The Malacca Dilemma
IITM CSC Article #64
13 August 2013
The Malacca Dilemma
In 2003, Hu Jintao in a speech to senior party members at an economic work conference highlighted what he called the “Malacca Dilemma.” According to President Hu, 80% China's trade passes through the 600-mile waterway including its oil imports. China is concerned about encroachments and free navigation through the strait. “Malacca Dilemma” has become the focus of Chinese planners as well as those outside watching China's rise. China's oil demand is expected to rise by several million barrels a day by 2015 with no equivalent rise in domestic production. This has left China scrambling for alternative sources and one option that has gained momentum is the Sino Myanmar pipeline, scheduled to be finished September 2013. Unfortunately for China, this pipeline will not solve problems of sea lanes of communication and may, in fact, make them worse.
The Malacca Dilemma is approximately 1000 km long but at several points is narrow as 15 kilometers. At their absolute narrowest, near Singapore, the width of the strait is only 2.8 kilometer. China's fears a hostile power could seize control of the straits and block nearly all of China's energy imports. Both land based artillery and airpower can effectively deny China the use of the strait. Data from World War II proves that the US conducted a similar campaign against Japan, which was also dependent on imports of oil and raw materials. The deduction was that land-based planes were more effective at maritime interdiction than carrier-based planes. This suggests that an adversary without carriers could still seal the strait effectively. This expands the threat of blockade from just the US or perhaps India, Singapore, Indonesia and Malaysia.
Malacca Strait carries 1/3 of the international trade. China’s energy demands make it import 5.62 million barrels of crude oil per day. 80% of this requirement has to come through the strait with rest being shipped from other places or sent through pipelines. A total of 15 million barrels of oil go through everyday of which 90% is crude oil. China produces only 3.8 million barrels a day domestically. The loss of the straits and their oil imports would bring the Chinese economy and transportation network to a halt as it would lose almost two thirds of its oil supply.
Knowing this, Chinese policy makers have started trying to find alternatives to Malacca. There were four proposals that would help middle-eastern oil get to China faster. The first was a proposal to spend 20 billion dollars to dig a canal across Thailand's Isthmus of Kra. On the face of it, this was a good alternative as it would save a journey of 1500 nautical miles for ships traveling to China. Unfortunately for China, it fell through due to high domestic opposition and a lack of support.. There were speculations that powerful people in Malaysia and Singapore were bribing people in Thailand's parliament to stop the project from going forward as it would reduce the amount of trade through their ports drastically. This may also be a reason why China didn't push the proposal through, as building the canal would probably alienate Singapore entirely after China has spent years in building good relations with it.
Another alternative was a pipeline from Gwadar in Pakistan to Xinjiang. The problem with this proposal was that Pakistan is currently unstable and the geographical landmass that the pipe would have to built would be very difficult. The third alternative was building a pipeline that would start in Iran, go through Pakistan, India and finally on to China. This failed not only because the pipeline was too long (2800 km), but also because of the international cooperation necessary to get it started.
The alternative that did succeed was the Sino-Myanmar pipelines. One will carry 440,000 barrels of crude oil a day while the other will carry natural gas. The pipeline itself extends nearly 800 km from the Shwe gas fields,in Myanmar to Kunming. The project cost China 2.5 billion dollars. Myanmar has welcomed the pipelines, both for the jobs they produce and because it's entitled to draw 40,000 barrels of crude oil a day. It can be said that this pipeline somehow solves China's Malacca dilemma. According to the Economist, “China sees this project as one of huge importance to its energy security, helping it avoid dependence on shipments coming through the Strait of Malacca.”
However, there are problems in this project. Firstly, the pipelines are not safer than seaborne shipping. If the Malacca straits were blocked, tankers could always be rerouted. A pipeline has none of these attributes. They are in fixed positions making it easy to attack. It is spread across several miles in a territory where different insurgent groups could cause a multimillion-dollar accident. China does not have control of Myanmar or the pipeline itself except on paper. Myanmar could conceivably halt oil and gas shipments in a dispute with China. The sea route to Myanmar has potential enemies. The US Navy operates out of the small island of Diego Garcia, which is in center of the Indian Ocean and gives them an excellent chance to interdict any shipping heading towards Myanmar. The Indian Navy too has aircraft carriers and the ability to project power over the entire Indian Ocean. The People's Liberation Army Navy is based on building local superiority and cheap forms of area denial. Their strategy is not to build far-flung bases, which they would then have to disperse their forces to defend. While tankers can be re-routed through the Sunda, Lombok, or other passages due to threats, pipelines remain fixed without any other mechanism that can be adopted to prevent damage.
But perhaps these strategic problems would become less important if the pipeline were to genuinely reduce the amount of oil going through Malacca? Unfortunately, Chinese oil imports are growing faster than the pipeline can alleviate. According to the Energy Information Administration, Chinese oil demand in 2010 was 9.4 million barrels per day. In 2011, that rose to 9.8 billion barrels per day. 9.8 – 9.4 equals a yearly increase of .4 million or 400,000 barrels per day demanded. China is only adding 170,000 barrels bpd of new production every year but that is expected to stop once China hits 4.7 billion barrels of indigenous production. The pipeline from Myanmar produces 0.44 billion bpd. Two years of Chinese growth in oil demand and China will be shipping just as much oil through Malacca as they were when it was built. According to the graph,
the red line, which is the shipments through Malacca, is increasing. The pipeline only offers a single one-time reduction. However, that reduction is eaten up in one or two years.
The final problem is Myanmar itself. Though initially in China's orbit, it is now showing signs of a democractic transition and attempts to court the West. It is significant to say that Obama's first destination during his second term was Myanmar. Whether the new government is actually trying to be open or playing at being democratic, it has shown willingness to do things that China finds upsetting. The suspension on construction of the Myitsone Dam was unexpected and it indicated that the Burmese government valued public opinion. While the pipeline is not relevant to China as a whole, it will become important for China's Southwest provinces. The pipeline will give Myanmar leverage over China to some degree, but unlike Malacca, it will be completely bilateral. The Malacca straits cannot be harmed, as doing anything would upset the status quo of 10 different countries.
In conclusion, the pipelines have bought China one or two years of slowing on oil shipments through the Malacca Strait. This depends on whether the refinery capacity can start running in Yunnan on time. Finally, they've just given a very serious pressure point to an ally who does not seem as close or as predictable as they did when the project was started. The Myanmar pipeline is going to have no effect on the Malacca dilemma and China will find itself back at square one in a year or two.