Booming Baluchistan: Who Benefits from These Lucrative Trade Routes?

The biggest winners may be Iran and Russia, not India and China.

Baluchistan—divided between the Iranian province of Sistan va Baluchestan, the parts of Afghanistan around Kandahar, Nimruz and Helmand and Pakistan’s Balochistan province—is on track to emerge as one of the most pivotal geo-economic hubs of the twenty-first century. Its main port in Pakistan, Gwadar, is the hub of the China Pakistan Economic Corridor (CPEC). It is where China has promised a series of investments in transportation and energy initiatives that would develop the infrastructure at the port itself, rail and roadways connecting Gwadar with Kashgar in western China, and oil and gas pipelines that would connect China, Pakistan and Iran. Iran’s southernmost port city of Chabahar, separated from Gwadar by only forty-four miles, is the focal point of Indian efforts to access Central Asia via Iran and Afghanistan, particularly to provide a secure route for Eurasian resources to arrive in India. There are also proposals that would link Chabahar to the emerging north-south corridor that is set to connect Iran to Russia, as well as connections to the Silk Road Economic Belt, which would provide a direct trade link between India and the European Union.

Both India and China in recent years have invested significant energy and funding in developing multiple trade and access routes in an effort to reduce dependence on current routes, a dependence that leaders in both countries believe could compromise their national security. China has viewed the requirement for the vast majority of its fuel imports to travel via sea in southeast Asia, including the Straits of Malacca, as a strategic weakness due to their impression that those lines are under the protection (and hence the control) of the United States Navy. China has pursued a diversification strategy along two primary paths in order to counter this perceived weakness. The Chinese have invested in the development of their blue water navy and coast guard fleets as an offensive strategy to enforce local sea control, while also developing multiple axes of access routes that would allow them or work around denial of the main sea routes. This diversification of connective trade and military basing includes the development of ports around the South Asia and East African rim, commonly referred to as the “String of Pearls” strategy. The total investment associated with the CPEC project reflects the value China places on ensured alternative trade routes; it could run as high as $46 billion, a staggering sum that dwarfs U.S. aid to Pakistan. The development of this route would allow oil and gas shipments coming into Gwadar from the Middle East to be transported into China—particularly the poorly connected western part of the country—at considerably lower cost than via ocean to China’s eastern ports. It would further support Chinese access to the Middle Eastern markets and connections to other countries where China has been working to develop diplomatic and economic ties, particularly Iran and Saudi Arabia. An additional component of the CPEC arrangement, where Pakistan continues to purchase Chinese submarines and other military capabilities, serves to enhance both Chinese and Pakistani power and prestige in the region. In short, the Gwadar–Kashgar link represents a winning combination for both countries.

India has significant interests in developing Chabahar as a port facility, as well as the rail and road networks that connect Chabahar inland to Afghanistan and (eventually) the central Asian republics, in order to facilitate the trade of raw materials out of its counterparts in central Asia, and to develop markets for Indian products. To this point, while Pakistan has permitted relief shipments of food from India into Afghanistan, it has not supported general trade originating in India; the trade route development provides India a route into central Asia that is free from constraints imposed by its neighbor and longtime rival. Oil and gas pipelines ending at Chabahar coming from the Middle East will also provide India access to energy sources without relying on the pipeline currently extending from Chabahar to Karachi. That said, India’s $100 million investment pales in comparison to China’s investment in Pakistan; it remains to be seen whether India can provide continued investments that will allow it to effectively balance Chinese influence in the region. As it stands, China has also expressed interest in supporting the development of Chabahar, and as Iran’s largest trading partner, that interest represents a significant influence on the direction of future development.