China, India Vie for Myanmar’s Energy Resources

The rivalry between Asia’s two major powers in Burma is a competition for access to oil and gas.

The competitive relationship between China and India has become a defining feature of the strategic environment across emerging Asia. While both nations are currently not in direct conflict, there are several areas that hold strategic interest which could potentially act as the stage for a clash between the two nations. Their current rivalry in Myanmar is one such area.

It is China and India’s incessant need for alternative sources of energy that is the main focal point of their rivalry within Myanmar. As China and India are increasingly forced to rely on the global oil market to meet their energy demands, they are more susceptible to supply disruptions and price fluctuations. Rapid growth rates in both countries have grown in tandem with increased demand for energy. By 2020, it is estimated that China and India combined will account for roughly one third of the world’s gross domestic product and, as such, will require vast amounts of energy to fuel their economies.

Myanmar holds vast strategic importance for both China and India due to its location and abundance of natural resources. It has vast reserves of natural gas and oil, so for both China and India it is presented as a source of energy free from the geopolitical risks of the Middle East. There has thus been major competition between China and India for access to Myanmar’s market.

Thus far, India has signed a $40 billion deal with Myanmar for the transfer of natural gas and has also had frequent discussions about building a pipeline from Myanmar to India. Only last year, India extended a $500 million line of credit to Myanmar. In addition to this, India also signed accords on air services, the development of border regions and investment in agricultural research. Perhaps most importantly, India has also acquired a 77.5 percent interest in an onshore oil block in Myanmar.

China has increasingly gained the most from Myanmar’s available resources, however, with China’s state run Global Times even commenting that India has been “edged out” of Myanmar. In 2005, for example, Myanmar reneged on a deal with India and instead signed a thirty year contract with China for the sale of 6.5 trillion cubic liters of natural gas.

Indeed, a gas pipeline connecting China and Myanmar is expected to begin pumping by the end of this month. The 1,100 kilometer pipeline stretches from Kyaukpyu Port on Myanmar’s central west coast, crosses the country from west to east and terminates at Ruili, near Kunming, in China’s Yunnan Province. Some 22 million tons of oil and twelve billion cubic meters of gas are expected to transit via the pipeline each year. The entire project cost $2.5 billion and was financed by China.

While military confrontation between China and India remains unlikely, perhaps best highlighted most recently during their recent border standoff in the Himalayas which resolved peacefully, their economic rivalry in Myanmar will likely persist for some time. As such, it is critical for there to be ongoing diplomatic engagement between China and India to avoid unnecessary or accidental escalation. If so, as commentators have most recently been highlighting, Myanmar will better be able to evolve into a regional trade hub of Southeast Asia.

This story first appeared at Asia Briefing, May 29, 2013.