China's footprint in Myanmar expands

http://www.atimes.com/atimes/China_Business/JK01Cb02.html

China Business
Nov 1, 2008

By Brian McCartan

CHIANG MAI - Once under the radar in mostly remote areas, China's growing investments in resource-rich Myanmar have become more openly apparent as Beijing parlays its close diplomatic ties to the country's ruling military junta into lucrative contracts and concessions. China's commercial advance comes while the United States and Europe impose strict trade and investment sanctions against the military regime.

Recent investigative reports, including from environmental groups EarthRights International and Arakan Oil Watch, detail the involvement of some 69 Chinese multinational corporations in at least 90 hydropower, mining and oil and gas projects across the country. The growing commitments are a testament to China's pragmatic approach to commercial diplomacy and underscore its



interest in maintaining Myanmar's political status quo.

China's Myanmar investments focus mainly on energy and natural resources, which are required in ever-larger quantities to fuel its fast-expanding industrialization and urbanization. Chinese projects range from hydropower dams to the highly ambitious and controversial Shwe Gas pipeline that is projected to cross the length of Myanmar to transport fuel to China's landlocked southern Yunnan province.

That particular project is designed to open access for China to the Indian Ocean for some fuel shipments and circumvent the congested Strait of Malacca, through which over 70% of its current oil and gas imports travel. Beijing has expressed strategic concerns that in a conflict the United States could block the strait and starve the Chinese economy of fuel imports.

India and Thailand also aggressively jockey for access to the resources of neighbor Myanmar, in contrast to US and Europe, which subject the country to strict trade and investment sanctions in protest against its rulers' abysmal rights record. Those curbs were recently augmented by so-called "smart sanctions" aimed at hitting the private resources of senior junta members and their top business associates.

The growing scale of China's commitments have the potential to provide huge profits for the regime, funds which historically have been employed to buy weaponry that is used to suppress the democratic and ethnic opposition. Some economic analysts estimate the regime has in recent years earned US$3.5 billion in natural gas sales alone.



China's investment in Myanmar's oil and gas reserves is on the rise. EarthRights International identified 21 Chinese-funded onshore and offshore oil and natural gas projects, including the Shwe Gas project in Arakan state and newer blocks in Sagaing division. China is also reportedly interested in using Kyaukpyu Island off Arakan state as a transshipment point for Middle Eastern oil and gas imports, which will then be piped up through Myanmar to China's Yunnan province.

A $1 billion contract has been signed between the Myanmar government and China Petroleum and Chemical Corporation, or Sinopec, to build a first oil pipeline. A parallel gas pipeline is expected to follow. A memorandum of understanding has also been signed between China National Petroleum Corporation (CNPC) and Myanmar Oil and Gas Enterprise (MOGE) for an assessment on the construction of a crude oil terminal.

Chinese partners are also involved in the gigantic 7,100-megawatt Tasang Dam on the Salween river in Shan state, while other dams on the N'Mai Hka, Mali Hka and Irrawaddy rivers in Kachin state are being built to provide electricity to Yunnan. According to EarthRights Internation, the Kachin state dams are expected to have a combined capacity of 13,360 megawatts.

Sidestepping sanctions
Chinese companies have also long taken part in small-scale mining operations in Myanmar, often in quest of gold and jade. According to EarthRights International, China is now involved in at least six major mining operations in the country, including China Nonferrous Metal Mining Company's recent $600 million investment in the Taguang Taung nickel deposit.

While the US recently imposed sanctions on the import of precious stones from Myanmar, Chinese merchants have helped to fill the trade gap. A government-sponsored gem fair in Yangon in October netted the regime an estimated $175 million. Chinese traders, who were mostly interested in Myanmar jade, represented the largest contingent at the event, with 2,200 out of the 2,648 attendees.

China's commercial embrace of Myanmar is underwritten by a long-standing policy of non-interference between the two neighboring countries. First signed in 1954 and known formally as the Five Principles of Peaceful Coexistence, the policy nominally separates business from politics. It has allowed China to invest heavily in Myanmar's underdeveloped resources while resisting US, European and United Nations calls to leverage its influence to push for political change.

Political change in Myanmar could erode Beijing's present privileged position there. Certainly China has used its veto power in the UN Security Council to block criticism and sanctions against Myanmar.

In the past year, Chinese statements on Myanmar have taken a slightly critical edge, indicating to some either that Chinese patience with Myanmar's generals is waning, or a concern that stability be maintained to protect Beijing's economic and strategic interests. After the junta's violent crackdown on demonstrators last year resulted in widespread international condemnation, Chinese diplomat Tang Jiaxuan was reported to have told Myanmar Foreign Minister Nyan Win in September 2007, "China wholeheartedly hopes that Myanmar will push forward a democracy process that is appropriate for the country." That veiled criticism went further the following month, when China joined with Russia and India in a call for the Myanmar's ruling generals to meet with the opposition.

A UN Security Council resolution in October last year condemning the Myanmar government for its use of violence against protestors and demanding the release of political prisoners was supported by the Chinese government. Yet China is clearly most concerned about a possible international intervention or sudden regime change in Myanmar that nullifies its commercial concessions and privileges.

Earlier this year, Beijing expressed strong opposition to the idea that US, France and Great Britain should use military means to force Myanmar's generals to accept foreign aid after the Cyclone Nargis disaster displaced as many as two million people in the country. At the height of the standoff, the US and France had warships near the coastal region worst hit by the storm, while Western diplomats pushed to invoke a UN "right to protect" provision to help the stranded victims.

China has instead advocated Myanmar change from within, in line with the ruling junta's stated plans to move towards a managed form of electoral democracy by 2010. At the same time, the democratic opposition has made few attempts to convince China that should they take power, Chinese strategic interests and investments would be preserved and guaranteed.

At least outwardly, there appears at present to be no contact between the opposition and the Chinese government. China's ability to provide low-cost machinery, technical know-how and long-term, low-interest loans would presumably make it an attractive strategic partner regardless of who holds power in Myanmar.

But from Beijing's point of view, its growing and more visible commercial interests are for now better served by the devil it knows.

Brian McCartan is a Chiang Mai-based freelance journalist.

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