PowerChina to Cooperate with Division of Pakistani Army on Construction of Hydropower Dam in Disputed Kashmir Region

On May 13, Pakistan’s gov­ern­ment offi­cial­ly grant­ed a $5.85 bil­lion con­tract to a con­sor­tium com­prised of China’s state-run Pow­er Chi­na Cor­po­ra­tion (70% con­trol) and Pakistan’s Fron­tier Works Orga­ni­za­tion (30% con­trol) for con­struc­tion work on the Diamer-Basha dam.  Fron­tier Works Orga­ni­za­tion is report­ed­ly a divi­sion of the Pak­istan Army.  The dam is locat­ed in Gilgit-Baltistan, an area that is dis­put­ed with India.  The con­tract calls for con­struc­tion of a diver­sion sys­tem, main dam, access bridge, and a 21 MW hydropow­er project, con­sti­tut­ing a seg­ment of the broad­er $14 bil­lion hydropow­er project. 
The Diamer-Basha dam project has been mired in con­tro­ver­sy of var­i­ous forms over the past decade, which has seem­ing­ly imped­ed Islamabad’s abil­i­ty to secure financ­ing for the project. West­ern finan­cial insti­tu­tions, such as the World Bank and Asian Devel­op­ment Bank (ADB), have report­ed­ly refused to finance the project due to relat­ed envi­ron­men­tal, eco­log­i­cal, and even geopo­lit­i­cal risk fac­tors. Not only is the dam sit­u­at­ed in a region that car­ries risk of seis­mic activ­i­ty (future earth­quakes with a mag­ni­tude of up to 8.7 are expect­ed to the region), it is also expect­ed to cause the dis­place­ment of local pop­u­la­tions, with some local res­i­dents protest­ing the dam’s dis­pro­por­tion­ate ben­e­fit to oth­er Pak­istani provinces. 
Impor­tant­ly, Diamer-Bhasha is sit­u­at­ed in Gilgit-Baltistan (near the strate­gic Chi­na-built, Karako­ram High­way), which is part of the Greater Kash­mir region that is claimed by both India and Pak­istan. Notably, Chi­na first sig­naled inter­est in the project in 2011, just a year after media reports emerged alleg­ing that approx­i­mate­ly 11,000 sol­diers from the People’s Lib­er­a­tion Army had been sta­tioned in the region to car­ry out var­i­ous infra­struc­ture projects along the high­way route.
The inclu­sion of Pow­erChi­na in the project is also of note, con­sid­er­ing Islam­abad with­drew inclu­sion of this same dam project from the Chi­na-Pak­istan Eco­nom­ic Cor­ri­dor (CPEC) in 2017 due to Beijing’s demand for own­er­ship of the final asset. Indeed, Chi­nese financ­ing for the project at the time was report­ed­ly made con­di­tion­al on total Chi­nese own­er­ship and oper­a­tion of the struc­ture, includ­ing main­te­nance and secu­ri­ti­za­tion of the dam. Islam­abad refused to agree to these terms.
Amid the coro­n­avirus pan­dem­ic, the sign­ing of this con­tract has been tout­ed by local author­i­ties as a crit­i­cal stim­u­lus for Pakistan’s econ­o­my, pur­port­ed to cre­ate 16,500 jobs while irri­gat­ing 1.2 mil­lion acres of agri­cul­ture land. With the expect­ed pro­duc­tion of approx­i­mate­ly 4,500 MW of elec­tric­i­ty, the dam is intend­ed to help alle­vi­ate Pakistan’s severe pow­er short­ages.