminiscent of the Silk Road that would significantly stretch from East Asia to Europe and expand China’s economic and political influence. For Pakistan, CPEC created an opportunity to connect between Peshawar and Karachi using a rail line and infrastructure funded by three grant agreements with Saudi Arabia. 

The port in Gwadar is the heart of CPEC and the gateway to Asia. CPEC will allow China to develop a bustling waterway on the Arabian Sea to construct a crude oil pipeline spanning that corridor. Port control in Gwadar also aids China to strangle maritime ports, “pearls,” along the Indian Ocean back to Hainan, and it will increase China’s influence in the Middle East and North Africa (MENA) and beyond. Chinese foreign direct investment (FDI) in the MENA region is increasing. Since 2010, China has invested billions of dollars in nearly every MENA country, and in 2016 eclipsed the United Arab Emirates to become the leading investor in the region. 

China has been planning a deep seaport control along the Indian Ocean. An example is the deep seaport of Hambantota is a cautionary tale of Sri Lanka. To achieve its goal, China is playing the game of lending. When a country could not pay back its loans, China will negotiate a 99-year lease of the targeted port and a 70 percent share of its profits to give the targeted country approximately $8 billion in infrastructure and development contracts repaid at 6.3 percent interest. Similar lending deals have been struck with other ports, including Piraeus in Greece, Doraleh in Djibouti, and, of course, CPEC’s crown jewel: Gwadar.

China has enormous energy demands, and energy consumption totaled 4.48 billion metric tons in 2017, more than every European Union country combined. China is the world’s top crude oil importer from the Middle East. In 2018, Saudi Arabia was the second-largest supplier of crude oil to China, and Iraq was the third-largest supplier. Iran and China are under many sanctions from The United States. Accordingly, in 2019, Tehran officially joined the Belt and Road Initiative. The US withdrawal from the Iran nuclear deal in May 2018 also prompted Tehran to intensify its relations with China. However, this does not mean that China will cancel its oil contracts with Saudi Arabia and Iraq and rely on Iran; however, the agreement created a back door for China and Iran to challenge the United States 

China is playing the same game with Iran that it played with Pakistan in Gwadar. China is developing the ports of Jask and Chabahar in Iran and plans to turn the two ports into a significant hub for the Iranian hydrocarbon sector. The project will connect a pipeline from the ports to Iran’s western regions so that Iranian tankers do not have to pass through the Strait of Hormuz. The Iranian-Chinese relations are not limited to oil; China and Iran are reportedly negotiating a $400 billion military and trade agreement. The Chinese are looking for ways to bypass American sanctions for increasing its bilateral trade and economic cooperation with Iran, indeed. 

In recent developments

Over the course of the past week, the Pakistani military was given control over a $60bn strip of the CPEC, as was stated by the Times of India.  

The Parliament gave the military the control over the strip, limiting the power of the civilian government, the paper stated. Possible implications of a “parallel government” have been discussed in the public, as Pakistan wonders what the future may hold for the high-profile economic project.

On December 20, Dawn News reported that a new border crossing point was opened between Iran and Gwadar. With Gwadar’s role as the heart of the CPEC and the gateway of Asia, this may signify a major economic boost to the Islamic Republic.

Transparency notice 

Dawn News is a publication of Dawn Media Group, which is the operation name of Pakistan Herald Limited, founded by Muhammad Ali Jinnah, who was the founder of Pakistan. Dawn news is the oldest English-language newspaper of Pakistan.