China, India Vie for Myanmar’s Energy Resources

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. Read more “China, India Vie for Myanmar’s Energy Resources”

New Japanese Government Deepens Burma Engagement

After his Liberal Democrats won last month’s parliamentary elections, Japan’s Shinzō Abe stated that turning the economy around would be his top priority as prime minister. It is therefore not surprising that the first trip abroad by officials in his new government would be to Burma, a country considered the next frontier for foreign investment since it has adopted political and economic reforms after being virtually isolated from the world while living under decades of military rule.

Japan’s finance minister Tarō Asō arrived in Burma’s relocated capital of Naypyidaw last Thursday for meetings with Burmese president Thein Sein and announced a series of moves that amounted to Japan boosting its economic ties with Burma. Asō reaffirmed Japan’s intention of forgiving ¥300 billion ($3.4 billion) of the ¥500 billion owed by Burma that was first announced last April.

Japan will now extend a new loan to the South Asian country of ¥50 billion, the first in decades, intended for infrastructure projects and the development of Burma’s Thilawa economic zone near Yangon. The Abe government will also work with the Burmese authorities and Japanese banks to refinance the balance of the country’s outstanding debt. This will clear the way for Burma to apply for more loans and international aid. Read more “New Japanese Government Deepens Burma Engagement”

Burma to Admit Atomic Energy Agency Inspectors

Coinciding with American president Barack Obama’s visit to the country, Burma announced this week that it will submit to international inspection to prove that it does not maintain a clandestine nuclear program. Such inspections could alleviate Western concerns about the South Asian country’s ties with the authoritarian regime of North Korea.

The Burmese government, which is controlled by the army but has initiated a number of democratic reforms this year, said on Sunday that it would sign an agreement with the International Atomic Energy Agency to allow inspections throughout the country. If such an agreement is reached, the agency’s monitors would be granted wide discretion to visit sites of their choosing, regardless of whether they have been declared nuclear related by the regime.

The Sydney Morning Herald reported in 2009 that Burma was developing a nuclear weapons capacity with North Korean support. A United Nations report the following year accused Pyongyang of supplying nuclear and ballistic missile equipment to Burma as well as Iran and Syria in violation of international sanctions. If IAEA inspections unearth North Korean involvement in a Burmese effort to acquire weapons of mass destructions, it would be an embarrassment for the communist state which has hitherto been among the few allies of Burma’s regime.

Even if Burma has made no promises of suspending nuclear activities, the admitting of inspectors marks another step toward normalization in the former pariah state’s relations with the West and the world at large.

Earlier this year, the United States lifted sanctions that prohibited foreign investment in Burma after the country freed political prisoners, relaxed press censorship laws and held a by-election in which opposition leader Aung San Suu Kyi won a seat in parliament. The Americans hope to wane China’s influence in the country which is Burma’s most important strategic and trading partner.

In Burma, Obama Seeks to Wane Chinese Influence

Barack Obama will be the first American president to visit Burma on Monday. He follows in Secretary of State Hillary Clinton’s footsteps who traveled to the country in December of last year, marking an opening in American-Burmese relations after half a century of diplomatic estrangement.

The Southeast Asian country of sixty million was long considered a pariah state in the West because of its closed military dictatorship and affiliation with the communist bloc during the Cold War. Up to this day, neighboring China is Burma’s most important strategic and trading partner. Chinese companies are heavily invested in Burmese infrastructure and pipeline construction and aim to import natural resources, including oil and natural gas, from the country. A proposed Sino-Burmese oil pipeline would enable China to bypass the Strait of Malacca in its petroleum trade with the Middle East.

China also enjoys access to Burmese ports and sells military equipment, including fighter jets and navy ships, to the country. Its base in the Coco Islands allows its to monitor Indian military activity, drawing criticism from New Delhi that China aims to erect a “string of pearls” of military installations across the Indian Ocean region.

Burma is diversifying its strategic relations, however, boosting trade with India and Pacific nations, including the United States, that are hoping to check Chinese ambitions in South Asia. Read more “In Burma, Obama Seeks to Wane Chinese Influence”

Careful Balancing Act for Southeast Asia

On Monday, South Korean president Lee Myung-bak visited Burma and promised to extend loans and grants to the poverty stricken country.

The surprise visit came as Japan and South Korea have stepped up their diplomatic engagement in Southeast Asia over the last month, which, in turn, comes on the heels of closer engagement by the United States since 2009.

This stems not only from a desire to gain access to the region’s natural resources but more importantly, to bolster their soft power in the Mekong region, an area that is becoming increasingly important as concerns persist about Chinese foreign policy amid the rapid modernization of the People’s Liberation Army. However, while the Mekong countries are interested in the economic and political benefits from closer relations with the United States, they are mindful of the risk of antagonizing China. Read more “Careful Balancing Act for Southeast Asia”

Vietnam Key to Japan’s Southeast Asia Policy

During the Mekong-Japan Summit held in Tokyo last month, Japan announced additional development aid for and investments in the countries that make up the Mekong Delta region.

The summit was further evidence of Japan’s goal of developing stronger relations with Southeast Asian states as the Japanese economy is beset with tepid growth and due to the uncertainty and mistrust with the region’s biggest and fastest growing power, China.

However, the headlines last month overlooked one of the most important outcomes of these meetings thus far, the steady improvement of Japan-Vietnam relations to the level of strategic partnership. Read more “Vietnam Key to Japan’s Southeast Asia Policy”

Chinese Dam Building Tests Southeast Asian Resilience

China’s hydropower development activities on the Mekong and Salween Rivers are a clear illustration of the country’s potentially destabilizing strategy, with both diplomatic and environmental impacts, in Southeast Asia.

These waterways, along with the Yangtze River (one of China’s domestic targets for intensive development), constitute the Three Parallel Rivers UNESCO World Heritage Site in southern China’s Yunnan Province. China has thirteen projects planned on the Salween (known in China as “Nu”) River above its entry into Burma, including several adjacent to or within the ecologically sensitive heritage site.

The environment is clearly not a priority in the Chinese decisionmaking process on the topic of energy development. But what about the priorities of China’s neighbors?

Beijing is, in fact, planning and building dams on several rivers that originate in southern China and flow into other South and Southeast Asian nations, including the Mekong, the Salween and Yarlung-Tsangpo or Brahmaputra River.

Downstream riparian nations include Bangladesh, Burma, Cambodia, India, Laos, Thailand and Vietnam. All of these countries will be affected by China’s dam building and hydropower operations in upstream reaches of the aforementioned rivers.

We may also consider nearby projects on the few Southeast Asian rivers that do not necessarily originate in China but in which Chinese investment and interests are focused.

As one example, in 2011 the president of Burma suspended construction of the Chinese funded $3.6 billion Myitsone Dam project on the upper Irrawaddy River over safety issues, resident relocation programs and environmental concerns. Nevertheless, China is pressing for resumed construction on the site from which it expects to reap the majority of generated power for Yunnan growth once the 6,000megawatt project is completed. Myitsone is just one component of a six dam Chinese project on the upper Irrawaddy River intended for energy export to Yunnan.

Despite the suspension, however, a recent report from an nongovernmental organization operating in northern Burma indicates that work surrounding the project continues, with Chinese workers continuing preparation on the Myitsone site and accelerated mineral extraction in the intended reservoir area.

Chinese impacts on the Mekong River community are not yet so overt or contested. Where the Lancang River exits China and becomes the Mekong, it contributes about 18 percent of the total mean annual flow of the entire Mekong River basin. The other 82 percent of Mekong River flow originates in the lower basin from its numerous tributaries there.

During the dry season (northern winter), as much as 30 percent of the total flow in the Mekong River comes from the Chinese portion of the basin. Compared with a population of roughly ten million in the upper basin, concentrated primarily in Yunnan Province, there are more than sixty million residents of five countries in the lower basin area.

With an overall basin size of 800,000 square kilometers, there seems more than enough water to sustain the people of the Mekong River basin, if water was all they needed. Of historically greatest importance to downstream nations is the productivity of the inland freshwater fishery along the Mekong River, which is estimated at more than two million tonnes annually.

Unless the river flow regimes and their influence on this fishery are better understood before further disruption, dam building activities and the ensuing strict flow regulation for hydropower production could decimate a principal food resource in downstream areas.

Working ahead of its downstream neighbors, China has five operational hydropower dams on the Lancang River in and above Yunnan, with three more projects currently under construction and as many as 23 more in planning stages.

All of these projects in China are on main reaches of the Lancang, as few workable tributaries exist in that narrow portion of the basin.

Downstream countries along the Mekong have been working consistently together on the Mekong River Commission and, until recently, have refrained from reservoir and hydropower construction on main river reaches.

Laos has proposed for MRC approval the controversial Xayaburi Dam, a $3.5 billion project that is expected to generate 1,260 megawatts of electricity for the country and could earn back its cost in a single year for the Thai developer.

A single dam along the lower Mekong River would certainly alter flow regimes in the region but will only marginally exacerbate the changes that are seen with China’s dam building activity upstream. However, spurred on by China’s concentration of projects, another ten dams on main river reaches are currently in the proposal and planning stages for MRC countries. That rush of project development is in addition to 41 hydropower dams on tributaries to the Mekong River that are expected to be complete by the end of 2015 and as many as 37 more lower basin tributary dams that could be developed in the 2016-2030 period.

Unlike dams on the main reaches of the Mekong River, which are subject to MRC approval, these tributary dam projects can proceed under the development practices of the individual lower basin countries.

China’s influence on the lower basin has, in effect, spurred the potential fragmentation of an historically strong MRC and its cooperative process. Instead of attempting to deal with the lower basin as a bloc, China could more easily overcome opposition to its own plans for the Mekong River on an bilateral basis, at which China excels when seemingly limitless investment packages are employed as leverage. For the MRC states, however, it’s not all about the money.

Lower basin riparians have, until most recently, recognized the delicate balance between hydropower projects to provide energy for economic development in individual nation and the need to maintain the ecologically vulnerable shared freshwater fishery that provides food security to millions of Southeast Asian residents.

China seems to see no such necessity for balance and is interested in the Lancang primarily as a resource for producing energy.

Widening the regional gap in priorities, China has refused to participate with fellow riparians in the MRC to date. Eventually, as China proceeds with its own dam building efforts, the lower basin countries will reach a point at which effects on river flow regimes become obvious and the sustainability of the vital Mekong basin freshwater fishery wanes.

With full dam building efforts applied in both upper and lower basin regions, complete collapse of the subsistence fishery ecosystem is well within the realm of likelihood, destroying 81 percent of the protein source for the lower basin peoples. A recent study has found that the tributary dams are actually more at fault for such a potential collapse, although flow regulating dams on the main Mekong River reaches will only hasten the demise of the Southeast Asian fisheries ecology.

As the first and most ambitious single actor, the overall upstream riparian and the basin country with the least apparent consideration for a cooperative and balanced approach to the river, China will take much of the blame for this decline.

As with the MRC, while the lower basin countries are all members of ASEAN, China is not. Without a common local or regional authority, MRC countries have little alternative but to appeal to the United Nations for intervention in their emerging dispute with China over the uses and hydrologic alteration of the Mekong River basin.

One potential outcome is a procedural stalemate, by which the long cycle of international mediation allows China to complete its dam building efforts on the Lancang River. At that point, the damage to the lower basin is done and MRC nations must simply deal with the consequences of a diminished resource.

Working sooner and more quickly, however, the lower basin countries could propose a river treaty with an independent overseer. A valuable precedent for this action can be found in the Indus River basin, where India and Pakistan have maintained the Indus Waters Treaty for more than fifty years with oversight by the World Bank. There are still disputes between the countries over (accused) abuses and violations of treaty provisions and allowances but at the very least there is an established mechanism for dispute resolution through independent evaluation and arbitration by a third party.

As a second potential outcome of the MRC complaint, and following on historical precedent, China may attempt to employ capital investment in infrastructure development as a way to get what it wants from the downstream nations.

China could make such a preemptive move in order to mitigate, by diplomatic and economic means, the physical impacts of its new dams on the lower riparians. Specifically, China may offer to help the MRC countries build their own dams, on tributaries and/or main Mekong River reaches, in exchange for freedom of construction and regulation on the Lancang River in the upper basin.

China has precious few opportunities to do that before any further alteration of the river flow regime occurs and downstream impacts become too difficult on the shared resources of the MRC nations.

Lower basin states must hold firm to an understanding of the impacts that their own dam building activities will have on shared resources and reject China’s “help” that is actually aimed at fragmentation of the lower basin system.

With such a realization of Chinese plans, the MRC states will finally recognize the potential impacts of Chinese involvement and push back at China in a concerted effort to bring the upstream nation’s own dam building activities under control and environmentally responsible oversight, though by then the fishery could be lost entirely.

Demands will be made for China to pay for lost resources in the lower basin and any dispute could lead to negotiation, conflict or both.

In any case, China stands to lose a valuable cache of trust and goodwill with its neighbors, if not also valuable investment and trade markets, not just in Southeast Asia. Other resource and trade partners watching all of this unfold will think twice about their relations with China after such alienating behavior in its own neighborhood. No country has it in their national strategy to be taken advantage of by a neighbor or trade partner.

Without preemptive engagement and China’s cooperation and a willingness to consider alternatives alongside fellow riparians in the lower basin, MRC nations will lose control of the Mekong River and the abundance of its valuable ecosystem. MRC nations can bring China to the negotiating table through diplomatic and economic sanctions, an action to which China must acquiesce for fear of losing one of its nearest and fastest growing markets.

Once China is forced to negotiate for its use of the upper basin in the Lancang and Mekong River system, the evaluation and arbitration process will slow China’s progress considerably by subjecting its dam building projects to international standards of environmental assessment on an individual and collective basis, which China has largely avoided to date. Its ambitions for a cascade of strictly regulated hydropower dams on the Lancang River, which are considered vital to economic and industrial development in its southern provinces, will be slowed or lost entirely.

This article was adapted from a strategic simulation run by Wikistrat, the world’s first massively multiplayer online consultancy.