CPEC in peril: China's strategic assets in Pakistan turning into a liability

The $65 billion China-Pakistan-Economic-Corridor (CPEC), from the restive oppressed Uyghur Muslim majority province of Xinkiang in China, all the way to the Pakistani/Balochi port of Gwadar, is clearly in deep jeopardy now. On top of the obvious debt trap to China, Pakistan finds itself facing a near uncontrollable security dilemma.

Runaway Uyghur fighters from Xinkiang, otherwise systematically oppressed by the Han Chinese, are in some degree contributing to the terrorism in Pakistan. This along with the Pakistani Taliban, the Baluchistan Liberation Army, and sundry terrorist groups once enthusiastically spawned by Pakistan to deliver a ‘thousand cuts’ to India - plus their various mutating affiliates.

Baluchis sheltering in Iran are also contributing their mite to the unrest and instability, with Iran reluctant to act harshly against their significant minority population.

This difficult situation is being aggravated daily by the economic weakness of China, plagued by a massive property and real-estate industry collapse, massive non-performing assets (NPAs), a low GDP growth rate, trade and diplomatic differences with the West, as well as a host of its neighbours.

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Its currency also cannot be trusted. Its Pakistan ‘all-weather partner’ turned dire liability, is living hand-to-mouth, as it is all but bankrupt. It not only owes billions, under multiple heads and sources, to China, it owes equally huge sums to the multilateral lending agencies such as the IMF and the World Bank plus other Western and Arab lenders. Total Pakistani debt topped $126 billion in 2022 and has worsened since.  The currency, the Pakistani rupee, is well on its way to becoming worthless. Foreign currency reserves have gone. Its revenue generation, never robust, as its economy is based on consumption and government spending, is now practically non-existent.

The multilateral lending agencies want Pakistan to renegotiate its loans from China before it gives it more money, but Pakistan is in no position to do so in real terms.

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This entire situation is making the Chinese truculent and short with Pakistan, but not really to the best effect. Pakistan, as per its long-studied practice, is trying to balance the influence of the superpowers, by playing the United States off against China to obtain a measure of leverage with both.

The US Ambassador to Pakistan Donald Blome, no doubt at the urging of the US State Department, visited oil, gas and mineral-rich Baluchistan, the largest province of Pakistan, on 12 September 2023. The Chinese have been operating in Baluchistan for long. But this visit is probably the beginning of a brand-new US initiative. The US Charge d’affaires had visited in 2021. And this was a long time after the visit of a previous American official, way back in 2006.

Blome met with Pakistani officials in Baluchistan and their Navy’s Western Commander. He also visited the port at Gwadar, run by the China Overseas Ports Holding. China hopes to use Gwadar for transhipments, oil cargos to itself should anything go wrong in the South China Sea, the Malacca Straits, its access to its Pacific ports-and exports to America. How it will drive its cargo through Pakistan to Xinkiang is another matter.

Pakistan, on its part, sees Gwadar as its only port besides Karachi.

Blome was also to see for himself that there is no Chinese military base in Gwadar as of now, even though the security situation is highly unstable. The Pentagon, in 2022, warned that there could be a People’s Liberation Army (PLA) Navy base in Gwadar before long. More so, if Pakistan capitulates any further to China.

But, first, before the US can consider fresh investments, there are the growing insurgencies. Almost to illustrate this, the same Pakistan Navy base Blome visited in Gwadar was also recently attacked by Balochi militants. The Balochis also attacked and killed Chinese engineers working on a dam at Dasu on the Indus River this month. This is in the sparsely populated Khyber Pakhtunkhwa region.

The Balochi militants routinely attack the provincial capital of Quetta, where the Chinese ambassador recently escaped an attempt on his life. They also do not hesitate to use human bombers in Karachi, again targeting and killing the Chinese, three teachers as it turned out.

All this, despite the best efforts of the Pakistan security forces. The Chinese have so far been disallowed to bring in their own security forces onto Pakistani territory, or indeed into Gwadar Port, other mining sites and Chinese population concentrations in Baluchistan. But the demand is renewed every time there is another terrorist attack on Chinese workers, officials and engineers.

The economic woes plaguing Pakistan have caused them to default on payments on power plants and infrastructure being built by the Chinese. The Pakistanis are also demanding a discount of $3 billion on the cost of a railway known as Main Line -1 from $ 9.9 billion to $6.6 billion. All this is putting pressure on the viability of the CPEC project, and has largely brought it to a stand-still.

The ambitious multiple roads, with industries, infrastructure projects, power plants, railways, and pipelines, are only partially completed after more than a decade. Most don’t make any money making repayment of loans only possible via other loans.

The CPEC main road snakes through the Pakistan Occupied Kashmir (PoK) and Gilgit-Baltistan, which could prove to be a choke point should India reclaim its territory, down to the plains of Pakistan.

The largely Shia population of PoK and Gilgit-Baltistan, like that of Baluchistan at the other end, are deeply unhappy with the rough and ready Sunni Pakistani administration. The PoK/Gilgit-Baltistan native population that Pakistan is trying to swamp with Sunni Muslims from the plains, would rather be part of Jammu and Kashmir on the Indian side. They have been demonstrating to this effect.

Once on the plains, the CPEC carriageways run for over 3,000 km. to the deep-water port at Gwadar. The Chinese have succeeded in building a deep-water port there, but it is still a-begging for cargo and usage, very much like their other white elephant port at Hambantota in Sri Lanka.

At least the Sri Lankans are not attacking the empty, state-of-the-art port that Sri Lanka had to cede to China on its territory. The same cannot be said for Gwadar in Baluchistan, regularly attacked by terrorists armed with explosives, grenades and small arms.

The Baluchis have made clear that they see no benefit from the Chinese-built port for themselves, lacking as they still are, in basics like electricity and water. The fishing in the area has been harmed. The air is polluted by coal-based power plants. The local population is constantly bullied by the Pakistani armed forces.

The recent elections in Pakistan to the Gwadar constituency in the Balochistan provincial assembly saw Maulana Hidayat ur Rehman, leader of the Gwadar Rights Movement elected. This will now provide an official voice to the Baluchistan activists.

Prime Minister Shehbaz Sharif is scheduled to visit Beijing shortly, and though he is well-experienced, will come under pressure on various aspects of the CPEC, the progress, payments, and security situation. However, China may well be caught between a rock and a hard place, having already invested billions. It is unable to make fresh investments now to keep up the pace of the project.

The geopolitical situation has also changed considerably for China, to its detriment, particularly since the COVID-19 pandemic, and no easy solutions present themselves.

China is now recalibrating its Belt and Road Initiative which has spanned 150 countries since 2013. It will now concentrate on smaller projects and has spurned Pakistani proposals for more BRI projects via direct investment on its soil.

The writer is a Delhi-based political commentator. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.