Economic corridor

hen Chinese President Xi Jinping went to Pakistan on an official visit in April 2015, he

brought with him a $46 billion gift that potentially could have very significant benefits for that
country, as well as have a major impact on the region. And although there remain a number of
unknowns on how this massive Chinese investment package will be implemented over the next 15
years or so, it is certain that it will pull Pakistan even deeper into Beijings geostrategic orbit. Even
though China and Pakistan have had a long and fruitful relationship for well over 50 years, if all the
projects associated with this deal are ultimately implemented, it will be a game-changer for the
regionequal to all the foreign direct investment inflows into Pakistan since 1970 combined and
dwarfing the $7.5 billion US aid package passed by Congress in 2009.
This $46 billion deal, known as the China-Pakistan Economic Corridor (CPEC), is essentially a
package of major projects that fall into two domains: transportation and energy. On the transport
side, there are about $12 billion in plans to build, among other things, a rail link connecting Gwadar,
a Chinese-built deep-sea commercial port on Pakistans southern coast, to the western Chinese city
of Kashgar, some 2,000 miles to the north. Other projects include widening the treacherous
Karakoram highway, itself previously built with Chinese help; upgrading Gwadar airport; building a
125-mile tunnel linking the two countries; and upgrading a number of existing highways, including
the critical Karachi-Lahore section.
A number of energy projects, about $34 billion in total, are also on the drawing board, including
pipelines to transport oil and gas to Kashgar; the completion of the Iran-Pakistan gas pipeline; and a
number of coal, wind, solar, and hydro energy plants that would add some 10,000 megawatts to
energy-starved Pakistan by 2018.
But the jewel in the crown for China is the development of Gwadar, which would give Beijing a firm
and reliable long-term beachhead in the Indian Ocean and close to the Persian Gulf, effectively
making it a two-ocean power.
The CPEC deal grants the Chinese 40-year operation rights to the port. This is hugely significant for
Beijing because it will allow China to ship some of its oil coming from the Persian Gulf to that port
and pump it through the pipelines to western China. Accordingly, with a transport route some 6,000
miles shorter, China will be able to save billions in transport costs and saved time. Indeed, Pakistan
in general and Gwadar in particular will be playing a critical role in Chinas joint plans for a Silk
Road Economic Belt and a Maritime Silk Road linking China to Europe and beyond.
At the moment, Gwadar is being developed as a commercial port and not as a facility for the Chinese
Navyyet it could potentially be made into one in the future. Such a development would without any
doubt exponentially increase Sino-Indian maritime competition in the Indian Ocean, in keeping with
Chinas first official defense white paper, published in early 2015, which makes quite clear that the

traditional mentality that land outweighs sea must be abandoned, and great importance has to be
attached to managing the seas and oceans and protecting maritime rights and interests.
In a move that will strengthen the defense of Gwadar, Pakistan is negotiating with China the
purchase of eight diesel-powered, conventionally armed attack submarines. This acquisition, which
is reportedly part of the CPEC package, would be one of Pakistans biggest weapons purchases ever,
at about $6 billion. Pakistans possession of such submarines, which are very quiet and lethal, would
seriously complicate any Indian attempt in blockading Karachi or Gwadar. This sale would also
further entrench China as Pakistans principal arms provider. In 2010 alone, Pakistan was the
destination for 60 percent of Chinas total arms sales.

hinas economic and military involvement in Pakistan began in the wake of the short 1962 Sino-

Indian war, when Pakistan felt that the US had been too quick to sell arms to India without getting
any concessions from the Indians on the Kashmir issue. That is when Pakistan started to look
elsewhere for international support, notably to China. But the bilateral Pakistan-China relationship
really took off during the 1965 Indo-Pakistan war when the US terminated all military aid to Pakistan
(and India), while China openly sided with Pakistan and threatened military action against India.
Although Chinas support for Pakistan during the 1971 Indo-Pakistan war was lukewarm at best, the
relationship nevertheless continued to grow in the 1970s, especially in the wake of Indias 1974
underground nuclear test. In the 1980s, Chinas relationship with Pakistan deepened with its
significant financial support for the Pakistan-based, anti-Soviet Afghan fighters, the mujahedin. In
the 1990s, the bilateral military relationship significantly deepened, especially in the field of nuclear
weapons and missiles. Today, among other things, China and Pakistan jointly manufacture the JF-17
fighter jet, which will eventually become the Pakistan Air Forces main combat aircraft.
This steadily developing bilateral relationship has been intensified by the effective end of major
Western, and in particular American, military presence in Afghanistan at the end of 2014. Beijing has
quickly seized this opportunity to bolster its long-term economic and strategic interests in Pakistan,
making it more than ever the critical land bridge in the development of Chinas Silk Road.
Accordingly, Chinese leaders have been willing to invest substantially in the development of
Pakistans decrepit infrastructure, particularly in its roads and energy sector.
Beijing knows that because of Pakistans domestic instability, the CPEC is a huge gamble. But if the
project does not come to complete fruitionand there are a number of reasons why it may notthe
bilateral relationship will nevertheless be more solid. And if the CPEC does meet all its targets, then
China will have opened a cornucopia of advantages, including a link to its already very significant
economic interests in neighboring Afghanistan, particularly in copper and oil.
The election of President Ashraf Ghani in Afghanistan in September 2014 has also influenced the
timing of the Pakistan proposal. Since the departure of President Hamid Karzai from the political
scene, Afghanistan has turned away from India and has instead embraced China and Pakistan.

Significantly, the first capital that the new president of Afghanistan visited was Beijing, not
Washington, let alone New Delhi. Under Karzai, who had very poor relations with Pakistan,
Afghanistan was drawn more and more into Indias orbit. By the time he left office, Afghanistan had
signed the Bilateral Security Agreement with New Delhi, Afghan military cadets were being trained
in India, and India was about to provide weapons for the Afghan National Security Forces. To
Karzais deep chagrin, Ghani put a stop to all these India-friendly activities and instead turned to
Islamabad and Beijing.
This was an intelligent and pragmatic move that made much more sense geostrategically than
looking to India for protection. By snuggling up to Islamabad, Kabul is putting pressure on Pakistan
to crack down on the Taliban and their allies, who are far from a spent force in Afghanistan. Put
differently, Ghani is calling Islamabads bluff about its repeated declarations that the Pakistan
military would pursue all terrorists without exception or compromise. Ghani knows that Beijing, too,
will be putting pressure on Pakistani leaders to deliver on that promise because terrorism, a lot of it
originating from Pakistan, is now an issue also affecting China.
While obviously not publicly stated, the third reason for the CPEC project is to counter the USIndian rapprochement, which has accelerated since Narendra Modi was elected as prime minister of
India last year. It was a process that had already begun under President Bush, who had stated back in
2005 that the US wanted to help India become a great power. But now it has become more insistent.
During his visit to India in January 2015, President Obama finalized the July 2005 US-India nuclear
deal and renewed the 10-year military cooperation agreement of 2005. Defense Secretary Ashton
Carter also signed a defense framework agreement during his visit to New Delhi in June 2015. Much
of this rapprochement between the United States and India is driven by Chinas aggressive behavior
in the South and East China Seas. And this latest Chinese venture in Pakistan will no doubt fuel
concerns about Chinas military intentions in the Indian Ocean.

n addition to the enormous construction, logistical, bureaucratic, and manpower challenges, the

China-Pakistan Economic Corridor will require the two countries to address two significant security
challenges. One is the activity of insurgents in Baluchistan, the large southwestern province where
Gwadar is located, and the other is the continued presence of the Taliban and their allies in the
countrys northwest. China will demand forceful action on both fronts.
Baluchistan has been in the throes of a low-level insurgency since the early part of this century.
Chinese workers and other non-Baluch have increasingly been the targets of Baluch insurgents
opposed to large development projects. For example, three Chinese engineers were killed by a car
bomb at Gwadar in May 2004. Also, the insurgents regularly sabotage oil and gas pipelines. In
addition to the several Baluch insurgent groups that seek greater autonomy from Islamabad, there is
also a very active terrorist group, Lashkar-e-Jhangvi, which targets principally, but not solely,
Pakistani Shiites, especially the Hazaras. The group sometimes works with ethnic Baluch groups in
coordinating attacks.

China shelved several Gwadar-related projects a few years back because of security concerns.
Presumably Beijing has decided to go ahead now because it believes the Pakistan security forces will
be able to contain these insurgents. Confirming Islamabads determination to prevent future attacks,
the Pakistani government has promised to provide 10,000 troops, including 5,000 trained
specifically in counterterrorism, to protect Chinese workers. And although there will be a lot of
pressure on Islamabad to ensure that new pipelines are safe from sabotagenow that they will be
transporting oil and gas to Chinathis will not be an easy task.
The second security challenge, the semi-autonomous Federally Administered Tribal Areas (FATA) in
the northwest along the border with Afghanistan, will be even more difficult to address because of
the number of disparate actors present and their differing political agendas. There are three broad
groups hiding in that frontier region: the Afghan Taliban, the Pakistani Taliban, and all the nonlocals, which include the Muslim Uighurs from Chinas western Xinjiang Province. The Chinese
leaders have been putting pressure on Pakistan to ruthlessly pursue all these groups, in particular the
Uighurs of the al-Qaedalinked separatist East Turkestan Islamic Movement (ETIM).
Many of the ETIM fighters fled to Pakistan along with other al-Qaeda and Taliban fighters following
the ouster of the Taliban from power in Kabul in 2001. While the actual number of Uighur operatives
in the tribal areas is probably not very high, they have managed to launch raids into Xinjiang
Province from those lawless areas. This has deeply upset the Chinese leaders, and they have
indicated their displeasure very publicly, especially after the deadly attack in the western city of
Kashgar (future destination of those new pipelines) in July 2011. In the wake of these attacks, Beijing
is reportedly interested in establishing bases either in FATA, which border Afghanistan in the
northwest, or in the Federally Administered Northern Areas (FANA) to the east, which border
Xinjiang Province. This straw in the wind has drawn the close attention of an already edgy India,
which is uncomfortable with the alleged presence of 7,00011,000 Chinese soldiers in FANA.
In the wake of a terrorist attack on Karachis international airport in June 2014, Islamabad ended its
unsuccessful negotiations with the Pakistani Taliban, and ordered its armed forces to launch a
military operation in North Waziristan and later in the Khyber Agency in FATA. Reportedly, Beijing
like Washingtonhad been pushing for this course of action. While the Pakistani military has
successfully hunted down many of the terrorists, including the members of the ETIM, many of them
have found refuge across the border in Afghanistan. Nevertheless, the year-long operation, which has
brought the total number of Pakistani troops in FATA to some 200,000, has managed to degrade,
disperse, and disrupt the terrorists capabilities and networks.
Importantly, following the horrendous terrorist attack on a school in Peshawar that killed 148
people, principally children, in December 2014, the military has repeatedly stated that it was
targeting allterrorist groups. Presumably, this means that the military no longer differentiates
between the good Taliban, who do not attack the Pakistani state and who could potentially be
useful to have as a bargaining chip in Afghanistan, and the bad Taliban, who attack everyone,
including Pakistani targets.

f the CPEC deal becomes a reality, it would be very good news for Pakistan. It would certainly help

the country deal with some of its major developmental issues, including upgrading some of its
decrepit infrastructure and correcting its significant energy shortage.
Reportedly, Pakistans economy loses up to 6 percent of GDP because of power and infrastructure
bottlenecks. That well over 1,000 people died in Karachi alone in June because of the lack of
electricity to power air conditioners is an indication of how dire the energy situation is in Pakistan.
Beijing is keenly aware that Pakistans domestic problems make it a problematic ally and partner.
However, China also knows that, unless something is done to very significantly assist Pakistan, this
nuclear-armed country of 200 million could collapse as a functioning state in the near future. Beijing
knows it would not be spared if such a nightmare scenario ever became reality. So, in addition to its
potential economic benefits, the CPEC represents Chinas best hope against regional chaos.
For CPEC to move forward, China will undoubtedly require that the Pakistani military continue to
relentlessly hunt down the Taliban and all its ideological fellow travelers, including in particular the
ETIM, in the tribal areas. Pakistan should undoubtedly have its own reasons for wanting this as well,
having suffered some 50,000 dead and billions in lost revenue as a result of terrorist activity. The
degrading of the Taliban et al. in the tribal areas would also hurt the Afghan Talibans ability to
wreak havoc in Afghanistan, allowing the government to get on with the job of reconstruction after
30 years of war. If such a process does not occur, the Taliban will dominate Kabul and the ETIM
would have a friendly rear base from which to potentially launch attacks into Xinjiang Province. This
is why China hosted exploratory peace talks between the Taliban and the Kabul government, with
Pakistani army intelligence present, in Urumqi, the capital of Xinjiang, in May.
But if the new economic corridor succeeds there will be losers as well as winners. Although India is
protesting about CPEC because some of the infrastructure traverses contested Pakistan-administered
Kashmir, its not making too much of a fuss about Gwadar, not just yet. That could change quickly,
however, if Gwadar becomes a full-fledged facility for the Chinese Navy.
Nor would the US see its national interests served by such an upgrade, which would effectively make
Beijing a two-ocean power. The big question for Washington is how will this huge Chinese
investment affect the Obama administrations rebalancing of American assets to the Asia-Pacific.
Initially, it will probably be minimal, given that Washingtons pivot is really focused on the western
Pacific and the South China Sea rather than South Asia and the Indian Ocean. However, if Gwadar
does develop into a Chinese naval facility in the future, Washington will need to recalibrate its
response accordingly, as this would have a direct bearing on Chinas ability to deploy naval assets in
the Indian Ocean.
US relationswith Pakistan today are good, and it is important they remain so in the future. Although
the US has for all intents and purposes been displaced by China as Pakistans major patron, it is
critical that Washington remain profoundly engaged with Islamabad. Pakistan is simply too
important and too vital strategically to be shoved to the back or even to the side. Accordingly,

Washington will need to be supportive of Islamabads counterterrorism efforts while at the same
time monitoring closely Chinas growing military and economic presence in Pakistan. Not to do so
could otherwise lead to nasty surprises down the roada road that will increasingly be paved with
Chinese power and money.