On May 8, according to a Reuters report, a consortium of Chinese companies made a proposal to the Myanmar government for an increased stake of 70% to 85% in the country’s $7.3 billion Kyaukphyu deep-sea port, located on the Bay of Bengal. The proposal comes in response to Myanmar’s offer last year for this project to be a 50/50 joint venture, which the consortium reportedly rejected.
There are a number of dimensions to Kyaukphyu that imbue it with strategic importance for China, including the dual oil and natural gas pipelines that run from the port to China’s Yunnan province that opened in 2015 and 2013 (an important – although insufficient – hedge for China to import energy via a route that circumvents the vulnerable Malacca Strait).
In addition, China’s efforts to build a Special Economic Zone (SEZ) around the port (a reportedly $10 to $12 billion project) are intended to transform it into a regional hub for logistics and mineral processing. The associated deep-sea port has been pegged as a potential dual-use concern by military analysts, who view it as potentially facilitating Chinese power projection, not only into the Indian Ocean, but also inland along new highway and railway lines being discussed along the pipeline route to China. Access and control of Kyaukphyu’s deep-sea port provides important positioning along the Bay of Bengal, which could translate into increased Chinese naval influence in the region.
Several sources identified by Reuters indicated that China may be leveraging its participation in the controversial Myitsone Dam (by, in effect, agreeing to abandon it) in return for this higher stake in Kyaukphyu. Reuters sources also indicated their expectation that Myanmar would agree to these proposed terms, taking a “backseat” – in part due to financial constraints – in the development and operational control of the project and yielding to the better-funded Chinese state-owned enterprises.