How China’s ‘Purse Diplomacy’ or ‘Infrastructure Diplomacy’ could be exploitative?


The future of the Chinese-financed, US$3.6 billion ($4.77 billion) Myitsone hydropower dam project, remains a troublesome issue for discussion during President U Htin Kyaw’s visit to Beijing on 11 April, due to its domestic opposition in Myanmar. Beijing seems to be inclined for a convenient bargain with concessions on preferential access to the strategic Kyaukpyu port on the Bay of Bengal and proposed development of several smaller hydro power dams.

Cancellation of the Myitsone hydropower dam project could force Myanmar to repay the US$800 million ($1.06 billion) already invested by China, which may be nonviable for Myanmar. Alternatively, Beijing can seal the  Kyaukpyu project  deal  in April to pump oil through 770 kilometers pipeline across Myanmar to Southwest China, as per Reuters. Caijing magazine reported that China will pay $13.6 million to Myanmar every year, with the Myanmar government expected to earn $1 for each ton of transported crude oil.

Myanmar is economically fragile, but geopolitically important for the Chinese “One Belt, One Road” policy. Gaining preferential access to the strategic deep port at Kyaukpyu is a worthwhile gain for China. The port is the entry point of a pipeline that, once operational, it  is expected to carry oil from the Bay of Bengal to refineries in Yunnan. The pipeline is believed to be capable of transporting six per cent of Chinese crude oil imports. The security of the pipeline however will be an issue which both countries will have to deal, as it flows through Myanmar’s Shan state, which is insurgency prone.

According to the Chinese Global Times, a crude oil transmission agreement between the two countries was signed during the meeting and “consensus” was reached on the Myitsone Dam, but neither government has articulated what this entails. The consensus part may not sound too convincing because Myanmar does not have the economic muscles, and its dependency on China is so much that it really has no choice but to concede to China’s will.  With the signing of the oil transmission agreement and preferential access to Kyaukpyu port, it is likely that the future of the dam may continue to remain uncertain. From Chinese perspective, the Myitsone Dam has already lost its economic value because Yunnan has adequate supply of electricity.

The above example brings to focus the apprehension of a number of countries that the ‘Purse Diplomacy’ or ‘Infrastructure Diplomacy’ of China including OBOR initiative can exploitative for the host countries, and may not be as beneficial as it seems to be. This is significant in light of OBOR summit in China in May 2017.

Gen Asthana

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