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Sink or swim? China, India in battle to develop new ports, boost oil access points

March 28, 2011

To secure additional resources, diversify trade and multiply access points, China and India are competing to build two new state of the art ports. Both ports are located at the doorstep of the Gulf shipping lanes – India’s in Chabahar in the southwest corner of Iran and China’s Gwadar port in Pakistan are barely 72kms (44 mile) from each other. The ports when fully operational will re-route oil from the rich Middle East to the energy guzzling nations. Set back with political turmoil, corruption and tardiness, both countries have invested billions into the ports to get them operational sooner than later.

While both ports are currently functional, India’s Chabahar port is smaller and faces the risk of being subdued under China’s Gwadar port which lies at a strategic location, 180 kms from the mouth of the Straits of Hormuz,  which offers Pakistan the chance “to take control over the world energy jugular and interdiction of Indian tankers,” according to former Indian navy admiral Sureesh Mehta.

Chabahar has a capacity of only 2.5 million tons per year, against the target of 12 million tons. Iran has declared Chabahar, located in its Sistan-Baluchestan province, a free trade zone. However Indian officials fear that the Iranian government is worried additional external exposure will magnify the already troubled region, and as a result are dragging their feet on the project.

India, meanwhile, has completed its end of the trilateral arrangement with Iran and Afghanistan. Indian engineers braved militant attacks to build a 200km-long road from Nimroz province in Afghanistan to the Chabahar port, offering landlocked Afghanistan an alternative supply route and reducing its dependence on trucking goods through Pakistan.

Indian officials say they’re willing to put in more money into Chabahar to get it going.

“We are ready to go the extra mile to get this going because this is in everyone’s interest, especially Afghanistan whose only access at the moment is Karachi and which is subject to the vicissitudes of Afghan-Pakistan relations,” the Indian government official told Reuters.

Meanwhile a major driving force for India to complete the project is competition with the Beijing financed US$248 million Gwadar port on the Arabian Sea. The port is part of a plan to open up an energy and trade corridor from the Gulf, across Pakistan to western China. It also gives China access to the Indian Ocean where India has long been the main player, after the United States.

So in theory China needn’t ship all its oil supplies from the Gulf through the Indian Ocean and then up to Shanghai. Instead the oil tankers would drop off at Gwadar, and from there the supplies would be trucked through Pakistan and into China through the Karakoram Highway that China is trying to expand.

Nonetheless, while China has completed its part of the agreement, unrest in Baluchistan, disagreement with the Singaporean that was given management and operational control of the port and a lack of infrastructure from the Pakistani side has left the project working at half its capacity – about US$700 million in cargo in 2009.

While Pakistan with the added aid of China is expected to complete their port first, the Gwadar port is also expected to overshadow the capacity of India’s Chabahar port curtailing  India’s planned trade in the region drastically.

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