Myanmar’s strategic location between China and India
July 29, 2010

Rich in oil and gas, strategically located between China and India, Myanmar is both ground for competition and cooperation between the nations.  Although official information is hard to come by, it is estimated that China, South Korea, Singapore and Thailand are Myanmar’s largest contributors of FDI. However as of the last fiscal year 2009-10, FDI into Myanmar fell almost 70 percent due to the economic crisis and the strengthening of sanctions against the Burmese military regime by the US and EU.

According to the Burmese Ministry of National Planning and Development, Foreign investment in the country registered a loss of 68 percent from US$985 million  in 2008-09 to the current US$315 million during 2009-10. The steep fall is largely due to massive investments made by China between 2008 and 2009: nearly US$860 million  in mining, 87 percent of total foreign investment in Myanmar. A factor that was not repeated last year.

To lure investments back into the country and build strategic ties with its neighbors, Myanmar’s Senior General Than Shwe recently met Indian leaders in New Delhi. Of late, China and India, have both been investing millions in Myanmar for predominantly two reasons –

Location: Myanmar’s large coastline provides naval access in the proximity of one of the world’s most strategic water passages, the Strait of Malacca, the narrow ship passage between Malaysia and Indonesia. The shortest sea route between the Persian Gulf and China. It is the key chokepoint in Asia. More than 80 percent of China’s oil imports are shipped by tankers passing the Malacca Strait, as a result, it remains a key point for both China and India to regulate. Burma is also strategic for China’s ‘string of pearls’ theory which is designed to counter US control over the Strait of Malacca chokepoint.

Myanmar’s location is also militarily important to China and India. In 1992, China and Burma agreed that China would modernise Burmese naval facilities, in return for permitting the Chinese navy to use the Small and Great Coco Island, located 18 Kilometers from the Indian Andaman & Nicobar Islands. Since then, Chinese experts have built an electronic intelligence station on Great Coco Island, vastly improved and militarised the Burmese port facilities in the Bay of Bengal at Akyab (Sittwe), Kyaukpyu and Mergui, and constructed a major naval base on Hainggyi Island near the Irrawaddy river delta.

To further woo the Burmese, China funds road constructions linking Rangoon and Akyab, providing the shortest access route to the Indian Ocean from Southern China. The Chinese have also built highways and deep sea ports to facilitate transit trade and provide job opportunities for Burmese workers and others in the region. Access to Burma’s ports and naval installations provide China with strategic influence in the Bay of Bengal, in the wider Indian Ocean region and in Southeast Asia, strenghtening their string of pearls theory.

India, too has tried to woo Myanmar, but has invested much less in the poor state than China. New Delhi has signed trade link ties with Yangon and is spending US$100 million to fund a deal linking Burma’s Sittwe port to Calcutta. During Than Shwe’s recent visit to India the EXIM bank also extended a US$60 million line of credit to Myanmar for financing railway projects. Worried about the rising military pressure from China and Pakistan in Myanmar, India has started its own campaign to woo the Burmese regime by providing military training and selling it arms and military hardware.

Gas: Gas is now by far the most important source of income for Burma, and one-third of FDI in Burma is in the oil and gas sector. The combined FDI in Burmese oil and gas since 1988 is approximately US$2.5 billion, 33 percent of all of Burma’s FDI. India and China’s proximity to Burma provides an opportunity for both countries to enhance their energy security by diversifying fuel-supply sources while avoiding the need for expensive LNG (liquid natural gas) transportation.

In 2004 a large new gas field, Shwe field, off the coast of Arakan was discovered by Daewoo International a state-owned Korean Gas Corporation which owns 70 percent of the field,  India’s ONGC  owns 2o percent and GAIL 10 percent. While gas from the Shwe field is supposed to be mined and supplied to China, the gas has become a contentious issue in relations between India and China, and an obstacle to Sino-Indian energy cooperation.

While Myanmar has given India the opportunity to pipe gas ealier, soured relations with Bangladesh stalled the deal. China took advantage of the stalemate. China simply trumped India with an offer to invest billions in building a strategic China-Burma oil and gas pipeline across Burma from Burma’s deepwater port at Kyaukpyu in the Bay of Bengal to Kunming in China’s Yunnan Province, a stretch of more than 2,300 kilometers. China plans an oil refinery in Kumming as well.
On a larger scale, what the Burma-China pipelines will allow is routing of oil and gas from Africa (Sudan among other sources) and the Middle East (Iran, Saudi Arabia) independent of dependence on the vulnerable chokepoint of the Malacca Strait. Burma will become China’s “bridge” linking Bangladesh and countries westward to the China mainland independent of any possible future moves by Washington to control the strait.


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