Pakistan 's Defence Minister Chaudhry Ahmed Mukhtar announced on May 22 that China had "acceded to Pakistan's request to take over operations" of the Gwadar port while Islamabad also requested Beijing to build a naval base at the same port. This is perhaps the biggest shift in Pakistan's policy in the aftermath of Osama episode.
Following the completion of Phase I of Gwadar, General Musharraf's government refused to let a Chinese company run the strategic port of Gwadar that China helped build. In Feb 2007 Pakistan signed an agreement with pro-US Singapore for 25 years, and gave it the status of a Tax Free Port for the following 40 years.
Almost three years after President Musharraf's escape from Pakistan, the Zardari government and the Pakistani army under the stewardship of General Ashfaq Kayani remained reluctant to cancel the contract with Port of Singapore Authority (PSA) and revive work at Gwadar, largely for fear of upsetting Washington.
The Planning Commission's task force on maritime industry had proposed that the operational agreement be cancelled because the PSA failed to fulfill its pledge to spend $525 million in five years, but nothing was spent during the last three years. The task force also observed that a penalty of $8-10 million would have to be paid to the PSA if the contract was cancelled.
Located close to the Strait of Hormuz in the Persian Gulf through which over 13 million barrels of oil pass every day, Gwadar is situated at the intersection of oil-rich Middle East, South Asia where one-fifth of the world's population lives and Central Asian Republics (CARs) having vast reserves of oil and minerals, is also likely to emerge as the country's most strategically-located deep-sea port.
Pakistan was interested in the project to seek strategic depth further to the southwest from its major naval base in Karachi that has long been vulnerable to the dominant Indian Navy. In the past, it endured prolonged economic and naval blockades imposed by the Indian Navy. To diversify the site of its naval and commercial assets, Pakistan has already built a naval base at Ormara, the Jinnah Naval Base, which has been in operation since June 2000. It can berth about a dozen ships, submarines and similar harbor craft.
Although the total cost of the project is estimated at $1.16 billion USD, China pitched in $198 million and Pakistan $50 million to finance the first phase. China also has invested another $200 million into building a coastal highway that will connect the Gwadar port with Karachi. The second phase, which will cost $526 million, will feature the construction of 9 more berths and terminals and will also be financed by China.
The Gwadar port project, however, is billed to crown the Pakistan Navy into a force that can rival regional navies. The government of Pakistan has designated the port area as a "sensitive defense zone." Once completed, the Gwadar port will rank among the world's largest deep-sea ports. The port will have global ramifications.
Countries like Russia and China will find this port of great importance to their futuristic needs as both have so far been unsuccessful in establishing ports in hot waters.
China 's decision to finance the construction of the Gwadar port and the coastal highway linking the port to Karachi will help its plans to develop western China. The distance from Kashgar to the Chinese east coast ports is 3,500 km, whereas the distance from Kashgar to Gwadar is only 1,500 km. The cost benefits to China of using Gwadar as the port for western China's imports and exports are evident.
China has no blue water navy and feels defenseless in the Persian Gulf against any hostile action to choke off its energy supplies. To cope with the new challenges, the Chinese leadership envisaged a new plan that was called by the US as "assembling a string of pearls."
Besides Gwadar, this string includes Chittagong of Bangladesh in the Bay of Bengal and Myanmar in the Indian Ocean. China has helped build the Chittagong port in Bangladesh where it is seeking an extensive naval and commercial access. In the case of Myanwar, Beijing has showered billions of dollars in military aid.
It has provided support for building several ports, road and rail links from the Chinese province of Yunnan to the Bay of Bengal, and a monitoring post on Myanmar's Coco Islands for sea traffic.
The new Chinese plans have rung alarm bells in India and the US too. India feels that it is encircled by China from three sides - Myanmar, Tibet and Pakistan. To counter Sino-Pak collaboration, India has brought Afghanistan and Iran into an economic and strategic alliance.
Following the Chinese ambitions in the region, India has pursued closer military ties with the US and issued a new naval doctrine stressing the need of protecting energy routes and responding to Beijing's inroads into the Arabian Sea.