CPEC Geopolitical Challenges

There is a bigger challenge for Pakistan that may eventually lead to a greater difficulty, for example, how
the United States is going to act in the region in future? In this context, one should not forget that the
United States had earlier blocked the construction of a gas pipeline from Iran to energy-starved India
through Pakistan. Even after striking the nuclear deal with Iran, USA still does not have a complete and
clear policy.

On the other hand, Iran has already completed the gas pipeline from its Pars gas field up to the Pakistani
border and the construction from the Iranian border to Gwadar has already started. Meanwhile after
signing a civilian nuclear deal with USA, India pulled out to show a renewed interest in trans-Pakistan
Iranian gas via sea.

The idea of Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline came later with the support of the
USA because it will provide an alternate route to the Central Asian Gas. It would no longer be necessary
for the Central Asian Republics (CARs) to depend on the existing Russian pipelines that carry the gas to
the Russian ports on the Black Sea. Furthermore, TAPI could satisfy gas thirst of the India and Pakistan,
without the involvement of Iran. Currently, TAPI is in its initial phases of design and may not be
completed even until 2020 due to the security problem that looms over TAPI in Afghanistan. After
originating from the Galkynysh gas field in Turkmenistan, TAPI will follow the Herat-Kandahar road and
then enter Pakistan through the Bolan Pass in Baluchistan. It will enter in India at Fazilka border crossing
with Pakistan. Safety of TAPI is a cause of concern in restive southern Afghanistan, as NATO troops have
largely departed from Afghanistan.

The idea of building mega projects through Baluchistan is not new. In the 90’s an earlier American
project, in which the oil and gas would have been transported by a pipeline from the oil-rich Central
Asian Republics (CARs), through Afghanistan and Pakistani Baluchistan was dropped due to the security
issues. It shows the pivotal role of Baluchistan in the overall economy and the national interest of
Pakistan as times have changed, and Pakistan is looking to improve a lot of its largest province.

Prime Minister of Pakistan; Nawaz Sharif is determined on improving the economy of Pakistan and
Baluchistan in particular. The USA has quietly left Afghanistan at the end of 2014, and Taliban terror
appears to decline after Pakistani military action. He has limited choice to look to China, in the context
of India’s intentions and the confusing policy of the USA about the region. The United States has been
ignoring Pakistani issues while dragging along the European Union in its pursuit of the Iranians nuclear
issue.

Business minded Nawaz Sharif wants his country to become the new Asian tiger and sincerely making
efforts to make peace with India. With the Kashmir issue being stagnant since 1947 caused the two
neighbors of multiple wars in the last century. Both the country have realized that this is not the way to
prosperity and old distributes need to be resolved. While the politician has to limit the extremist both in
India and Pakistan, as most of the population understands that the status quo in Kashmir is suitable, and
trade across the border is in the interests of both sides. No one wants a war that could bring the region
to the nuclear brink. Despite the fact India’s conventional forces are superior to Pakistan, in retaliation
Pakistan would have no choice but to use its nuclear arsenal and nobody wants that for the region and
the world. Not only due to its regional implications but also its environmental problems will cause to the
planet.

Therefore, the skeptics should pursue a peace-making course in the region and even offer help to
Pakistan’s efforts to improve its infrastructure. An economically stable Pakistan perhaps will contribute
to dilute the impact of the Taliban on the Afghan border, gratify the grievances of the Baluch and enable
both Pakistan and India to start a multi-billion trade with each other. Western and American absolute
fixation on Iran is counterproductive, and a prosperous Pakistan and, therefore, CPEC is in everyone’s
interest.

United States’ Perspective of CPEC

China is putting $46 billion in Pakistan, and they will be looking to protect that too. It means China is
stepping into a vacuum left by the United States when it declined to invest in Pakistan, despite the
strategic alliance between the two countries during the Cold War as well as after the 9/11, terrorist
attacks.

Over the past 13 years, the United States has given Pakistan about $10.5 billion in economic assistance,
$7.6 billion in security-related aid, and $13 billion as a reimbursement in counter-terrorism support. But
USA is not interested in building infrastructure such as dams, electrical power plants, railways, roads and
bridges and ports in Pakistan.

By comparison, China views its relationship with allies on the geopolitical, geostrategic, and geo-
economics basis. As per Chinese viewpoint, “if you want to achieve some goal, you have to take a
comprehensive approach which includes, political, economic, military and social.”
Robert Hathaway, former director of the Asia Program at the Woodrow Wilson Center in Washington,
said that U.S. officials appeared to be comfortable to let China become the dominant influence over
Pakistan. U.S. policymakers are skeptical that China’s $46 billion aid will never be fully materialized. They
think a significant terrorist attack or Pakistani political crisis, the country with a history of three
successful military coups since its creation in 1947, could quickly reason the Chinese to reconsider their
relationship. American alleged that they never get results commensurate with the effort or money they
put into Pakistan over the years.

Pakistan has the potential to be an overall turnaround story, and it is important to convince the U.S.
policymakers and business leaders to look at Pakistan beyond the security lens. Getting USA’s
relationship right will require deeper thinking and action on issues around trade and investment,
education, and broader economic development. The United States should be Pakistan’s preferred
partner given its 70-year relationship. But to participate in the upside of the Pakistan story, the United
States will need to view Pakistan not as a part of the problem but part of the solution and as a potential
partner.

Even today USA media still portrait Pakistan as a failed state and associated with terrorism, although
there are several changes and improvement have been made that suggest the United States should
soon act on CPEC opportunities. Contrarily, Western media headlines on Pakistan highlights over the
progress on the security front, the increased political stability, and incremental advances in the
economic field. Sadly, in spite of the potential in Pakistan, USA continues to brand it as a dangerous
country and never look at Pakistan beyond the security lens.

Pakistan’s Perspective of CPEC

Since the announcement of the $46 billion China-Pakistan Economic Corridor (CPEC) in 2014, the project
has become the center point of relations between the two countries. CPEC massive infrastructure
development projects include highways, railways, and oil and gas pipelines – mostly constructed by
Chinese companies. Pakistan sees the CPEC as a way of stabilizing the troubled province of Baluchistan
and boosting its economy, perhaps even easing tensions by providing employment for locals.

Pakistan is eager for CPEC-related projects to succeed, especially considering that it loses 4-6% of its
GDP annually because of inadequate infrastructure. Pakistan has failed to meet energy demands since
2004, while power companies are heavily relying on government subsidies to cover production costs,
thus hiking up energy process that results in slow business growth and an increase in poverty.
Businesses have suffered from power shortages that pushing smaller firms out of the market and few
government-owned companies are privatized so as to cope with Pakistan’s risky financial system.

Investors from China have promised Pakistan to fill the gap in energy production by focusing on coal, but
Pakistan, take this as short term solution as Coal is one of the biggest air polluters. Coal doesn’t offer
Pakistan the sustainability it needs, in fact, even China is moving away from the fossil fuel as recently
promised to the world. But, at least, these plans offer Pakistan a chance at normalizing its economy and
may add 2% of GDP growth.

For Pakistan, the benefits of CPEC have already started showing both nationally and internationally.
Instant benefits for Pakistan are that the CPEC’s partial achievement has injected optimism in a country
starved for infrastructure and energy investment. The deal has also greatly helped the government to
improve the image of the country and attract more foreign investment.

Pakistan’s relationship with the United States is deteriorating on the investment front, and the country
needs to prosper economically, making it less reliant on the IMF and the United States. The economic
corridor will provide Pakistan with the perfect opportunity to stabilize itself economically while
cultivating ties with its neighbors. It also helps to realize the US regarding imbalance policies in the
region and may rethink their mix of engagement.

Similar to USA approach towards India, China is interested in leveraging Pakistan as a “launching pad”
for greater connectivity with energy producers in the Gulf and the Middle East, as well as markets in the
West. Although Pakistani businesses still prefer the attraction of technology transfer and innovation
offered by U.S. companies, for Pakistanis, Chinese investment is better than no investment. Pakistan
also assumes that the Chinese investment may provide another reason that the United States should
reassess its relation with Pakistan.

Pakistan has invited Iran into trilateral China-Pakistan-Iran relationship with the hope to improve inter-
regional trade and waiting for Iran decision. Iran’s decision to join CPEC would help to improve everyday
living across the Sistan-Balochistan region and could also be facilitating trade between Islamabad,
Beijing, and Tehran. It also provides an economical gateway to the Gulf region for other regional
countries like Russia and even India.

On diplomatic front, Pakistan has already started seen the positive effects, for example; Pakistan and
Saudi Arabia have historically been close allies, but following China’s financial pledge, the country chose
to remain neutral regarding Saudi Arabia’s involvement in the Yemen conflict. Add the fact that Pakistan
is coming out of diplomatic isolation as China’s money is turnout be a game changer.

The journey will exemplify China’s efforts to rebuild the old Silk Route that for eras linked Asia to the
Middle East, and brought wealth to Pakistan. And along the way, China will try to use its “Belt and Road”
economic development strategy to lift Pakistan toward prosperity.

CPEC is a flagship project of One Belt One Road

China Pakistan Economic Corridor (CPEC) – a billions of dollars mega economic project – is actually the
leading manifestation of the Chinese One Belt One Road (OBOR) vision. Being the first of its form and
now almost in practice, CPEC not only brings the dream of OBOR into reality but also changes the
economic, strategic and political status quo of regional relations.

Understanding CPEC and OBOR: China Pakistan Economic Corridor is a mutual economic venture
between China and Pakistan on the formula of give and take. China is investing over $50 billion in
Pakistan’s infrastructure and energy sectors in return for access to the country’s routes leading to
Gwadar port. The port will ultimately enable the Chinese goods to reach the African and Middle Eastern
markets using the shortest possible way from the Western China.

One Belt One Road, on the other hand, is a mega vision of China to connect the whole region and
beyond into a single network of transit routes using which China can carry its products to most of the
Asian and European countries. OBOR remains to be the most important step of China to be a superior
economic power replacing the United States.

CPEC as Flagship of OBOR: Flagship means to be in leading position in a venture. As far as CPEC is
concerned, it is truly the flagship of OBOR owing to the following reasons:

 CPEC turns out to be one of the most important links in the OBOR network that will allow China to
reach the markets of Africa, Middle East and Europe
 CPEC stands out to be the first such project that has been materialized in no time and it is almost in
the starting phase of its practice
 Providing the shortest link between three continents, allowing massive trade transit and connecting
the Chinese dots of OBOR; CPEC remains a flagship of the One Belt One Road vision.
How CPEC is Game Changer? CPEC is game changer in the region owing to following reasons:

 It is ensuring unprecedented ties between China and Pakistan on the economic grounds
 It has brought Russia, U.K, Iran and Central Asian Republics to revive their attention towards Pakistan
and the South Asian region
 It is building the economic connectivity between Africa, Middle East and Asia along with seeking
access to the European markets
 It is altering the regional strategic balance by marking a shift in alliances
 New political and economic blocs are surfacing with new visions owing to the CPEC
 It is altering the regional approach from protectionism towards liberalism of trade and shared
prosperity.
Conclusion: OBOR is the long term economic and strategic vision of the Chinese people while CPEC is the
leading practical manifestation in this regard. With its apparent benefits to China, Pakistan and other
regional countries; CPEC stands out to be a game changer as well altering the regional alliances and
shifting the balance of power.

India’s Perspective of CPEC

India assumes China is increasing its presence in the Indian Ocean with its ‘String of Pearls’ strategy to
which it has recently been added the island nation of Seychelles and now Gwadar and CPEC in Pakistan.
The term ‘Sting of Pearls’ was coined by the United States, but Indian defense analysts frequently use it.

Indian viewed Gwadar as a large-scale naval mobilization program by China and in a worst-case
situation, Beijing could use these Navel bases to threaten India’s security, risk global sea lanes and
challenge the United States for regional naval superiority.

India is also worried about China’s growing investment in Pakistan, predominantly to fund a new batch
of nuclear reactors to help Pakistan’s plans to add four new nuclear plants by 2020, with four more
reactors in the pipeline (adding up to a total power capacity of 7,930 MW by 2030).

Since long India is also worried as it has its eyes on energy assets in Central Asia and Afghanistan to fulfill
its energy thrust, but China has eaten up many of these in recent years.

CPEC | Global Trade Impact

China-Pakistan Economic Corridor (CPEC) is a massive infrastructure that includes roads, pipelines, and
railways, those will pass through the entire length of Pakistan which includes KPK, Azad Kashmir (PoK),
Punjab, and Baluchistan. CPEC will shrink the distance for Chinese goods bound for Europe, Africa, and
the whole western hemisphere, substantially by almost 3000 km/13,000 km and vice versa. Goods trade
by CPEC will not only provide safe route but also avoid the unsafe Strait of Malacca in Southeast Asia by
many km. CPEC has global trade implications, for example, if the Chinese ships were to be unloaded at
New York rather than California, it would travel less by two thousand miles through the Suez Canal
route. There is also an existence of anticipation that when the CPEC is completed, a reduction in the
voyage of merchandises from the western hemisphere may also become the same distance route and
compete with the Panama Canal.

Consequently, CPEC has global trade implications, and even if Northwestern Indian states use the port of
Gwadar to do business, it would be cheaper and quicker through the corridor. You never know, it could
be possible because precedence exists for the use of Fazilka-Amruka-Bahawalpur route was known as
“The Golden Route” before 1947.

Whereas, there are undeniable facts that, there are some other geopolitical considerations with
multiple competing political interests relating to CPEC. About a 120 km west of Gwadar, the Iranian port
of Chahbahar was built by Pakistan’s rival India to bypass Pakistan to reach its interests in Afghanistan in
the early nineties. Despite US and EU pressure, India conducts a trade of about 15 billion dollars with
Iran and imports about 15% of its oil needs from Iran as India is the world’s fourth largest consumer of
petroleum. Furthermore, India is building the railway links from Chahbahar to connect to the Iranian
Railway to tap the mineral-rich Afghanistan and to reach the Central Asian markets.

These regional dynamics seem to have threatened Indians as if the Chinese were encircling them.
Pakistan also feels surrounded by India, while Indians are extending the Iranian railway into the mineral-
rich Afghanistan. India also hopes to increase their commercial and strategic interests in the former
Soviet Central Asian Republics (CARs) through Afghanistan.

While troublesome for a few, many countries are observing the CPEC with interest. Recently, Pakistan’s
President welcomed the wish of Central Asian states to join CPEC. Even Russia, which has had a cooled
relationship with Pakistan, is now warming up and has shown interest into the economic corridor,
besides building Karachi to Lahore gas pipeline.

With the possible inclusion of these new states in the deal, the possibility of CPEC becomes more
tangible and resilient. However, for Pakistan, Iran’s inclusion in the deal will increase and multiply the
corridor’s advantages. For this reason, Islamabad extended an invitation to Tehran, which Iran has
agreed to consider.