Energy & Resources

Burmese days

Wen’s energetic trip to Burma

Burmese days

From China’s point of view, it may sometimes seems that the more countries are subject to US and EU sanctions, the better. A friend in need is a friend indeed, goes the saying. Especially if that friend is rich in oil and gas – and Burma (officially known as the Union of Myanmar) has plenty of both.

So despite Burma’s pariah status, pragmatic diplomacy was the order of the day during Premier Wen Jiabao’s visit to China’s resource-rich neighbour last week.

Imports of oil, gas and other commodities have made China into Burma’s third largest trading partner. Chinese companies have also contributed nearly $2 billion in foreign investment. Wen’s meetings with junta leaders in the capital Naypyidaw should pave the way for closer economic ties.

Economic sanctions have left the Burmese leadership perennially short of two of their favourite items: foreign currency and military hardware. And pipeline diplomacy is central to their plan for remedying the shortfall.

Fortunately, the Chinese agree on the junta’s priorities – for pipelines, at least. Wen’s visit was chiefly concerned with discussions about the progress of a pipeline for delivering Burmese oil and gas to Chinese cities. The junta first agreed to the project in 2008, and work started last October.

“The oil pipeline will diversify China’s crude oil import routes from the Middle East and Africa, and avoid the sea route through the piracy-prone Strait of Malacca,” explains the China Daily.

When completed, the pipeline will also represent a major victory for the Chinese government over rival India. Both countries have been prepared to overlook much of the evidence of the Burmese regime’s human rights abuses in hope of gaining more of its affection – and most importantly, its energy resources. Burma has access to an estimated 2.5 trillion cubic metres of natural gas and at least 32 billion barrels of proven oil reserves. But the country’s capital shortage means it’s relatively underexplored. That could mean too that there’s much more natural wealth as yet undiscovered.

A Chinese military delegation followed Wen’s visit, which will also have been noted in New Delhi. Indian planners are already fearful that Chinese-built ports in the Indian Ocean are forming a ‘string of pearls’ that could isolate the country in the event of conflict.

Most Western governments look on with distaste at the rush to cut a deal for Burmese resources. It’s a sentiment likely to deepen on speculation that the junta is trying to develop nuclear technology. Just days after Wen’s visit, an army defector published several photos he said was evidence of a Burmese nuclear programme.

Beijing is aware of the concerns of its international peer group. But as with the handling of its North Korean relationship, the Chinese leadership has evidently decided to proceed on its own terms.

The Burmese junta, for its part, will hope that Wen’s visit lends some legitimacy to its latest round of national elections. Prime Minister Thein Sein reportedly told Wen that the elections were part of a ‘road map’ to democracy. International observers see it as more of a dead-end, doubting that legitimate polls will ever be held.

© ChinTell Ltd. All rights reserved.

Sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.