Communist China Aims For a Pipeline in Burma

Daily News Article   —   Posted on January 15, 2008

(by Joseph Goldstein, Jan. 15, 2008, NYSun.com) – Communist China is aiming to satisfy its growing energy needs with a pipeline through Burma, an effort that will complicate American attempts to change the regime in Rangoon, which has been widely condemned for its human rights abuses.

Burma’s ruling junta, the State Peace and Development Council, attracted global attention in September, when its security forces beat up and arrested monks and civilians who took to the streets in protest. After an even bloodier crackdown against demonstrators in 1988, the junta allowed opposition parties and permitted free elections in 1990, only to later ignore the results.

The junta’s more intransigent response this time can be partly explained, Burma analysts say, by the country’s rising importance to China, as Burma’s offshore reserves of natural gas become a significant contributor to the region’s energy supply.

So far, Thailand has been the only significant buyer of Burma’s offshore gas. Now, a proposed pipeline to draw gas reserves off Burma’s west coast to China is gaining momentum and could open as early as 2010, according to little-noticed regional news reports from last month.

India had also sought to purchase the gas reserves in question, which come from Burma’s offshore Shwe field, but Burma chose to sell to China.

“The sanctions from the West become meaningless with the pipelines,” an exiled Burmese political dissident, essayist, and entrepreneur, Bo Kyaw Nyein, said. “There is a tightening between these two countries at a crucial point in Burmese history.”

Though the gas reserves at issue are small compared to China’s energy needs, a pipeline represents a strategic coup for China ? an overland shortcut straight into the mainland. A pipeline for natural gas would likely be coupled with a pipeline that delivers Middle Eastern crude to China’s southwestern Yunnan province, where there is talk of building a refinery for the crude, according to news reports.

“Shwe is nothing to them, but crude oil coming in through Burma is very significant,” an expatriate Burmese now working in Alaska as a consultant on a natural gas project, Sein Myint, said. “The Chinese are always thinking about oil security and a pipeline across Burma puts Burma in a very important strategy position.”

Currently the supertankers that carry crude oil to China ply a roundabout course through congested shipping lanes before arriving to China’s coast. The pipeline would drastically cut short that journey by allowing tankers to unload crude in the Bay of Bengal near Burma’s Western coast. Besides cutting down on shipping costs, the shortcut diminishes China’s reliance on the Straits of Malacca, which narrow to 1.5 miles and separate Malaysia from Sumatra.

About 80% of China’s oil imports pass through this lane, which is easily closed and frequented by American warships. An overland route for oil requires more than laying pipe. Burma’s Western coast lacks a deep water port to accommodate oil tankers. A likely candidate would be the island of Ramree, where Burmese energy officials have long wished to place a refinery capable of handling sour crude from the Middle East.

There is little economic data available on Burma’s economy, but most experts say the energy sector is its most promising, and only growing, industry. A Human Rights Watch report said natural gas accounted for half of Burma’s 2006 exports, with Thailand paying $2.16 billion for gas.

“Outside investment in Burma’s oil and gas industry has thrown a lifeline to the country’s brutal rulers,” a director of a Human Rights Watch program that examined gas contracts in Burma, Arvind Ganesan, said in a statement.

Annual income from gas exports could amount to $500 million a year to Burma for about 20 years from the pipeline deal, the director of the Institute for the Analysis of Global Security, Gal Luft, said. Further income could derive from rent on the land used by the pipeline, which would likely go directly to the Burmese government.

Although an ally to the junta, China keeps informal contact with opposition Burmese groups, including officials with the National League for Democracy exiled in Thailand, Burmese opposition sources say.

Burmese political dissidents say that an increased stake in Burmese gas may make China more wary of the possibility of a change in government in Burma.

“If Burma had a democratic government, whoever is in charge of energy will start talking with the competition and China no longer will have a special privilege,” Mr. Sein Myint, who returned to Burma briefly as a consultant on a refinery project in the early 1990s, said. “You can imagine they are going to protect their interests. China is the key player to what happens next in Burma.”

A crude oil pipeline beginning on the Burmese island of Ramree and arriving in Southwestern China would likely do little to wean Burma of its dependence on the spot market in Singapore for its own diesel. Burma’s three small refineries don’t come close to satisfying the country’s energy needs and the initial protests in August of this year were sparked when the government slashed energy subsidies, drastically raising the price of natural gas and diesel.

Burma watchers are paying close attention to whether the country’s energy officials can tempt outside investors to commit to building a refinery for Middle Eastern crude on Ramree.

One source of that investment could be Saudi Arabia. Saudi Arabia and Burma formally established diplomatic relations in 2004, with a Saudi embassy opening the following year in Rangoon. Now Burma is planning to open an embassy in Riyadh, and has already sent a diplomatic delegation there, which is currently housed in hotels, a source with knowledge of the individuals said. Even these tenuous points of contact are prompting significant speculation among Burma watchers, given the few points of common interest that exist between the oil-rich kingdom and one of the world’s most isolated countries.

In the past, Saudi Arabian officials condemned Burma for its persecution of Burma’s Rohingya Muslim minority, which resulted in a mass flight of Rohingya to Bangladesh.

Reprinted here with permission from The New York Sun. Visit the website at NYSun.com.