|Dore Crude Tanker carries Iran Crude to Burma for China.|
On any other route, this would have been just another Iranian oil shipment. But using the Myanmar-China oil and gas pipeline brings new complications. That’s because the pipeline has a new avatar — it is now a part of China’s Belt and Road Initiative, along with other large infrastructure projects that were not originally a part of BRI, but were included later to boost the profile of the program.
Sending Iranian crude through an oil pipeline with the “Belt and Road” label removes any doubts of whether BRI’s projects have political motives or not. For critics of BRI, it adds fodder to the narrative that the infrastructure plan is a tool for China to undercut the influence of the US. BRI already has a serious public relations problem and is viewed with suspicion, sometimes for good reason.
Earlier this week, the renewal of US secondary sanctions on Iran faced strong opposition from the remaining JCPOA signatories. China has made it clear it will continue to import Iranian barrels, and using a BRI project to do so will give the US ammunition to criticize BRI openly, potentially leaving the host country open to US reprisals.
BRI has not been particularly polarizing so far, and its participants have included US allies. Oil and gas pipelines are magnets for controversy, however. From the Sumed pipeline in the Middle East to Nordstream 2 in Europe, there hasn’t been an international oil or gas pipeline that was devoid of geopolitics. Myanmar will be no different.
|US Naval Fleets from Singapore and Japan control Malacca Strait and threaten China's trade route.|
The Panama-flagged Dore delivered its cargo of Iranian crudes at Maday Island (in Burma’s Arakan) on June 1, the only vessel to have shipped oil from Iran to Myanmar since the 13 million mt/year (260,000 b/d) Yunnan Petrochemical refinery in southern China started operations in August last year.
Dore’s cargo of 948,000 barrels of crude oil included 474,000 barrels of Iranian South Pars condensate. The refinery said it also processed 56,000 mt of Iranian Heavy crude received via the 1,420 km pipeline, Platts reported previously.
Yunnan Petrochemical has a 1.2 million mt/year delayed coking unit that enables it to process Iranian crude, and it has already tested the first cargo successfully. Other major Chinese refineries under Sinopec have used Iranian crudes and found them attractive because of a high naphtha yield, which is needed for petrochemical products.
All of this paves the way for the China-Myanmar pipeline to become a conduit for Iranian crude, even if it is for just one refinery, which if fully utilized will account for nearly a third of China’s intake of Iranian crude. China’s imports of Iranian crude were around 638,000 b/d in the first half this year.
The final question is around the implications for Myanmar, and the legal complications for players in the Iran crude supply chain, like pipeline operators, shipowners, ports or banks involved.
Legal experts advise caution. “In respect of persons involved in transporting or storing petroleum from Iran, there is a risk that they could be subject to US sanctions,” Clyde & Co Partner Avryl Lattin said.
Sanctions or other punitive measures of the Trump administration are often considered on a case-by-case basis, such as special waivers given to India to import Russian military equipment because of its position as a budding strategic partner of Washington’s Indo-Pacific strategy, Collin Koh, Research Fellow at the Maritime Security Programme of the Institute of Defence and Strategic Studies, Singapore, said.
“It depends a lot on how the target country weighs in significance within the US strategic calculus. Myanmar is certainly not one country that the US can afford to alienate now,” Koh said.
There are signs that Myanmar wants to turn towards China due to the Rakhine issue, but at the same time Naypyidaw is more amenable to Western concerns and interests than ever before, He said. Due to this, even India and Australia are careful in their treatment of Myanmar.
So the US may not want to exacerbate the situation by imposing punitive actions on Myanmar just because Iranian oil was piped through its territory to southern China, Koh added. “The concerns are long-term geopolitics,” he said.
|Panama-flagged Crude Tanker DORE leaving Maday Island Terminal in Western-Burma (June-2018).|
|More than 13 million-tons of Iran's crude oil will flow through China-Burma pipelines every year.|
|More than 30 army battalions are stationed along the pipeline to guard the flowing crude oil.|
(Burmese Army's price from China is the protection from international persecution.)
Ne Win knew the strategic importance of Burma to China and used it accordingly so that US would leave him alone for three decades. China took the advantage and build the strategic pipelines while US was imposing devastating economic sanctions on friendly Burma for the benefits of so-called people leader Aung San Suu Kyi. Now is too late to fix that foolish strategic mistake made by Clinton-Albright Administration.)
LOS ANGELES, 4 June 2010 -- China National Petroleum Corp. said it has begun construction on two oil and natural gas pipeline projects that will link southwestern China and Myanmar. CNPC, which made the announcement during Chinese Premier Wen Jiabao's state visit to Myanmar, said the 793-km gas pipeline and 771-km oil pipeline will extend from the Kyaukpyu port on Myanmar's west coast and enter China at Ruili, Yunnan Province.
Kyaukpyu is on Ramree Island about 400 km northwest of Yangon, and is due to become the import terminus for Middle East and African tankers supplying oil to China. The new port will be able to receive vessels of up to 300,000 dwt and will have storage capacity of 600,000 cu m.
According to CNPC, the $1.5 billion oil line has a designed transport capacity of 22 million tonnes/year, while the $1.04 billion gas line has a designed transport capacity of 12 billion cu m/year.
CNPC said Southeast Asia Pipeline Co., one of its affiliates, was put in charge of the design, construction, operation and maintenance of the pipelines under the agreement signed with Myanmar National Oil & Gas Co.
Analysts said the oil line will diversify China's import routes from the Middle East and Africa, enabling it to bypass the sea route through the piracy-prone Strait of Malacca. The gas line will help meet rapidly expanding demand in southern China.
Oil for the line will come from China’s Middle Eastern and African suppliers, while the gas line will be fed by fields in Myanmar, which has the most extensive gas reserves in Southeast Asia at 21.2 tcf. Recent reports claim that Myanmar produces around 1.2 bcf/year of gas but wants to increase this to almost 2.2 bcf/year by 2015.
China signed 15 major agreements with Myanmar during Wen’s 2-day visit to the military state, ranging from the gas line, a hydro project, trade, and finance. In November 2009, CNPC said it had started construction of a large-scale oil port in Kyaukpyu as a facility for the planned China-Myanmar oil line project (Oil & Gas Journal Online, Nov. 4, 2010).