Myanmar-China Pipeline: Myanmar Pays a Price

Although a 770-km pipeline complex between the Kyaukpyu port in Myanmar to Yunnan in western China has begun to deliver oil and gas across the country, issues of compensation, environmental degradation, safety and adequate compensation remain.

In many ways, the story of the pipeline illustrates the price countries pay for participating in China’s ambitious One Belt-One Road (OBOR) plan to develop trade routes for railways, power grids, ports, roads and other infrastructure across half the planet. The projects are designed in China to benefit China. Benefits for the participating nations are secondary.

The US$1.5 billion pipelines, which started construction in 2009, are designed to shift natural gas from Myanmar and crude oil from the Middle East and Africa through the Bay of Bengal to terminals in Myanmar. The pipelines then transfer the resources to Yunnan to feed refineries for the world’s second-biggest oil consumer, eliminating the 5,000-km shipping lanes of the pirate-infested Strait of Malacca and across the South China Sea.

The pipelines inside Myanmar, owned and built by Beijing under the One Belt, One Road policy, are designed to transfer 22 million tonnes of crude oil annually (around 442,000 bbl/day) and carry nearly 6 percent of China's 2016 total energy imports. Today China is demanding up to 85 percent ownership of the strategic Kyaukpyu port at the western terminus.

A joint venture of the China National Petroleum Co. (50.95 percent) and Myanmar Oil and Gas Enterprise (MOGE, 49.1 percent), the pipelines almost divide Myanmar in half, a country in desperate need of financial support. The agreement gives Myanmar an annual road-right fee of US$13.81 million along with a transit fee of US$1 per ton of crude under a 30-year agreement. Myanmar is entitled to 2 million tonnes of crude annually for domestic consumption.

The 793-km natural gas pipeline went operational in 2015 with a transmission capacity of 12 billion cubic meters annually from the Shwe offshore field in the Bay of Bengal. The oil pipeline, parallel to it, was delayed by political differences and by public resistance. Activists claim that more than 20,000 indigenous people lost their livelihoods through confiscation of arable lands along the route.

Recently a Shan state lawmaker, Nang Kham Aye, demanded that benefits from the pipeline should go to his impoverished provincial government, only to have Myanmar Electric Power and Energy Minister Tun Naing claim that no such revenue or profit has appeared yet.

The skimming of natural resources in Myanmar by Chinese interests has long been contentious, from the exploitation of jade and other precious stone mines along the border to the oil and gas pipeline. It brought a stop to the Myitsone Dam, meant to be one of the world’s largest, at the confluence of the two streams that form the Irrawaddy, Myanmar’s most fabled river, which flows through the valley that is considered to be the birthplace of Burmese civilization. The 139-meter-high dam would have produced electrical capacity of 6,000 megawatts, 90 percent of which would have been sent back to China. The catchment area was to be 1,300 meters long. The Chinese government is still trying to restart it.

A recent visit by Myanmar President Htin Kyaw to Beijing has overcome the political difficulties over the pipelines, however. Htin Kyaw is a trusted ally of Aung Sun Suu Kyi, the de facto head of the National League for Democracy (NLD) government. He signed the agreement in the presence of Chinese President Xi Jinping on April 10, with both sides agreeing to get the pipeline operating as soon as possible.

Contentious issues remain, however, including not just Myanmar being done out of its share of the revenue but land compensation for the farmers who were evicted, safety concerns from oil spills and ecological restoration at the site of the pipeline construction, according to the US-based NGO Earth Rights International NGO.

“The CNPC as one of the main investors should keep their commitment to health, safety, and the environment and solve these problems with the effective consultation with local communities,” Valentina Stackl, communications manager for the US-based ERI, told Asia Sentinel.

The affected communities, she said, had no choice but to remain silent under the previous military government. After the NLD came to power in 2010 elections, more communities have begun standing up for their rights, not just on Chinese-originated projects, but those with potential delinquent investors.

Lately the Myanmar-China Pipeline Watch Committee, an umbrella body of local community-based organizations, urged the authority to adopt measures to prevent oil spills, which could severely affect the ecosystem and harm the livelihoods of thousands of residents.

Burmese farmers who handed over their lands have yet to receive compensations, the committee charged. The pipelines run in parallel through four provinces all the way across Myanmar before entering Chinese territory.

The CNPC claims the project paid careful attention to environmental protection and land restoration and community development activities like building of schools, hospitals, roads, bridges, power & water supply, telecommunication arrangements.

Anti-Chinese sentiment has been strong in Myanmar for decades, including riots in 1967 when the Burmese people targeted the Chinese embassy in Yangon. Beijing objected to the regime, then led by General Ne Win. Later when Myanmar fell under complete military rule, ties improved. AS the international community turned on Myanmar following the so-called 08-08-88 uprising, which paved the way for the military takeover, China turned up as one of the country’s few friends.

Myanmar’s dependence on China continued until a quasi-democratic government took power in 2011. The former President Thein Sein, who suspended the Myitsone hydropower project, tried to build closer ties with Europe and the US. The relationship survived with the initiative of Myanmar’s State counsellor and foreign minister Suu Kyi.

But, amid the contradictions, China continues to take advantage of the situation. The Beijing administration, ostensibly playing the role of peace broker in Myanmar, maintains secret relationships with rebel groups including the United Wa State Army, the Kachin Independence Army, the Myanmar National Democratic Alliance Army, etc.

China also allegedly supports northeast India-based separatist armed groups including the United Liberation Front of Asom (Independent), which is running camps in China-Myanmar border areas adjacent to Ruili in Yunnan as a card against New Delhi which has sheltered the Dalai Lama’s on its soil for decades.