US uneasy as Beijing develops a strategic string of pearls

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  Declan Walsh in Gwadar
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• The Guardian, Thursday 10 November 2005

There is an air of El Dorado about Gwadar, a fishing village on the Persian Sea with dreams of becoming a glittering metropolis. Advertising billboards along the rubbish-strewn streets feature digitised images of skyscrapers and tourist-clogged beaches. Offices with names like Gold Mine Investments and New World City have sprung up overnight. Property prices have risen up to 30-fold, turning poor fishermen into small-time tycoons with four-wheel drives and second wives.

Dealers such as Kamran Ali, 25, have flooded in from the big cities. "In five years' time this will be like Dubai, or parts of Europe," he said.

Or, possibly, Beijing. Gwadar's ambitious plans hinge on a giant deepwater port whose money, bricks and mortar come from China. Last year 400 Chinese labourers worked 24-hour shifts to complete the project, intended to serve Afghanistan and Central Asia. Through cheap loans and generous grants the Chinese government covered 80% of the $250m (£144m) cost.

Now a dredger is out in the bay carving a deep channel that will accommodate cargo ships, oil tankers and, if necessary, warships.

A high-stakes geopolitical game is sweeping Asia. Triggered by a roaring economy, propelled by swelling confidence and funded by chequebook diplomacy, Beijing is projecting its new might across the continent - and setting off alarm bells from Washington to Tokyo.

"There is a cauldron of anxiety about China," the US deputy secretary of state, Robert Zoellick, said in September.

In May China signed a $600m deal with the president of Uzbekistan, Islam Karimov, 12 days after his troops killed hundreds of protesters. Relations are warming with former enemies seeking a bulwark against US might. In August almost 10,000 Chinese and Russian forces took part in a joint exercise.

In Pakistan an old friendship is being rekindled. China helped to build Pakistan's weapons plants and, according to western intelligence, had a hand in its nuclear bomb. The two countries' friendship is "higher than the Himalayas and deeper than the ocean", according to popular cliche.

Now it is driven by a fresh impetus - increased cooperation between Islamabad's enemy, India, and China's rival, America. "It's a classic case of the enemy of my enemy is my friend," said Dr Rifaat Hussain, director of the army-run Institute for Strategic Studies and Research Analysis in Islamabad.

This year the two countries signed 22 trade agreements, including the joint production of a jet fighter, and the sale of four Chinese navy frigates to Pakistan. But in Gwadar, China insists, its interest is purely commercial.

The port has a great commercial attraction. It lies 1,250 miles from Xinjiang, a landlocked western province and latecomer to China's economic boom. From next year Beijing hopes for a fresh flow of traffic across the Himalayas and down to the Persian Sea.

But Gwadar also has an immense strategic lure. It lies close to the Straits of Hormuz, the gateway to the Gulf through which 40% of the world's oil passes. Most Chinese oil supplies pass through the Malacca Straits, thousands of the miles to the south, that Beijing perceives as US controlled. To counter this vulnerability Beijing has adopted the "string of pearls" policy - cultivating commercial or military ties in strategic ports from the Gulf to the east coast of China. Gwadar is the first pearl in a line that stretches to Bangladesh, Cambodia and into the South China Sea.

The Pentagon is watching uneasily. China's military is modernising rapidly. One US military report claimed the Chinese navy was beefing up to "deter the potential disruption of its energy supplies from potential threats, including the US navy, especially in the case of a conflict with Taiwan".

China dismisses such talk as scaremongering. The dragon does not breathe fire, Premier Wen Jiabao told a meeting of Asian ministers in Islamabad last April. "Even if we become stronger and more developed, we will not stand in the way of others, still less become a threat," he said.

Other analysts say a purely military analysis ignores the wider picture of China's political reforms, embrace of international trade and normalisation of relations with the west.

When the first ships sail into Gwadar by the end of next year it will not be used by any military, Chinese or otherwise, according to Akbar Ali Pesnani, chairman of the Gwadar port authority: "It's a strictly commercial venture."

Chinese officials brush aside claims they will use Gwadar to monitor sea traffic passing into the Middle East. Their main future involvement with the port is an offer of help in building a railway link across Pakistan towards their own borders, they say.

Even then, there is no guarantee Gwadar will succeed. Most access roads are still on the drawing board; property development has been marred by fraud and speculation; land prices dipped sharply recently, causing some estate agents to leave town. "We give it a 50/50 chance of success," said one western diplomat in Islamabad.

However, China's enthusiasm is undiminished, despite running into bloody local opposition. In May 2004 a car bomb in Gwadar killed three Chinese engineers working on the port and injured 11. Intelligence services suspected local nationalists.

But elsewhere optimism is tinged with apprehension. "China has to turn to the international resource supply system, and will seek military force to safeguard its share when necessary," wrote Zhang Wenmy of the China Institute of Contemporary International Relations this year. "There has never been a case in history where such a pursuit was realised in peace."