China takes risky step with Myanmar pipeline

China will soon be burning oil and gas piped in through Myanmar, but putting some of its energy security in the hands of a pariah state beset by international sanctions and civil strife could be a risky gamble.

A gas pipeline with annual capacity of 12 billion cubic metres is due to come onstream within the next two years, carrying the fuel from military-ruled Myanmar's rich offshore deposits into southwestern China.

If all goes to plan, China at some point in the near future will start also receiving 12 million tonnes of oil a year via a separate pipeline, about as much as it imported from Sudan last year, its fifth-largest supplier. There is no exact date for its opening yet.

The former Burma is a friend of China, which has stood by the country's ruling generals, selling arms and providing diplomatic cover when needed – with an eye firmly on Myanmar's natural resources and access to the Indian Ocean.

But the relationship is more a practical partnership than a meeting of minds, despite the parallels between the two authoritarian governments.

Myanmar's military harbours a profound mistrust of its powerful northern neighbour, while China worries instability in Myanmar could spill over into its territory.

Those fears came to the fore last August when fighting between Myanmar's military and the Kokang rebel group pushed thousands of refugees into China. Myanmar's army ended up firing across the border, provoking irritation in Beijing.

"If Beijing thinks that the pipeline in Burma is going to be relatively trouble-free then they ought to rethink," said Maung Zarni, a Myanmar expert at the London School of Economics (LSE) Centre for the Study of Global Governance.

"Even a regime that is currently in a marriage of convenience with them would fire into Chinese territory," he added.

China, the world's second-largest oil user, sees the pipelines as a way to get around what in domestic energy strategy circles is known as the "Malacca Strait dilemma".

The fear is that during a conflict, a hostile power could choke off energy supplies that are taken on supertankers through the narrow Strait of Malacca between Malaysia and Indonesia.

Some 80 per cent of China's oil imports arrive this way.

The area already has a piracy problem. In 2005, the Joint War Committee of the Lloyd's Market Association added the area to its list of war risk zones.

Bringing energy supplies through Myanmar is a handy way to avoid the Strait, and expands efforts to diversify supply routes with crude and gas pipelines from Central Asia.

"One of the pipelines will be purely for oil, and that oil isn't coming from Burma. It will be offloaded from tankers coming from the Middle East and then piped to Yunnan and on. It's very important," said Ian Storey, a fellow at Singapore's Institute of Southeast Asian Studies.

"One way of looking at the Kokang incident is the Burmese were actually just clearing the border in preparation for that pipeline. So China couldn't be too critical of that incident because it's in their own interests."

But the benefits may be more than offset by two major risks – the disparate rebel groups who have fought Myanmar's government for decades, and popular mistrust at an influx of Chinese migrants.

 

Keep up with the latest business news from the region with the Emirates Business 24|7 daily newsletter. To subscribe to the newsletter, please click here.

 

Comments

Comments