Myanmar Said To Compensate China For Myitsone Dam Suspension

This Bystander is starting to pick up details of a settlement between China and Myanmar following Naypyidaw’s unilateral suspension of construction work on the Myitsone hydroelectric dam on the Irrawaddy river. State media report that the two countries “agreed to properly settle matters” at a meeting between Foreign Minister Yang Jiechi and his Myanmar counterpart, Wunna Maung Lwin, who had been dispatched to Beijing as a special envoy of Myanmar President Thein Sein for talks China had demanded. This followed a meeting between President Thein and Beijing’s ambassador to Naypyidaw at the weekend.

We understand, however, that Myanmar has agreed to compensate Beijing through further natural-resources concessions, including giving China an increased share of its revenues from the $2.5 billion oil and gas pipeline being built through central and northeastern Myanmar by state-owned China National Petroleum Corp to connect Yunnan to terminals it is building on the Indian Ocean. This will be done under the guise of repaying the loan agreement between China and Myanmar’s former military rulers to fund Myitsone, most of whose electricity is intended to be exported to China.

It is unclear when work will resume at Myitsone, in which state-owned China Power Investment Corp. is the main investor. The original announcement said the project would be suspended for the remainder of President Thein’s term of office, which ends in 2016. We also understand that work will continue on six other Chinese-backed hydro-power dams in Kachin State.

Myanmar Pulls Plug On Chinese Dam Project

The Myanmar government’s decision to halt work on the Myitsone dam being built jointly with China on the upper reaches of the Irrawaddy river close to the border with Yunnan province is as remarkable as it was unexpected given that Beijing is one of the few friends the internationally isolated country has. Myanmar’s president, Thein Sein, says the $3.2 billion project is against the will of the people and the parliament, two groups whose will has not mattered much in the past. There is yet to be any public comment from Beijing on the decision. (Update: Beijing has now called for talks, and our take on that.)

Myitsone is only one of six hydroelectric projects in Myanmar in which China is involved. Because it would dam the Irrawaddy, a river closely linked to Burmese national identity, it has become the most iconic. Likened to the Three Gorges Dam on the Yangtse river for its size, adverse environmental impact and mass relocations of local populations, it has brought together both environmental activists and political opponents of the military junta that initiated the project and of what is now the new military-backed civilian government. Pro-democracy leader Aung Sun Suu Kyi has recently spoken out in opposition to the project. It has also become the focus of growing anti-Chinese sentiment in the country, which saw serious anti-Chinese riots in the 1960s. The growing grip of Beijing on the country’s national resources has many Burmese again fearful that their country is turning into a quasi-semi-autonomous region of China.

The dam is being built in Kachin State where ethnic rebels have been fighting an insurgency against the central Burmese authorities for years. They have succeeded in shutting down a couple of other small hydropower projects also built by China and intended to supply Yunnan with electric power. They promised to do the same with Myitsone, which was hit by grenade attacks in April last year.

In June this year, China pulled out engineers and technicians working on the Tapain hydropower plant after fighting broke between government forces and the Kachin Independence Army, sending hundreds of local Chinese-Burmese villagers fleeing across the border into Yunnan. Bridges on the roads to the province from the remote mountainous area, and along which Myanmar’s exports of minerals, jade, timber and foods move, with construction materials and cheap Chinese consumer goods coming in the other direction, were also reported to have been destroyed. A similar government offensive against ethnic rebels, in that case, the Kokang, who are largely ethnically Chinese, led to tens of thousands fleeing into Yunnan in 2009. The incident ruffled relations between Beijing and the Burmese military junta.

Beijing has again become increasingly concerned that its energy projects in the country are at jeopardy. An oil and gas pipeline now being built that will connect southern China to the Indian Ocean also passes through the troubled area, and there are plans for a rail link from Kunming to Yangon and on to the coast at Kyauk Phyu, the port being built by the Chinese which is also the terminus for the oil and gas pipeline.

China’s energy and infrastructure projects in Myanmar are far more important to it than its investments in mining and rubber plantations. Kyauk Phyu gives Beijing access not only to Myanmar’s offshore gas but also Middle Eastern oil that won’t need to be shipped through the Straits of Malacca. The suspension of the Myitsone project is a reminder to Beijing that, similarly to its experience in Libya, there are risks to continuing and expanding economic involvement with the government of an internationally isolated regime whose control over its country remains incomplete.

Footnote: The Myitsone hydroelectric power project was initiated in December 2009 with a scheduled completion date of 2019. It was planned to have an installed capacity of 6,000 megawatts and is estimated to generate 29,400 million kilowatt-hours a year of electricity. The Chinese partner is China Power Investment Group, one of the five largest of China’s state-owned power companies.