Chinas String of Pearls Strategy

Chinas String of Pearls Strategy CHAPTER I INTRODUCTION String of Pearls Chinas String of Pearls strategy is the name given to a geopolitical strategy adopted by China arising as foreign oil becomes a center of gravity critical to Chinas energy needs.[1] This policy on the face of it appears to be an attempt by China to have an increased access to various ports and airfields in the South Asian region and at the same time to developing special diplomatic relations with these countries. This seems to be a strategic move as China is establishing these pearls or a series of nodes[2] of military and economic power thus enhancing its overall influence in these regions. A question posed by the String of Pearls is the uncertainty of whether Chinas growing influence is in accordance with Beijings stated policy of peaceful development, or if China one day will make a bid for regional primacy[3]. China gives the impression that it is interested in having a more powerful role to play on the global stage and thus evoking concerns in its neighbours, especially India, as being threatening. However, Chinas development of these strategic geopolitical pearls has been non-confrontational[4], with no evidence of imperial or neocolonial ambition, whatsoever. Extension of the Pearls The pearls extend[5] from the coast of mainland China through the littorals of the South China Sea, the Strait of Malacca, across the Indian Ocean, and on to the littorals of the Arabian Sea and Persian Gulf. However, looking at the progress that China has made in the last couple of years it may not be too erroneous to say that it is now trying to extend these pearls by making a foray into the African continent and the Central Asian regions. In light of this, it is imperative to focus on the abovementioned issue and the concerned predicament in the minds of the other world power players as to the real design and intention of China and the consequence that this might have on the energy and economic security of these nations, particularly India and the US. Emergence of Strategic Players The rise of this strategy has not only shifted focus on China and its growing energy needs but also has brought to limelight those smaller nations in which China is trying to gain foothold and develop these pearls. Nations like Myanmar, Bangladesh, Thailand and recently, countries like Sudan, Egypt Nigeria etc which are rich in energy resources, have come to play a major role in the worlds energy needs. These nations are fast becoming the centre of the worlds energy playing field and are emerging as the strategic centres around which this game of energy security will be played out in the coming future. Hence, it becomes essential for fast developing countries like India and Brazil, who need their share of this energy market, to progress ahead in order to counter Chinas strategy at the earliest. These nations need to evolve their own strategy if they do not want to be left behind because not acting at this point in time may have a huge impact on their economies in the coming future. METHODOLOGY Statement of the Problem This paper seeks to study and analyse the impact of Chinas string of pearls policy on the energy security of the worlds major players in general and India in particular. Hypothesis Chinas String of Pearls policy does not have security implications for India militarily but will have definite implications on the energy security particularly that of India and US. Justification of the study China, in the past decade has influenced the behaviour of its neighbouring nation states to quite an extent. In continuing with its stated policy of economic reforms, it had to secure all the energy resources that it could in the available time frame. Although the name String of Pearls was a name coined by a minor pentagon analyst[6] but certainly it does indicate Chinas quest for securing its energy needs by occupying certain areas of influence in and around its neighbourhood. China, in recent past, has started making headway into the vast energy resources of Africa and Central Asian regions apart from the resources in Myanmar, Spratlys and Paracel islands. Hence, a detailed study is required to look into the effects that may be caused by Chinas incursions into these yet untouched and somewhat unexplored regions. The world took some time to wake up to the vast amount of energy resources that these countries had and China had a headstart in this regard over other nations in these regions. This study tries to bring out the effect that the existing pearls have on the energy security of India and other nations and examines the new pearls and their effects on the energy security of these nations. Scope This study concentrates on the specific issue of string of pearls policy and the impact of this policy on the energy security of India in particular. The study also tries to bring out the aspect of Chinas inroads into the African Countries and the Central Asian Regions as an extension of this policy. The aspects of Chinas military modernization as an offshoot of this policy have been kept out of this discussion. Operational definitions Methods of data collection Organisation of the dissertation Rising China: Implications for India by Major General (Retd) Dhruv Katoch SM, VSM, USI journal July September 2009. www.wisegeek.com/what-is-a-string-of-pearls-strategy.htm www. U.S.-China Commission, 2005 Report to Congress. Rising China: Implications for India by Major General (Retd) Dhruv Katoch SM, VSM, USI journal July September 2009. www. M K Bhadrakumar, India and its troublesome Neighbours, The Hindu, 02 Nov 2009 CHAPTER II HISTORICAL BACKGROUND HOW CHINA TRANSFORMED IN THE LAST DECADE? Before we begin to discuss the String of Pearls policy in detail, lets take a look at how China has transformed itself economically in the last 10 years. China is the third largest economy in the world after the US and Japan. China has had the fastest-growing major economy for the past 30 years with an average annual GDP growth rate above 10%[7]. In 1978, after years of state control of all productive assets, the government of China embarked on a major program of economic reforms. In an effort to awaken a dormant economic giant, it encouraged the formation of rural enterprises and private businesses, liberalized foreign trade and investment, relaxed state control over some prices, and invested in industrial production and the education of its workforce. By nearly all accounts, the strategy has worked spectacularly. Chinas economy regained momentum in the early 1990s. In early 1992, China made a series of political pronouncements designed to give new impetus to and reinvigorate the process of economic reform. Along with cContinuity in the political system, but a bolder reform was announced in the economic system were announced as the a hallmarks of the 10-year development plan for the 1990s. Although capital accumulation, i.e., the growth in the countrys stock of capital assets, such as new factories, manufacturing machinery, and communications systems, was important, as so were the number of Chinese workers., a A sharp, sustained increase in productivity (that is, increased worker efficiency) was the driving force behind thise economic boom. China has really come very far in the last ten years. Chinas growth as an economy wont flow smoothly from the bottom-left to the upper-right side of the chart. But the fact remains that China will be the biggest, fastest-growing economy in the world in the twenty-first century[8]. In fact, it is interesting to note that when China began its reforms , Deng Xiaoping put military last on the list forro modernization[9]. Chinas economy is gathering momentum and gaining speed. After a period of a double -digit growth in the post-Tiananmen period of the early 1900s, the law of large numbers would have predicted that thisat kind of growth couldnt happen again. But China has defied conventional wisdom. Already one of the largest economies, China grew by at least 10 percent in 2003, 2004, 2005, 2006 and 2007. The country had $21 billion in foreign reserves in 1993; ten years later, in 2003, China was adding $200 billion or more of reserves into its coffers each year. By the end of 2006, China had more than $1 trillion in foreign currency reserves, an unprecedented amount that was growing by $50 billion each month. Chinas leaders are traveling the world negotiating long-term supply contracts with oil-producing countries. China doesnt have enough of its own energy reserves, and obtaining enough energy to fuel its economy is a very real concern. Quest for Energy South Korea, Taiwan, Thailand, Hong Kong, and Singapore were dubbed Asian Tigers as they sustained rapid economic growth and industrialization from the 1960s through the 1990s. Chinas rise in the 21st century, the rise of the Asian Dragon, has the potential to surpass greatly the growth of the Asian Tigers. Since the beginning of economic reforms under Deng Xiaoping, China has averaged an annual gGross dDomestic pProduct (GDP) growth rate of 9.4 percent. Since 1978, foreign trade has grown from a fraction of a percent of the world economy, or $20.6 billion, to over 4 percent, or $851 billion in 2005. Chinas GDP is the worlds third largest at roughly 1/7th that of the United States, yet because of its population of 1.3 billion, on a per capita basis, China is ranked roughly 100th in the world and considered a low-income developing country. Many economists believe that with the latent potential of a rapidly emerging middle class, China has the potential to continue its impressive growt h for many years to come. An ever-increasing demand for energy fuels Chinas growth. Chinas Energy Needs The majority of Chinas energy requirement, 70 percent, is currently met by coal — China is the worlds largest producer and consumer of coal. Although coal will remain preeminent, oil consumption is expected to grow at an average annual rate of 5.8 percent for the next 10 years. In 1985, China was East Asias largest petroleum exporter; in 1993, China became a net oil importer; and in 2004, China leapfrogged Japan to become the worlds second largest oil importer. Roughly 40 percent of all new world oil demand is attributable to Chinas rising energy needs. Secure access to foreign oil resources will be necessary both for continued economic growth and, for the survival of the Chinese Communist regime because since growth is the cornerstone of Chinas domestic stability., for the survival of the Chinese Communist regime. http://en.wikipedia.org/Swiki/Economy_of_the_Peoples_Republic_of_China Jack Perkowski, Managing the Dragon Robyn Meredith, The Elephant and the Dragon CHAPTER III THE PEARLS AND THEIR STRATEGIC SIGNIFICANCE A few strategists in India and US have been using the term String of pearls to designate those areas where China is establishing its bases. These bases have been given the term pearls. Each pearl in the string is a nexus of Chinese geopolitical influence or military presence, which stretches from Hainan Island to Gwadar[10]. GWADAR, PAKISTAN Gwadar port is a small fishing village, 450 miles west of Karachi and 75 km east of Iran border , and was identified by Pakistan as a potential port location in 1964 but lacked the means to develop. It is a deep sea , warm water port situated in the Balochistan province of Pakistan at the apex of Arabian sea and entrance of Persian gulf. The port facility at Gwadar is a win-win prospect for both China and Pakistan. The port at Karachi currently handles 90 percent of Pakistans sea-borne trade, but because of its proximity to India, it is extremely vulnerable to blockade. This happened during the India-Pakistan War of 1971 and was threatened again during the Kargil conflict of 1999. The port is strategically located between three important regions Oil rich Middle East, heavily populated Pakistan and the Central Asian Region. A modern port at Gwadar would enhance Pakistans strategic depth along its coastline with respect to India. For China, the strategic value of Gwadar is its 240-mile distance from the Strait of Hormuz.[11] China has funded a majority of the $1.2 billion project and provided the technical expertise of hundreds of engineers. Since construction began in 2002, China has invested four times more than Pakistan and contributed an additional $200 million towards the building of a highway to connect Gwadar with Karachi. This port accrues the following advantages for China :- It can serve as a potential Chinese Naval Anchor. It serves as an energy transport hub to carry oil from Gwadar to its western region of Xinjiang by an oil pipeline. It helps insulate the Chinese imports from interdiction in case of any major war. It benefits by having access to international trade routes. Use of rail network is also a major advantage although the access in this case may be hampered due to the difference in gauge between China , Pakistan and CAR nations. Shanghai port is approximately 16000 kms from Chinese industrial areas and sea travel adds another 2-3 months whereas Gwadar is only 2500 Kms and will work throughout the year. It also provides Beijing with a listening post from where it can monitor US, India and US-India Maritime cooperation. As Admiral (retd) Sureesh Mehta[12] said It has a serious strategic implication for India, being only 180 Nm from the exits of Strait of Hormuz, would enable Pak to take control over the world energy jugular interdiction of Indian tankers. Hambantota, SriLanka Hambantota is a rural town in the SE coast of Srilanka. As per the 2007 agreement, development of Hambantota included[13]:- Developing a container port Developing a bunkering system Establishing an oil refinery Setting up an airport and other facilities The approximate expenditure in setting up Hambantota was $1 Bn of which 85% will be financed by China over the next fifteen years. A question that comes to mind is that although there seems to be not much economic significance of this pearl to China, then why is it investing so heavily here. Possibly the following answers come to mind:- There is a potential for Navy as a Port of Call. The port can be used for refueling purposes. The port will act as a Listening post and watch tower on Indias nuclear, space and naval establishments in South India. At present, there is no military component here but Chinas involvement here would make much more sense from a military perspective. Chittagong, Bangladesh Chittagong is the largest seaport in Bangladesh. China is developing a container port facility a Chittagong[14]. However, it is important to note here that there has been no further word on this development probably because of the regime change in Bangladesh which is India friendly. Sittwe, Myanmar Among the many ventures of China in Myanmar, the following two are the most crucial:- The gas pipeline from Myanmars West Arakan state to Yunnan province. Using Sittwe Port as a sea gateway. According to the 1992 agreement, China was ready to modernize Myanmars naval facilities in return for the permission to use the Coco Islands. China undertook building a deep sea port (Kyaukpyu)[15]; road construction from Kunmig to Sittwe for which a feasibility study was done in 2005 and is also funding the road construction from Rangoon to Akyab. From 2013, Chinese oil tankers from the Middle East and Africa will be able to cross the Bay of Bengal to dock at Myanmars Sittwe and Kyaukphyu ports from where their cargo will be transported through pipelines to Yunnan. The transport time of fuel that bypasses the Malacca Strait in this way will be cut by a week. A recent article in the Outlook[16] explained the significance of Chinese Vice-President Xi Jinpings Dec 09 visit to Myanmar, one of the key reasons being Chinas determination to go ahead with the construction of the parallel oil and gas pipelines from the Arakan area of Myanmar to Yunnan. He accorded a greater priority to the A rakan-Yunnan pipeline as compared to the Gwadar-Xinjiang pipeline proposed by the Pakistan Government citing the reason that the Chinese Government was more confident about the Myanmar Army taking care of the security of parallel pipelines passing through Myanmar than about the Pakistan Government for security of a pipeline passing through Pakistan. Moreover, the first stage of the pipeline connecting Xinjiang with the Central Asian Republics has been recently commissioned, thereby reducing the urgency of a Gwadar-Xinjiang pipeline. There is another added advantage of the Arakan-Yunnan pipelines over the pipeline from Gwadar. The former has a two-fold benefit it will help carrying oil brought by Chinese tankers from West Asia and Africa thereby reducing present Chinese dependence on Malacca Strait transporting the gas procured locally in Arakan by Chinese companies The pipeline from Gwadar can only be used to carry oil/gas from West Asia. Pakistan does not have any oil or gas to sell to China . As per the Indian analysts, Chinese presence may allow it to interdict regional SLOCs. On this account, Myanmar is emerging as the single largest threat to Indian strategic interests in SE Asia. Coco Islands Coco islands are a pair of strategically important islands located in the East Indian oceanOcean politically administered by Burma under Yangon division. The Great Coco Islands (102) and Small Coco Islands (51) are separated from each other by Alexandra Channel. They are separated from the Andaman by Coco Channel; Myanmar 300 km N Historically, these islands were a part of India under British rule but due to lack of close supervision, they were transferred to Myanmar. These islands were supposedly leased to the Peoples Republic of China since 1994, according to various amateur sources[17]. The government of Burma and that of the Peoples Republic of China do not comment on such manner. China has helped in carrying out the following activities here:- Establishing a SIGINT and ELINT int gathering station (supposedly 92) Oon the Great Coco Island. Building a maritime base on the little Coco Island. Development of airfield, radar dish, ae, jetty and a number of buildings. However, there are no signs of a large base here. Strategic importance of this pearl for China:- Monitoring Indian Naval activity Monitoring movement of other navies and ships esp between Bay of Bengal and Malacca Strait. May be used to monitor the activities at the launch site of ISRO at Sriharikota and DRDO at Chandipur on sea. According to Indian analysts, this may pose a threat to Indian tri-service command at Port Blair (190 Nm away). If seen in toto, this completes the maritime encirclement of India. Strait of Malacca Strait of Malacca is a narrow 805km stretch of water between Peninsular Malaysia and Indonesian island of Sumatra. At the Philips Channel, this Strait narrows down to 2.8 km, thus becoming one of the worlds most significant choke points. Straits of Malacca and Hormuz have become crucial waterways for China. Close cooperation with Myanmar and Pakistan thus also becomes a crucial issue[18]. From economic and strategic perspectives, Strait of Malacca is one of the most important shipping lanes of the world. This Strait is economically significant for China in that 50,000 vessels pass through it each year and almost 80% of Chinas oil passes through this Strait. In essence, whoever controls Malacca threatens Chinas oil supply route. China gave a statement indicating that it would use its naval might to ensure that these sea lanes remain open. In President Hu Jintaos own words[19], Malacca dilemma is the key to Chinas energy security. Hu also hinted that various powers (including US) had tried to enlarge their scope of influence in the Straits of Malacca by either controlling or trying to control navigation in the Straits of Malacca. It is interesting to note here that Indias naval base in the Andaman and Nicobar islands puts India in an advantageous position. Kra Canal Kra Canal or the Thai Canal is actually a plan for a large canal that would cut through Southern Thailand to enable improved transportation in the region. China had planned to construct this over ten years employing 30,000 workers with an estimated cost of $20-25 Bn. However, initially the plan seemed to have been dropped owing to environmental concerns but recently there have been signs of revival of this plan since there are economic benefits for China and a threat of piracy in the Strait of Malacca. The plan was tentatively approved in 2007 but Singapore and US showed their dissent for obvious reasons. Another alternative to this plan is to build a pipeline across the Isthmus to carry oil to ships waiting on the other side. South China Sea South China Sea is located south of China and Taiwan, west of Philippines, North West of Malaysia, North of Indonesia and East of Vietnam. The region has proven oil reserves 7.7 billion barrels (28 bn estimated) and its natural gas reserves are estimated at 7500 km3. A significant part of this region is the Spratly Islands where oil was discovered in 1968. It has been estimated by the Geology and Mineral Resources Ministry[20] of Peoples Republic of China that Spratly islands may have oil reserves to make them the fourth largest reserve bed in the world. Hence, there is intensification by PRC to claim these islands. Woody Islands Woody Islands are a part of the Paracel Islands occupied by PRC. This node acts as a Chinese Emergency Rescue Centre served by an artificial harbour and an airfield with a 2350m runway. The centre was occupied in 1956 and also has oil tanks, gun emplacements and ammunition storage bunkers. The islands may be used as a staging point to sp offn ops in the Spratlys. There are also reports of the existence of Silkworm anti-ship cruise missile installations on the Woody Islands. In mid 95, a new SIGINT station was established on the Rocky Island, north to Woody Island. Since it is the highest point, there is good signal interception is obviously good. Hainan Islands These 200 islands form the smallest province of PRC and are home to the PLAN strategic nuclear submarine naval harbour that is capable of hiding upto 20 nuclear submarines from spy satellites. The harbour houses nuclear ballistic missile subs and is large enough to accommodate aircraft carriers. PLAN has developed Sanya Naval Base (Yulin) in Southern part to op Jin class subs (SSBNs) and Shang class subs (SSNs) (replaced Han Class). Rising China : Implications for India by Major General (Retd) Dhruv Katoch SM,VSM ,USI journal July September 2009. Source: http://intellibriefs.blogspot.com/2008/01/gwadar-port-has-strategic-implications.html Source: http://intellibriefs.blogspot.com/2008/01/gwadar-port-has-strategic-implications.html Source: http://www.marinebuzz.com/2007/11/02/china-funds-sri-lanka-hambantota-port-development-project/ Dilip Ghosh,Chinas String of Pearls encircling India , Asia Defence News Vol IV , Issue 12 , 15 Dec 2009. Dilip Ghosh,Chinas String of Pearls encircling India , Asia Defence News Vol IV , Issue 12 , 15 Dec 2009. Source: http://www.outlookindia.com/article.aspx?263531 Source: http://en.wikipedia.org/wiki/Coco_Islands Amardeep Athwal, China India relations contemporary Dynamics Source: The Straits of Malacca: the Rise of China, America s Intentions and the Dilemma of the Littoral States by Mokhzani Zubir, Researcher, Centre for Maritime Security Diplomacy Source: http://en.wikipedia.org/wiki/Spratly_Islands CHAPTER IV POSSIBLE MOTIVATIONAL FACTORS BEHIND THIS STRATEGY Chinas development during the past decade, from its expanding economy and increased global influence to its growing military might and demand for energy, presented tremendous challenges to their leaders as they managed the turmoil of massive structural, technological, and social changes. The governing three key worries of the Chinese government have been:-elites of China had three overarching concerns:- Regime survival. Territorial integrity. Domestic stability. In the succeeding paragraphs these three concerns and their impact on the economy have been highlighted. The relation between the economy and the string of pearls strategy has also been shown. Regime Survival Regime survival was has always been and will shall remain the foremost concern of the ruling Chinese Communist Party (CCP). The party leadership is It is aware that their survival depends upon the satisfaction of the Chinese people and their ability how well they are able to protect Chinese national interests. The collapse of the When Soviet Union collapsed and the end of the Cold War ended, Communism was exposed deduced as a communism as a bankrupt ideology with a flawed economic system[21]. To avoid the same fate as had befallen the erstwhile USSR, the Chinese adopted a socialist market economy. Although a lot of economic and social reforms have taken place but , in the middle of it the CCP has maintained a strict authoritarian control. The CCP is aware of the fact that as long as the economy is thriving the populace willl be satisfied and hence there would not be a serious threat to the current regime. Territorial Integrity China has in the recent past adopted a strategy of befriending its neighbours with the notable exceptions being India and Taiwan and in the process has met with considerable success too. Although certain contentious issues still remain with the countries such as Japan over some disputed islands but more or less China has successfully demilitarized its land borders in the nNorthern and the cCentral aAsia. On the central Central asian Asian front, China has become more influential under the support of the Shanghai Cooperation Organization (SCO), whose member states consist of China, Russia, Kazakhstan, Uzbekistan, Kyrgyzstan, and Tajikistan, along with the observer members of India, Pakistan, Iran, and Mongolia. It is slowly but surely laying to rest the dispute over Tibet although in a more subtle way. The only spanner in the wheel that remains is its relations and territorial disputes with India which are not showing any signs of fast progress. However, the relations with India have been more of a sine curve with statements against one another coming from both sides. India has more or less recognized Chinas claims to Tibet and China has reciprocated by recognizing Indias claim to the Himalayan state of Sikkim. Even with respect to Taiwan, Chinese policy attempts to balance the stick of diplomatic and military pressure with the carrot of mutually beneficial cross-strait economic ties. With the last elections in Taiwan throwing some startling results in favour of cChina, the day is not far off when it will come into some sort of agreement with Taiwan also. What has made China want to have good relations with its immediate neighbours . neighbours. The one thing that comes to mind is economy. It seems that the ever increasing demands of increased economic development are the driving forces behind Chinas improved relations with her neighbors. Domestic Stability Again successful economic development is perceived as key to Chinas third area of strategic concern, domestic stability. CCP is focused inward, and primarily domestic politics drive Chinas foreign and economic policies. Changes to the economic system and the decision to embrace globalization are causing major shifts in Chinese society[22]. The Chinese government is aware that although it is moving towards becoming an economically prosperous nation but everything is not in order inside their house. ThHere are large disparities between the economy of the people who are living in the coastal cities such as Shanghai and the people who are living in the interior less developed regions which have not seen the effects of the information revolution. Due to this class distinction due as a result of theto economic stratification, the government is wary and knows that if there are anti government demonstrations they cannot be repressed as was done earlier, the famous example being of the Tianan men Square crackdown of June 1989. Thus to address this issue the regime is aware that it needs to bring economic parity to its provinces such as Yunnan and Xinjiang. In meeting this challenge, the government must foster economic prosperity to satisfy the demands and expectations of the Chinese people. Link with Energy All these three abovementioned factors, as have been shown in the preceding paragraphs, are inescapably linked with the economic prosperity of China. The government iof China is aware that the greatest strength of cChina as also its greatest vulnerability is the its economy and hence it has based its national policy and strategy on economyaround this key factor. For its economy to continue thriving, as is with the case of all nations, China knows that it has to rely upon continued and sustained import of energy. Since energy provides the foundation of the economy, Chinas economic policy depends on the success of its energy policy. As the energy resources available within the country are quite limited and cannot ascribe to the full economy; hence it China, therefore, has to rely in a big way on the external sources of energy and raw materials. To import these energy resources and raw materials, it has to have a good and effective transportation system both on land and at sea is required. The three major problems that were faced by China in importing energy via land based routes were that firstly, most of the energy rich nations are either not connected by land; secondly, it would take a major effort and would not be cost effective to connect them with land and thirdly, even if these nations were connected, their links pass through other natio ns which may be a risk keeping in mind the fluid world order and changing equations. Hence, it was important that the Sea Lines Of Communications , which were importing the major chunk of energy be secured . Securing Sea Lines of Communications for energy and raw materials supports Chinas energy policy and is the principal motivation behind the String of Pearls. This is how and why the String of Pearls relates to Chinas Grand National Strategy. Protection of SLOCs The question that arises here is that from whowhom is the protection is required, if at all.? Whom does China fear? Over 70 percent of the total oil imports of China come from either the Middle East or the African countries majority of which is transported through sea and this will remain so for the foreseeable future. Hence, China has a long-term commitment to these supply sources due to which it has been trying to build up better relations with these countries whether that comes as monetary help or in some other form. For eg, Saudi Arabia is Chinas largest crude oil supplier, and the Saudi national oil company, Aramco, is a 25 percent investor in Chinas String of Pearls Strategy Chinas String of Pearls Strategy CHAPTER I INTRODUCTION String of Pearls Chinas String of Pearls strategy is the name given to a geopolitical strategy adopted by China arising as foreign oil becomes a center of gravity critical to Chinas energy needs.[1] This policy on the face of it appears to be an attempt by China to have an increased access to various ports and airfields in the South Asian region and at the same time to developing special diplomatic relations with these countries. This seems to be a strategic move as China is establishing these pearls or a series of nodes[2] of military and economic power thus enhancing its overall influence in these regions. A question posed by the String of Pearls is the uncertainty of whether Chinas growing influence is in accordance with Beijings stated policy of peaceful development, or if China one day will make a bid for regional primacy[3]. China gives the impression that it is interested in having a more powerful role to play on the global stage and thus evoking concerns in its neighbours, especially India, as being threatening. However, Chinas development of these strategic geopolitical pearls has been non-confrontational[4], with no evidence of imperial or neocolonial ambition, whatsoever. Extension of the Pearls The pearls extend[5] from the coast of mainland China through the littorals of the South China Sea, the Strait of Malacca, across the Indian Ocean, and on to the littorals of the Arabian Sea and Persian Gulf. However, looking at the progress that China has made in the last couple of years it may not be too erroneous to say that it is now trying to extend these pearls by making a foray into the African continent and the Central Asian regions. In light of this, it is imperative to focus on the abovementioned issue and the concerned predicament in the minds of the other world power players as to the real design and intention of China and the consequence that this might have on the energy and economic security of these nations, particularly India and the US. Emergence of Strategic Players The rise of this strategy has not only shifted focus on China and its growing energy needs but also has brought to limelight those smaller nations in which China is trying to gain foothold and develop these pearls. Nations like Myanmar, Bangladesh, Thailand and recently, countries like Sudan, Egypt Nigeria etc which are rich in energy resources, have come to play a major role in the worlds energy needs. These nations are fast becoming the centre of the worlds energy playing field and are emerging as the strategic centres around which this game of energy security will be played out in the coming future. Hence, it becomes essential for fast developing countries like India and Brazil, who need their share of this energy market, to progress ahead in order to counter Chinas strategy at the earliest. These nations need to evolve their own strategy if they do not want to be left behind because not acting at this point in time may have a huge impact on their economies in the coming future. METHODOLOGY Statement of the Problem This paper seeks to study and analyse the impact of Chinas string of pearls policy on the energy security of the worlds major players in general and India in particular. Hypothesis Chinas String of Pearls policy does not have security implications for India militarily but will have definite implications on the energy security particularly that of India and US. Justification of the study China, in the past decade has influenced the behaviour of its neighbouring nation states to quite an extent. In continuing with its stated policy of economic reforms, it had to secure all the energy resources that it could in the available time frame. Although the name String of Pearls was a name coined by a minor pentagon analyst[6] but certainly it does indicate Chinas quest for securing its energy needs by occupying certain areas of influence in and around its neighbourhood. China, in recent past, has started making headway into the vast energy resources of Africa and Central Asian regions apart from the resources in Myanmar, Spratlys and Paracel islands. Hence, a detailed study is required to look into the effects that may be caused by Chinas incursions into these yet untouched and somewhat unexplored regions. The world took some time to wake up to the vast amount of energy resources that these countries had and China had a headstart in this regard over other nations in these regions. This study tries to bring out the effect that the existing pearls have on the energy security of India and other nations and examines the new pearls and their effects on the energy security of these nations. Scope This study concentrates on the specific issue of string of pearls policy and the impact of this policy on the energy security of India in particular. The study also tries to bring out the aspect of Chinas inroads into the African Countries and the Central Asian Regions as an extension of this policy. The aspects of Chinas military modernization as an offshoot of this policy have been kept out of this discussion. Operational definitions Methods of data collection Organisation of the dissertation Rising China: Implications for India by Major General (Retd) Dhruv Katoch SM, VSM, USI journal July September 2009. www.wisegeek.com/what-is-a-string-of-pearls-strategy.htm www. U.S.-China Commission, 2005 Report to Congress. Rising China: Implications for India by Major General (Retd) Dhruv Katoch SM, VSM, USI journal July September 2009. www. M K Bhadrakumar, India and its troublesome Neighbours, The Hindu, 02 Nov 2009 CHAPTER II HISTORICAL BACKGROUND HOW CHINA TRANSFORMED IN THE LAST DECADE? Before we begin to discuss the String of Pearls policy in detail, lets take a look at how China has transformed itself economically in the last 10 years. China is the third largest economy in the world after the US and Japan. China has had the fastest-growing major economy for the past 30 years with an average annual GDP growth rate above 10%[7]. In 1978, after years of state control of all productive assets, the government of China embarked on a major program of economic reforms. In an effort to awaken a dormant economic giant, it encouraged the formation of rural enterprises and private businesses, liberalized foreign trade and investment, relaxed state control over some prices, and invested in industrial production and the education of its workforce. By nearly all accounts, the strategy has worked spectacularly. Chinas economy regained momentum in the early 1990s. In early 1992, China made a series of political pronouncements designed to give new impetus to and reinvigorate the process of economic reform. Along with cContinuity in the political system, but a bolder reform was announced in the economic system were announced as the a hallmarks of the 10-year development plan for the 1990s. Although capital accumulation, i.e., the growth in the countrys stock of capital assets, such as new factories, manufacturing machinery, and communications systems, was important, as so were the number of Chinese workers., a A sharp, sustained increase in productivity (that is, increased worker efficiency) was the driving force behind thise economic boom. China has really come very far in the last ten years. Chinas growth as an economy wont flow smoothly from the bottom-left to the upper-right side of the chart. But the fact remains that China will be the biggest, fastest-growing economy in the world in the twenty-first century[8]. In fact, it is interesting to note that when China began its reforms , Deng Xiaoping put military last on the list forro modernization[9]. Chinas economy is gathering momentum and gaining speed. After a period of a double -digit growth in the post-Tiananmen period of the early 1900s, the law of large numbers would have predicted that thisat kind of growth couldnt happen again. But China has defied conventional wisdom. Already one of the largest economies, China grew by at least 10 percent in 2003, 2004, 2005, 2006 and 2007. The country had $21 billion in foreign reserves in 1993; ten years later, in 2003, China was adding $200 billion or more of reserves into its coffers each year. By the end of 2006, China had more than $1 trillion in foreign currency reserves, an unprecedented amount that was growing by $50 billion each month. Chinas leaders are traveling the world negotiating long-term supply contracts with oil-producing countries. China doesnt have enough of its own energy reserves, and obtaining enough energy to fuel its economy is a very real concern. Quest for Energy South Korea, Taiwan, Thailand, Hong Kong, and Singapore were dubbed Asian Tigers as they sustained rapid economic growth and industrialization from the 1960s through the 1990s. Chinas rise in the 21st century, the rise of the Asian Dragon, has the potential to surpass greatly the growth of the Asian Tigers. Since the beginning of economic reforms under Deng Xiaoping, China has averaged an annual gGross dDomestic pProduct (GDP) growth rate of 9.4 percent. Since 1978, foreign trade has grown from a fraction of a percent of the world economy, or $20.6 billion, to over 4 percent, or $851 billion in 2005. Chinas GDP is the worlds third largest at roughly 1/7th that of the United States, yet because of its population of 1.3 billion, on a per capita basis, China is ranked roughly 100th in the world and considered a low-income developing country. Many economists believe that with the latent potential of a rapidly emerging middle class, China has the potential to continue its impressive growt h for many years to come. An ever-increasing demand for energy fuels Chinas growth. Chinas Energy Needs The majority of Chinas energy requirement, 70 percent, is currently met by coal — China is the worlds largest producer and consumer of coal. Although coal will remain preeminent, oil consumption is expected to grow at an average annual rate of 5.8 percent for the next 10 years. In 1985, China was East Asias largest petroleum exporter; in 1993, China became a net oil importer; and in 2004, China leapfrogged Japan to become the worlds second largest oil importer. Roughly 40 percent of all new world oil demand is attributable to Chinas rising energy needs. Secure access to foreign oil resources will be necessary both for continued economic growth and, for the survival of the Chinese Communist regime because since growth is the cornerstone of Chinas domestic stability., for the survival of the Chinese Communist regime. http://en.wikipedia.org/Swiki/Economy_of_the_Peoples_Republic_of_China Jack Perkowski, Managing the Dragon Robyn Meredith, The Elephant and the Dragon CHAPTER III THE PEARLS AND THEIR STRATEGIC SIGNIFICANCE A few strategists in India and US have been using the term String of pearls to designate those areas where China is establishing its bases. These bases have been given the term pearls. Each pearl in the string is a nexus of Chinese geopolitical influence or military presence, which stretches from Hainan Island to Gwadar[10]. GWADAR, PAKISTAN Gwadar port is a small fishing village, 450 miles west of Karachi and 75 km east of Iran border , and was identified by Pakistan as a potential port location in 1964 but lacked the means to develop. It is a deep sea , warm water port situated in the Balochistan province of Pakistan at the apex of Arabian sea and entrance of Persian gulf. The port facility at Gwadar is a win-win prospect for both China and Pakistan. The port at Karachi currently handles 90 percent of Pakistans sea-borne trade, but because of its proximity to India, it is extremely vulnerable to blockade. This happened during the India-Pakistan War of 1971 and was threatened again during the Kargil conflict of 1999. The port is strategically located between three important regions Oil rich Middle East, heavily populated Pakistan and the Central Asian Region. A modern port at Gwadar would enhance Pakistans strategic depth along its coastline with respect to India. For China, the strategic value of Gwadar is its 240-mile distance from the Strait of Hormuz.[11] China has funded a majority of the $1.2 billion project and provided the technical expertise of hundreds of engineers. Since construction began in 2002, China has invested four times more than Pakistan and contributed an additional $200 million towards the building of a highway to connect Gwadar with Karachi. This port accrues the following advantages for China :- It can serve as a potential Chinese Naval Anchor. It serves as an energy transport hub to carry oil from Gwadar to its western region of Xinjiang by an oil pipeline. It helps insulate the Chinese imports from interdiction in case of any major war. It benefits by having access to international trade routes. Use of rail network is also a major advantage although the access in this case may be hampered due to the difference in gauge between China , Pakistan and CAR nations. Shanghai port is approximately 16000 kms from Chinese industrial areas and sea travel adds another 2-3 months whereas Gwadar is only 2500 Kms and will work throughout the year. It also provides Beijing with a listening post from where it can monitor US, India and US-India Maritime cooperation. As Admiral (retd) Sureesh Mehta[12] said It has a serious strategic implication for India, being only 180 Nm from the exits of Strait of Hormuz, would enable Pak to take control over the world energy jugular interdiction of Indian tankers. Hambantota, SriLanka Hambantota is a rural town in the SE coast of Srilanka. As per the 2007 agreement, development of Hambantota included[13]:- Developing a container port Developing a bunkering system Establishing an oil refinery Setting up an airport and other facilities The approximate expenditure in setting up Hambantota was $1 Bn of which 85% will be financed by China over the next fifteen years. A question that comes to mind is that although there seems to be not much economic significance of this pearl to China, then why is it investing so heavily here. Possibly the following answers come to mind:- There is a potential for Navy as a Port of Call. The port can be used for refueling purposes. The port will act as a Listening post and watch tower on Indias nuclear, space and naval establishments in South India. At present, there is no military component here but Chinas involvement here would make much more sense from a military perspective. Chittagong, Bangladesh Chittagong is the largest seaport in Bangladesh. China is developing a container port facility a Chittagong[14]. However, it is important to note here that there has been no further word on this development probably because of the regime change in Bangladesh which is India friendly. Sittwe, Myanmar Among the many ventures of China in Myanmar, the following two are the most crucial:- The gas pipeline from Myanmars West Arakan state to Yunnan province. Using Sittwe Port as a sea gateway. According to the 1992 agreement, China was ready to modernize Myanmars naval facilities in return for the permission to use the Coco Islands. China undertook building a deep sea port (Kyaukpyu)[15]; road construction from Kunmig to Sittwe for which a feasibility study was done in 2005 and is also funding the road construction from Rangoon to Akyab. From 2013, Chinese oil tankers from the Middle East and Africa will be able to cross the Bay of Bengal to dock at Myanmars Sittwe and Kyaukphyu ports from where their cargo will be transported through pipelines to Yunnan. The transport time of fuel that bypasses the Malacca Strait in this way will be cut by a week. A recent article in the Outlook[16] explained the significance of Chinese Vice-President Xi Jinpings Dec 09 visit to Myanmar, one of the key reasons being Chinas determination to go ahead with the construction of the parallel oil and gas pipelines from the Arakan area of Myanmar to Yunnan. He accorded a greater priority to the A rakan-Yunnan pipeline as compared to the Gwadar-Xinjiang pipeline proposed by the Pakistan Government citing the reason that the Chinese Government was more confident about the Myanmar Army taking care of the security of parallel pipelines passing through Myanmar than about the Pakistan Government for security of a pipeline passing through Pakistan. Moreover, the first stage of the pipeline connecting Xinjiang with the Central Asian Republics has been recently commissioned, thereby reducing the urgency of a Gwadar-Xinjiang pipeline. There is another added advantage of the Arakan-Yunnan pipelines over the pipeline from Gwadar. The former has a two-fold benefit it will help carrying oil brought by Chinese tankers from West Asia and Africa thereby reducing present Chinese dependence on Malacca Strait transporting the gas procured locally in Arakan by Chinese companies The pipeline from Gwadar can only be used to carry oil/gas from West Asia. Pakistan does not have any oil or gas to sell to China . As per the Indian analysts, Chinese presence may allow it to interdict regional SLOCs. On this account, Myanmar is emerging as the single largest threat to Indian strategic interests in SE Asia. Coco Islands Coco islands are a pair of strategically important islands located in the East Indian oceanOcean politically administered by Burma under Yangon division. The Great Coco Islands (102) and Small Coco Islands (51) are separated from each other by Alexandra Channel. They are separated from the Andaman by Coco Channel; Myanmar 300 km N Historically, these islands were a part of India under British rule but due to lack of close supervision, they were transferred to Myanmar. These islands were supposedly leased to the Peoples Republic of China since 1994, according to various amateur sources[17]. The government of Burma and that of the Peoples Republic of China do not comment on such manner. China has helped in carrying out the following activities here:- Establishing a SIGINT and ELINT int gathering station (supposedly 92) Oon the Great Coco Island. Building a maritime base on the little Coco Island. Development of airfield, radar dish, ae, jetty and a number of buildings. However, there are no signs of a large base here. Strategic importance of this pearl for China:- Monitoring Indian Naval activity Monitoring movement of other navies and ships esp between Bay of Bengal and Malacca Strait. May be used to monitor the activities at the launch site of ISRO at Sriharikota and DRDO at Chandipur on sea. According to Indian analysts, this may pose a threat to Indian tri-service command at Port Blair (190 Nm away). If seen in toto, this completes the maritime encirclement of India. Strait of Malacca Strait of Malacca is a narrow 805km stretch of water between Peninsular Malaysia and Indonesian island of Sumatra. At the Philips Channel, this Strait narrows down to 2.8 km, thus becoming one of the worlds most significant choke points. Straits of Malacca and Hormuz have become crucial waterways for China. Close cooperation with Myanmar and Pakistan thus also becomes a crucial issue[18]. From economic and strategic perspectives, Strait of Malacca is one of the most important shipping lanes of the world. This Strait is economically significant for China in that 50,000 vessels pass through it each year and almost 80% of Chinas oil passes through this Strait. In essence, whoever controls Malacca threatens Chinas oil supply route. China gave a statement indicating that it would use its naval might to ensure that these sea lanes remain open. In President Hu Jintaos own words[19], Malacca dilemma is the key to Chinas energy security. Hu also hinted that various powers (including US) had tried to enlarge their scope of influence in the Straits of Malacca by either controlling or trying to control navigation in the Straits of Malacca. It is interesting to note here that Indias naval base in the Andaman and Nicobar islands puts India in an advantageous position. Kra Canal Kra Canal or the Thai Canal is actually a plan for a large canal that would cut through Southern Thailand to enable improved transportation in the region. China had planned to construct this over ten years employing 30,000 workers with an estimated cost of $20-25 Bn. However, initially the plan seemed to have been dropped owing to environmental concerns but recently there have been signs of revival of this plan since there are economic benefits for China and a threat of piracy in the Strait of Malacca. The plan was tentatively approved in 2007 but Singapore and US showed their dissent for obvious reasons. Another alternative to this plan is to build a pipeline across the Isthmus to carry oil to ships waiting on the other side. South China Sea South China Sea is located south of China and Taiwan, west of Philippines, North West of Malaysia, North of Indonesia and East of Vietnam. The region has proven oil reserves 7.7 billion barrels (28 bn estimated) and its natural gas reserves are estimated at 7500 km3. A significant part of this region is the Spratly Islands where oil was discovered in 1968. It has been estimated by the Geology and Mineral Resources Ministry[20] of Peoples Republic of China that Spratly islands may have oil reserves to make them the fourth largest reserve bed in the world. Hence, there is intensification by PRC to claim these islands. Woody Islands Woody Islands are a part of the Paracel Islands occupied by PRC. This node acts as a Chinese Emergency Rescue Centre served by an artificial harbour and an airfield with a 2350m runway. The centre was occupied in 1956 and also has oil tanks, gun emplacements and ammunition storage bunkers. The islands may be used as a staging point to sp offn ops in the Spratlys. There are also reports of the existence of Silkworm anti-ship cruise missile installations on the Woody Islands. In mid 95, a new SIGINT station was established on the Rocky Island, north to Woody Island. Since it is the highest point, there is good signal interception is obviously good. Hainan Islands These 200 islands form the smallest province of PRC and are home to the PLAN strategic nuclear submarine naval harbour that is capable of hiding upto 20 nuclear submarines from spy satellites. The harbour houses nuclear ballistic missile subs and is large enough to accommodate aircraft carriers. PLAN has developed Sanya Naval Base (Yulin) in Southern part to op Jin class subs (SSBNs) and Shang class subs (SSNs) (replaced Han Class). Rising China : Implications for India by Major General (Retd) Dhruv Katoch SM,VSM ,USI journal July September 2009. Source: http://intellibriefs.blogspot.com/2008/01/gwadar-port-has-strategic-implications.html Source: http://intellibriefs.blogspot.com/2008/01/gwadar-port-has-strategic-implications.html Source: http://www.marinebuzz.com/2007/11/02/china-funds-sri-lanka-hambantota-port-development-project/ Dilip Ghosh,Chinas String of Pearls encircling India , Asia Defence News Vol IV , Issue 12 , 15 Dec 2009. Dilip Ghosh,Chinas String of Pearls encircling India , Asia Defence News Vol IV , Issue 12 , 15 Dec 2009. Source: http://www.outlookindia.com/article.aspx?263531 Source: http://en.wikipedia.org/wiki/Coco_Islands Amardeep Athwal, China India relations contemporary Dynamics Source: The Straits of Malacca: the Rise of China, America s Intentions and the Dilemma of the Littoral States by Mokhzani Zubir, Researcher, Centre for Maritime Security Diplomacy Source: http://en.wikipedia.org/wiki/Spratly_Islands CHAPTER IV POSSIBLE MOTIVATIONAL FACTORS BEHIND THIS STRATEGY Chinas development during the past decade, from its expanding economy and increased global influence to its growing military might and demand for energy, presented tremendous challenges to their leaders as they managed the turmoil of massive structural, technological, and social changes. The governing three key worries of the Chinese government have been:-elites of China had three overarching concerns:- Regime survival. Territorial integrity. Domestic stability. In the succeeding paragraphs these three concerns and their impact on the economy have been highlighted. The relation between the economy and the string of pearls strategy has also been shown. Regime Survival Regime survival was has always been and will shall remain the foremost concern of the ruling Chinese Communist Party (CCP). The party leadership is It is aware that their survival depends upon the satisfaction of the Chinese people and their ability how well they are able to protect Chinese national interests. The collapse of the When Soviet Union collapsed and the end of the Cold War ended, Communism was exposed deduced as a communism as a bankrupt ideology with a flawed economic system[21]. To avoid the same fate as had befallen the erstwhile USSR, the Chinese adopted a socialist market economy. Although a lot of economic and social reforms have taken place but , in the middle of it the CCP has maintained a strict authoritarian control. The CCP is aware of the fact that as long as the economy is thriving the populace willl be satisfied and hence there would not be a serious threat to the current regime. Territorial Integrity China has in the recent past adopted a strategy of befriending its neighbours with the notable exceptions being India and Taiwan and in the process has met with considerable success too. Although certain contentious issues still remain with the countries such as Japan over some disputed islands but more or less China has successfully demilitarized its land borders in the nNorthern and the cCentral aAsia. On the central Central asian Asian front, China has become more influential under the support of the Shanghai Cooperation Organization (SCO), whose member states consist of China, Russia, Kazakhstan, Uzbekistan, Kyrgyzstan, and Tajikistan, along with the observer members of India, Pakistan, Iran, and Mongolia. It is slowly but surely laying to rest the dispute over Tibet although in a more subtle way. The only spanner in the wheel that remains is its relations and territorial disputes with India which are not showing any signs of fast progress. However, the relations with India have been more of a sine curve with statements against one another coming from both sides. India has more or less recognized Chinas claims to Tibet and China has reciprocated by recognizing Indias claim to the Himalayan state of Sikkim. Even with respect to Taiwan, Chinese policy attempts to balance the stick of diplomatic and military pressure with the carrot of mutually beneficial cross-strait economic ties. With the last elections in Taiwan throwing some startling results in favour of cChina, the day is not far off when it will come into some sort of agreement with Taiwan also. What has made China want to have good relations with its immediate neighbours . neighbours. The one thing that comes to mind is economy. It seems that the ever increasing demands of increased economic development are the driving forces behind Chinas improved relations with her neighbors. Domestic Stability Again successful economic development is perceived as key to Chinas third area of strategic concern, domestic stability. CCP is focused inward, and primarily domestic politics drive Chinas foreign and economic policies. Changes to the economic system and the decision to embrace globalization are causing major shifts in Chinese society[22]. The Chinese government is aware that although it is moving towards becoming an economically prosperous nation but everything is not in order inside their house. ThHere are large disparities between the economy of the people who are living in the coastal cities such as Shanghai and the people who are living in the interior less developed regions which have not seen the effects of the information revolution. Due to this class distinction due as a result of theto economic stratification, the government is wary and knows that if there are anti government demonstrations they cannot be repressed as was done earlier, the famous example being of the Tianan men Square crackdown of June 1989. Thus to address this issue the regime is aware that it needs to bring economic parity to its provinces such as Yunnan and Xinjiang. In meeting this challenge, the government must foster economic prosperity to satisfy the demands and expectations of the Chinese people. Link with Energy All these three abovementioned factors, as have been shown in the preceding paragraphs, are inescapably linked with the economic prosperity of China. The government iof China is aware that the greatest strength of cChina as also its greatest vulnerability is the its economy and hence it has based its national policy and strategy on economyaround this key factor. For its economy to continue thriving, as is with the case of all nations, China knows that it has to rely upon continued and sustained import of energy. Since energy provides the foundation of the economy, Chinas economic policy depends on the success of its energy policy. As the energy resources available within the country are quite limited and cannot ascribe to the full economy; hence it China, therefore, has to rely in a big way on the external sources of energy and raw materials. To import these energy resources and raw materials, it has to have a good and effective transportation system both on land and at sea is required. The three major problems that were faced by China in importing energy via land based routes were that firstly, most of the energy rich nations are either not connected by land; secondly, it would take a major effort and would not be cost effective to connect them with land and thirdly, even if these nations were connected, their links pass through other natio ns which may be a risk keeping in mind the fluid world order and changing equations. Hence, it was important that the Sea Lines Of Communications , which were importing the major chunk of energy be secured . Securing Sea Lines of Communications for energy and raw materials supports Chinas energy policy and is the principal motivation behind the String of Pearls. This is how and why the String of Pearls relates to Chinas Grand National Strategy. Protection of SLOCs The question that arises here is that from whowhom is the protection is required, if at all.? Whom does China fear? Over 70 percent of the total oil imports of China come from either the Middle East or the African countries majority of which is transported through sea and this will remain so for the foreseeable future. Hence, China has a long-term commitment to these supply sources due to which it has been trying to build up better relations with these countries whether that comes as monetary help or in some other form. For eg, Saudi Arabia is Chinas largest crude oil supplier, and the Saudi national oil company, Aramco, is a 25 percent investor in