Kachin Conflict Shows China’s Business Dilemma in Burma

By William Boot 23 January 2013

After Burmese artillery shells landed on Chinese soil recently Beijing reacted indignant, dispatching a high-ranking delegation to Burma to demand a ceasefire in Kachin State. Yet, those shells, and many of the other weaponry used in the conflict, are likely to have been Chinese made.

In a business merry-go-round that could now easily blow up in China’s face, the Burmese military has dozens of Chinese warplanes, scores of rocket launchers, artillery and other Chinese equipment.

Flush with money generated from natural gas export to Western and Thai oil companies, the Burmese army in the past decade spent lavishly on upgrading its military hardware with the help of its northern neighbour.

The Kachin Independence Army, which is fighting off an army offensive in the mountains on Burma’s northern border with China, is also equipped with Chinese small arms.

But although China might be concerned about its weaponry destabilizing the border area, a bigger reason that it wants the fighting in Kachin to stop are its large strategic investments in Burma.

The 900-kilometer-long pipelines being built through Burma from the coast by the China National Petroleum Corporation (CNPC) are nearing completion.

The billion-dollar pipelines—one for crude oil the other for natural gas from Burma’s Shwe field in the Bay of Bengal—will be completed and ready to begin pumping at the end of May, the official Chinese news agency Xinhua reported on Jan 20.

The pipelines, coming up from the coast at Kyaukphyu, enter China at Ruili opposite Muse in Shan State after skirting the Kachin border.

“The current fighting appears not to be near the pipelines but the Chinese have invested billions of dollars in them and port transfer facilities and processing plant in Yunnan Province, so they will be concerned about even the remotest possibility of a spill over of the trouble into the pipelines’ path,” Bangkok oil industry analyst Collin Reynolds told The Irrawaddy.

Transhipping crude oil from the Middle East or Africa through Burma via the Indian Ocean is a costly new venture by China as its importation of raw energy resources grows.

The Chinese strategists in Beijing want to use Burma as a conduit to reduce the risks to so much oil bound for Chinese ports having to negotiate the narrow Malacca Strait between Malaysia and Indonesia via Singapore.

“Military conflict anywhere near this major new venture through Burma will have Beijing anxious,” said Reynolds. “If they are looking at a big map, fighting in northern Kachin looks awfully close to their pipelines even if it isn’t.”

The pipelines will be capable of pumping 22 million tonnes of crude oil from the Middle East and Africa and 12 billion cubic metres of Burmese gas annually, Xinhua reported.

“The project is a fourth way for oil and natural gas to enter China, after ocean shipping, the Sino-Kazakhstan pipelines and the Sino-Russian crude oil pipeline. It will reduce China’s reliance on the Straits of Malacca for oil imports,” Xinhua said.

The pipelines in Burma are finished and the sections within China are due to be completed by February, Xinhua quoted CNPC project director Gao Jianguo as saying. There will be a period of testing before full commercial operations can commence.

While international concern over the Kachin conflict is now growing—both in China and among the US, Britain and the EU—Asian and western arms firms have in the past been glad to supply the warring parties.

China has played a prominent role in arming and training the Burmese military, while a number of other countries have also sold weapons and equipment, including Russia, Singapore, South Korea, Poland, Ukraine, Belarus and Switzerland.

No-one knows for sure how much money the military have spent on themselves during the decades that it ruled Burma with an iron fist, but it is estimated to be in the hundreds of millions of dollars, and possibly billions.

Twenty Russian MiG-29s were bought from Moscow at a cost of over US $500 million in early 2011, according to Flight International magazine.

With strict economic sanctions in place by the European Union, the US and other Western countries until 2012, the Burmese military relied on China, Russia and several countries in eastern Europe for military hardware, among them Poland, Ukraine and Belarus.

Weapons sanctions were introduced by the EU in 1991, but Poland and other eastern European countries didn’t join the EU until 2004.

China in particular seems to have created its own business dilemma, after selling weapons it now wants Burma to stop using for fear of jeopardizing strategic economic interests and possibly causing unrest on its border.

Among other involvement, China helped set up air defences and air training in Burma after the junta established its Air Defence Command in the late 1990s.

Russian Foreign Minister Sergei Lavrov visited Burma only last week to discuss business prospects. The Russian state-owned Rosoboronexport company is among the most recent suppliers of military hardware, including Mi-35 helicopter gunships delivered in 2011 along with training.

It was a week which also saw senior Burmese military officers visiting Singapore for talks on “mutual cooperation” including infrastructural development and training, the official New Light of Myanmar said.

As history has proven, whatever the pros and cons of the fighting in Kachin State, there won’t be a shortage of willing sellers of weaponry to Burma in the future—even if China becomes hesitant because of the rebound risks.