With little interest on the U.S. side, the Gwadar proposal was eventually lost in the larger vortex of U.S.-Pakistani relations, a drama that has been admirably explained by other scholars.62 High points in the relationship have mainly coincided with U.S. security priorities during the Cold War, the proxy war against the Soviet Union in Afghanistan, and after the 9/11 terrorist attacks. All have come crashing down, with each declaration of partnership eventually giving way to disagreement and ultimately disappointment. As Husain Haqqani, a former ambassador of Pakistan to the United States, has written, “The relationship between the United States and Pakistan is a tale of exaggerated expectations, broken promises, and disastrous misunderstandings.”63
“The New Silk Road”
While that entire tale cannot be told in passing, its most recent chapter set the stage for deeper relations between Pakistan and China and the emergence of CPEC. The war in Afghanistan again made cooperation with Pakistan essential, and the United States doled out assistance to improve relations. In 2004, the United States designated Pakistan a major non-NATO ally, giving it greater access to U.S. military equipment and training. A few months later, the 9/11 Commission recommended a “comprehensive effort that extends from military aid to support for better education, so long as Pakistan’s leaders remain willing to make difficult choices of their own.”64 Support for Pakistan remained a bipartisan cause, and in 2009, the U.S. Congress passed a bill, sponsored by John Kerry and Richard Lugar, providing $7.5 billion in nonmilitary aid to Pakistan over five years.65
The U.S. aid package to Pakistan made infrastructure its top priority, allocating $3.5 billion for “high visibility, high impact” projects.66 These projects were intended to help address Pakistan’s development challenges while improving public perceptions of the United States. “Many Pakistanis talk nostalgically about the days when U.S. assistance efforts were more noticeable, technology-based, and longer-term,” a U.S. State Department report, required by the legislation, explained.67 After largely abandoning the business of delivering large infrastructure projects in the 1960s and 1970s, the U.S. government was getting back into the game.
The United States even introduced a vision for regional connectivity: the New Silk Road. Planners at the U.S. Department of Defense’s Central Command (CENTCOM) picked up the idea from S. Frederick Starr, a scholar on Russian and Eurasian affairs who long advocated building transport links across the Eurasian supercontinent.68 General David Petraeus, then CENTCOM commander, was intrigued and encouraged his staff to pursue it. But the idea struggled to gain traction with the U.S. State Department and Ambassador Richard Holbrooke, the U.S. special representative for Afghanistan and Pakistan.
After Holbrooke’s death, CENTCOM’s New Silk Road advocates caught the ear of Ambassador Marc Grossman, Holbrooke’s successor. Eager to define an economic effort that complemented the military and diplomatic surges under way, Secretary of State Hillary Clinton forged ahead with the idea. “Let’s work together to create a new Silk Road,” she declared in Chennai, India, on July 20, 2011. “Not a single thoroughfare like its namesake, but an international web and network of economic and transit connections. That means building more rail lines, highways, energy infrastructure, like the proposed pipeline to run from Turkmenistan, through Afghanistan, through Pakistan into India.”69
Afghanistan’s President Hamid Karzai embraced the idea, even calling for his country to become “the Asian Roundabout” in the New Silk Road, but it barely registered in Pakistan.70 In January 2011, Raymond Davis, working as a contractor for the U.S. Central Intelligence Agency in Lahore, had killed two men, who he thought were robbers. On May 2 of that year, U.S. Special Forces raided a compound in Abbottabad and killed Osama bin Laden. Announcing the New Silk Road in India did little to improve its reception in Pakistan, where policy makers tend to view U.S.-India efforts as coming at their expense.
As the U.S. government’s focus shifted toward limiting its footprint in the region, the New Silk Road fell among its priorities. Without strong support for additional resources, it was mainly a repackaging of existing efforts.71 A few months after announcing the effort, Clinton cushioned expectations, telling a meeting of thirty foreign ministers in New York, “This isn’t about grand infrastructure projects—it’s about promoting sustainable cross-border economic activity.”72 U.S. assistance to Pakistan peaked in 2010, the year prior, and declined in the following years.73 By January 2015, when President Obama visited India, the New Silk Road did not merit a mention in his remarks.74
On the ground, U.S.-funded projects in Pakistan ran into familiar challenges.75 USAID emphasized hiring local workers, as it does around the world, while adhering to both local and U.S. government regulations. Both goals are admirable. Local employment benefits Pakistani workers. Requiring that work meet not only local regulations but also U.S. regulations ensures that higher-quality projects are delivered. But meeting U.S. regulations with foreign workers, who are not familiar with those regulations, takes longer. And U.S. officials, like their predecessors in Pakistan, felt that time was in short supply.
The U.S. funding surge was too little to meet Pakistan’s needs and too much to manage effectively. Unlike the Chinese investment that would follow, U.S. assistance was poured into supporting smaller projects and social infrastructure such as schools. Lacking the funds to deliver the big-ticket industrial projects that have become CPEC’s hallmark, U.S. assistance was also used to help identify and prepare projects that could attract other sources of investment. But many Pakistani elites viewed USAID activities with suspicion, and trust did not increase along with U.S. funds.76
The surge in funding exceeded the U.S. government’s ability to effectively manage the assistance, especially given that U.S. agencies had competing priorities. The State Department supported spending faster to achieve political objectives in service of the U.S. war effort in Afghanistan. USAID was more focused on longer-term development objectives.77 Some U.S. staffers took shortcuts during project procurement, declining to obtain independent cost estimates before making contract awards. Still, a pipeline of unspent funds built up. An audit by the USAID inspector general, an internal watchdog, found that only 15 percent of projects fully met their intended goals.78
U.S. officials were criticized if they pushed projects forward quickly and criticized if they proceeded with caution. In one example of speed, they helped complete the Satpara Dam, in Gilgit Baltistan, only to discover that the project was unsustainable. Tax revenue from the energy produced only covered salaries for dam workers and not maintenance costs. For decades, officials from the World Bank and Asian Development Bank had been calling for energy-tariff reforms, pointing out that power generation had become a fixation at the expense of transmission and taxation. To make matters worse, the Gilgit Baltistan government did not have the expertise to run the dam, and locals diverted streams to other power sources, leaving the dam operating at less than 40 percent capacity.79 It became a high-visibility, low-impact project.
When U.S. officials exercised greater caution, they risked being overtaken by events. In July 2013, after three years of lobbying by the government of Pakistan, the U.S. approved a feasibility study for the Diamer-Bhasha Dam, also located in Gilgit Baltistan. The study was intended to give international investors greater confidence to invest in the project, which at $12–14 billion, was nearly twice the entire U.S. aid budget for Pakistan. Several concerns about the project stem from its location: disputed territory, with high seismic activity, settled by thirty thousand people who would need to be relocated.80
By the time the feasibility study was approved, China was rising among Pakistan’s donors and investors. In 2014, China announced $12 billion in official financing, three-fifths of which was on commercial terms.81 The announcement of CPEC in May 2013, during a visit by Li Keqiang to Pakistan, came as U.S. aid was dropping. Just as China seized the opportunity in 1965 to offer its assistance when the United States was reevaluating its ties with Pakistan, it
was stepping forward again.
But this time, China had much more to offer. Although the initial MOU for CPEC was light on details, agreements signed in 2014 and 2015 began to suggest that CPEC could reach $46 billion. During Xi’s visit to Pakistan in April 2015, the two sides signed fifty-one MOUs. Prime Minister Nawaz Sharif assured the Chinese that he “would extend all possible facilitation” as projects broke ground.82 Expectations were sky high. CPEC, some Pakistani observers believed, was China’s “Marshall Plan.”
In 2016, Pakistani officials sent USAID a letter asking it to stop the feasibility study for the Diamer-Bhasha Dam.83 The following year, Pakistan and China signed an MOU to finance the project with three other dams as part of a $50 billion package. With that announcement, CPEC swelled to a mythical $100 billion.
But the Diamer-Bhasha Dam, like other parts of CPEC, has not materialized. Six months after announcing the $50 billion MOU, Pakistan’s Water and Power Development Authority (WAPDA) withdrew its request for Chinese financing. “Chinese conditions for financing the Diamer-Bhasha Dam were not doable and against our interests,” Muzammil Hussain, WAPDA’s chairman, explained.84 Whether that was a negotiating tactic for better terms or an honest refusal, the project’s future remains uncertain. It is also possible that China structured an offer to Pakistan that it knew would be rejected. In 2018, Pakistan’s top judge started a crowd-funding campaign for the dam, and a handful of celebrities, including the R&B singer Akon, have encouraged Pakistanis to donate.85 As of early 2020, they had raised less than 1 percent of the estimated cost.86
“Please Build a Naval Base”
CPEC has slowly come down to Earth. In October 2018, Pakistan declared that it would seek a bailout from the IMF, which has provided $27 billion in financial assistance to Pakistan over the past six decades.87 Facing criticism about unsustainable debt in other BRI-participating countries, especially Sri Lanka, Chinese officials have been eager to make CPEC appear safer by releasing more sober estimates. At the end of 2018, the Chinese government claimed that twenty-two projects were completed or under way, totaling $19 billion. The largest category was energy, totaling almost $13 billion, two-thirds of which was for coal power plants.88
Both sides set out to manage Pakistan’s debt risks, but long-term planning is no match for short-term political incentives.89 The CPEC long-term plan, according to Dawn’s reporting, recommended securing financial guarantees from Pakistan and noted that Pakistan’s economy could only absorb $2 billion a year in direct investment, $1 billion in preferential loans, and $1.5 billion in commercial loans.90 But when Sharif pushed for a $21 billion package of power projects before facing reelection in 2018, he was willing to give generous guarantees, reportedly as high as 34 percent in investment returns for some power plants.91 Those deals could squeeze Pakistan further in the coming years.
Gwadar Port continues to inch ahead. The project was briefly reenergized in 1997, when Sharif formed a task force that endorsed developing the port. But the following year, Pakistan held its first public test of nuclear weapons, triggering international sanctions and limiting outside investment for the port. During President Pervez Musharraf’s 2001 visit to Beijing, marking the fiftieth anniversary of Chinese-Pakistan relations, he signed an agreement to develop the port. The first phase of construction was completed in 2005, a year ahead of schedule, but due to security concerns, an opening ceremony was not held until 2007.92 When the port received its first commercial shipment in 2008, the ship was carrying too much wheat for the port to handle and needed to offload onto another vessel before docking.93
Official ceremonies have continued to outpace the port’s actual performance. In 2015, with Sharif back in office, a second phase of construction was announced as part of CPEC. Both sides were eager to declare victory, and in November 2016, Sharif hosted a ceremony that strained even the politician’s imagination for ribbon cutting. “This idea was conceived only two years ago, and this day marks the breaking of the dawn of a new era,” he told reporters. The ceremony was timed to coincide with the arrival of a convoy that had left Kashgar nearly two weeks earlier and traveled along the KKH. “The newly-constructed roads in Balochistan have opened up new areas that were inaccessible and deprived of development . . . and have brought peace to a volatile region,” Sharif claimed.94
Peace and prosperity have yet to dock at Gwadar. Little of anything has arrived. The port received its first container ship in October 2018, and it is equipped with only three berths for unloading cargo, hardly enough to make Gwadar the “next Dubai,” as its boosters have claimed.95 It is still largely disconnected from the rest of the country and has struggled to provide basic services, including reliable potable water and electricity. If large cargo ships suddenly began arriving, the port and its weak infrastructure reaching inland would not be able to handle them.
The port’s local benefits are questionable. If and when the port becomes profitable, China will receive the lion’s share of profits, 91 percent, and Pakistan’s federal government will receive 9 percent, leaving nothing for Baluchistan’s provincial government. Locals have expressed concerns about being excluded from construction jobs, forced relocation, fishing communities losing access to the water, and increased security checkpoints and surveillance.96 These concerns feed into a larger criticism that CPEC’s benefits run one-way.97
Baluchistan remains risky, especially for those who are working on CPEC projects. In September 2016, two months before Sharif’s declarations of peace, a spokesman for Pakistan’s Frontier Works Organization, the same group that was created to build the KKH, announced that militants had killed forty-four Pakistani workers since 2014. In November 2018, militants attacked the Chinese consulate in Karachi. The Baluchistan Liberation Army, which took responsibility for the attack, accused China of exploiting Pakistan’s resources.98
China has leaned on Pakistan to improve security. In 2004, following attacks on Chinese workers at the Gomal Zam Dam, in northern Pakistan, China put the project on hold.99 But the attention around CPEC has made it more difficult to pause projects or to send Chinese troops without attracting undue attention. At China’s urging, Pakistan created an army division of fifteen thousand troops to secure projects. Chinese firms also employ private security contractors, taking advantage of a gray area in Pakistan’s legal regime, where joint ventures between Pakistani and foreign security firms have thrived.100
Security risks, coupled with Gwadar’s weak commercial performance, have fueled speculation that the port will become a Chinese naval facility.101 “We have asked our Chinese brothers to please build a naval base at Gwadar,” Chaudhary Ahmed Mukhtar, Pakistan’s defense minister, told the Financial Times in 2011.102 Chinese and Pakistani officials have since denied that possibility.103 China does not need a standing naval presence at Gwadar, and it might settle for the ability to access the port. Indeed, the terms that Pakistan offered the United States decades ago provide one option. In 1972, Pakistan’s defense minister, acting on Bhutto’s direction, noted that Pakistan did not want large numbers of U.S. military personnel stationed at the port but that the United States might find it valuable to have access to facilities as needed.104
China and Pakistan’s most ambitious connectivity projects, a pipeline and railway, remain pipe dreams. The pipeline would be among the longest and highest in the world, stretching from Gwadar, across the Karakorum mountains, to Kashgar in western China.105 Pumping oil from sea level to fifteen thousand feet, across a distance of more than three thousand kilometers, would require powerful pumps, extra heating, and special insulation. Construction is estimated at $10 billion, which even appears conservative when compared to other high-rising pipelines.106 After construction, operations would add roughly eight dollars to the cost of each barrel pumped.107
The pipeline’s strategic value does not appear commensurate with its high price tag.108 Some observers have suggested that it could help reduce China’s reliance on oil shipped through the Strait of Malacca. But if the
project’s main purpose is to provide an alternative oil supply in the event that the Strait of Malacca was closed, it would still remain vulnerable to sabotage from the ground or aerial bombing. It would be even easier to blockade or disable Gwadar Port than the Strait of Malacca. The prospect of a Strait of Malacca closure and conflict, presumably between the United States and China, now seems remote, but the pipeline would remain vulnerable to attacks from Baluch militants in the meantime.
The railway could allow commerce to continue overland all year, but it would come at an astronomical cost. Extending Pakistan’s railway network north to Khunjerab would require building an estimated two hundred kilometers of tunnel and seventy bridges. Building south to Gwadar would require upgrading an existing line, for which feasibility studies have only begun.109 Altogether, the two extensions are estimated to cost $16 billion, and each will take at least five years to build.110 Officially, the southern component is slated to begin construction in 2025, and the northern component will begin in 2030, close enough to allow officials to speak about the project with a straight face and far enough away to allow them to comfortably delay it.111
While the railway and pipeline have not moved forward, the Chinese telecom giant Huawei has laid a fiber-optic cable across the Khunjerab Pass. At $44 million, it is less expensive and more practical.112 Huawei representatives point out that it will allow Pakistanis to access Chinese content more quickly, and by avoiding undersea cables, the route makes espionage from neighboring countries other than China more difficult.113 Unlike the proposed pipeline, the fiber-optic cable is less vulnerable to attack and cheaper to repair. Unlike the proposed railway, it cannot carry people. It offers the type of connectivity that is most comfortable to both governments.
The Emperor’s New Road: China and the Project of the Century Page 16