
On Wednesday, Chinese Overseas Ports Holding Company Ltd (COPHCL), a Chinese state-owned enterprise, officially took control of the strategically important port at Gwadar in Pakistan. The Chinese firm officially signed a 40-year lease for over 2,000 acres of land in Gwadar, marking a milestone in the implementation phase of the China-Pakistan Economic Corridor (CPEC), a major bilateral initiative to build transportation and other infrastructure along the length of Pakistan, connecting the country’s Arabian Sea coast with the Himalayan border with China. CPEC was unveiled during Chinese President Xi Jinping’s April 2015 state visit to Pakistan, where Gwadar was high on the agenda.

Pakistan’s Federal Minister for Planning, Development and Reform Ahsan Iqbal handed over the lease to Wang Xiaodao, the vice chairman of China’s National Development and Reform Commission. Gwadar is a designated free-trade zone by the Pakistani government. The designation will last for 23 years. Additionally, because of Gwadar’s location in the restive southern Pakistani province of Balochistan, the Pakistani government has created a protection force for Chinese workers who will be working on CPEC projects, including at Gwadar.

The security situation in Balochistan is a concern for China, which wants to avoid CPEC projects and Chinese contractors potentially facing attacks. On Sunday, just days before the port hand-over, Pakistan’s chief of naval staff, Admiral Mohammad Zakaullah, said that the Pakistani Navy would also protect Gwadar “against all asymmetric threats under the prevalent precarious internal and external security environment.”

Hong Lei, spokesman for the Chinese Ministry of Foreign Affairs, said that COPHCL’s takeover of the Gwadar facility “is a business practice within China-Pakistan economic cooperation and trade and part of mutually beneficial and friendly cooperation between the two countries.” Pakistan and China are allies and describe their bilateral relationship as an “all-weather” partnership. Hong added that “Companies from China and Pakistan will continue to build and develop the port following the principle of conducting consultations on an equal footing and pursuing win-win results.”

Wednesday’s deal was widely reported in India where perceptions persist that Gwadar could be converted into a dual-use port facility by China, potentially abetting the Chinese People’s Liberation Army-Navy’s power projection in the western Indian Ocean. For China, Gwadar, as the littoral node of CPEC, is important for energy security reasons as well. China is the world’s largest importer of crude oil and is highly reliant on these imports traversing the crowded Malacca Strait and South China Sea on their way to Chinese Pacific-facing ports.

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According to the U.S. Department of Defense, 82 percent of all Chinese crude oil imports and 30 percent of natural gas imports rely on this route. Gwadar, along with the Burmese port of Kyaukpyu, give China Indian Ocean-facing littoral facilities that can hedge Beijing’s current reliance on open sea lanes in the South China Sea. Gwadar is particularly appealing for China due to its proximity to the Hormuz Strait, which is a chokepoint for 20 percent of international crude oil and liquefied fuels.