In a blunt statement, Russia rejected the veracity of reports by Pakistani media that Moscow was going to become part of the China-Pakistan Economic Corridor (CPEC). Prime Minister Nawaz Sharif said that CPEC is the symbol friendship between China and Pakistan and the project has earned Pakistan a good reputation. China launched the first trade activity on rail and sea link between Kunming (China) and Karachi (Pakistan). Federal Minister for Planning, Development and Reforms Ahsan Iqbal has compared the significance of CPEC for Pakistan to that of its atomic program. He also said that interest rate over CPEC loans is two percent. Baloch leader Abdul Hayee has shown reservations in CPEC.

Russia’s Rebuttal:

The Ministry of Foreign Affairs of the Russian Federation has categorically rejected the reports of Pakistani media about ‘secret negotiations’ between the two countries regarding cooperation on CPEC.[1] Last week, some media reports claimed that the Russian Spy Chief Alexander Bogdanov paid a secret visit to Gwadar port to assess Moscow’s possible access to the port in future. It was further said by the reports that Pakistan has formally allowed Russia to become part of the CPEC project. In an explicit statement, Russian Foreign Ministry said that “Moscow is not discussing the possibility of joining this project (CPEC) with Islamabad.”[2] At the same time the statement acknowledged the “inherent value” of trade and economic cooperation between Pakistan and Russia. Moscow’s joining of CPEC could strengthen Pakistan’s position at regional level to the disadvantage of India. New Delhi has on the one hand showed reservations about CPEC and on the other, vowed to isolate Pakistan. Regardless of the above, the value of CPEC cannot be underplayed by regional players, including Moscow, which cannot see itself as dependent on a project from Pakistan.

PM on CPEC and China:   

Prime Minister Nawaz Sharif said that CPEC had attracted attention of the world for good reasons. He observed that “CPEC has changed the negative security narrative into an exceedingly positive economic narrative for Pakistan.”[3] He added that successful implementation of CPEC projects was an illustration of Pakistan-China friendship. He also noted “Pakistan’s economy was in shambles in 2013 when the present government came into power. It was China that supported and helped us in the economic revival at such crucial juncture”.[4] Under CPEC project, China has started investing billions of dollars ($46 billion- $51 billion) in various projects throughout Pakistan. It must be said, however, that this investment is not direct, but through institutions and mechanisms such as the Asian Infrastructure Investment Bank (AIIB), an international financial institution formed by China with support of 57 countries, with an aim to support infrastructure building in the Asia-Pacific. CPEC is very much the pilot project of this institution. The precise details remain a well-guarded, and politically lambasted secret.

Rail, Sea Freight Service:

A direct rail route and sea freight service between China and Pakistan has been launched. A cargo train with 500 tons of commodities left Kunming, the capital of southwestern province of China Yunnan, for Guangzhou, the port city in southern China.[5] At Guangzhou, the cargo will be loaded to ships and transported to Karachi by sea which will mark opening of a new route. China’s official news agency, Xinhua tweeted that “China, Pakistan launch direct rail and sea freight service between Kunming and Karachi, cutting transport cost by over 50 percent.”[6] This service is part of China’s “Maritime Silk Road” which is the second leg of “One Belt One Road” (OBOR) Initiative. The land and sea routes of OBOR will converge at Gwadar port in Pakistan. Both the countries have already launched the land route of OBOR in October when hundreds of containers with Chinese cargos were transported through CPEC to Gwadar port.[7] Earlier in the year, naval cargo ships have also started the trade process in Gwadar.

Two Percent Interest Rate:

Federal Minister for Planning, Development and Reforms Ahsan Iqbal clarified the interest ratio on loans to be provided by China for CPEC. He said “[T]he interest rate for the loan is two percent.” He added that “[T]here are several cost heads included in the interest and they amount to roughly two percent.”[8] The question of interest ratio over the Chinese financing of CPEC projects has long been a shrouded by opacity. Such important information will help boost the transparency in terms and conditions tied to this venture. As for the timeframe of repayment is concerned, the Minister said that “[T]he payback period is 20-25 years.” Despite this step forward, a lot of information about CPEC still remains closely guarded, which has caused significant detraction in the opposition political parties and forces. Whatever the reason, this level of concealment only hurts the accountability of the government, and allows for further divergence on CPEC-related matters.

Miscellaneous:

Federal Minister for Planning, Development and Reforms Ahsan Iqbal has said that CPEC is as vital as to the country as is its atomic program. He added since we don’t politicize the atomic program, in the same vein, politicization of CPEC should be avoided.[9] Dr. Abdul Hayee Baloch, chief organizer of his own faction of the National Party, has voiced ‘serious reservations among the Baloch people’ about CPEC.[10]  English daily The News International has reported that thousands of Pakistanis have started learning Chinese language so as to be able to reap the benefits of CPEC.[11] Pakistan People’s Party Sindh President Nisar Khuhru has criticized Prime Minister Nawaz Sharif for “unfair sharing” of the CPEC projects with KP, Sindh and Balochistan.[12] It must be said, however, that this is fairly low-caliber political dissent regarding CPEC. From the start, the need for secrecy and policies that ostensibly favor the ruling party’s hub, Punjab province, have caused opposition politicians to openly criticize the government and call for better transparency. This dissent is both understandable, and at times purely for the sake of political expediency and provincial political point-scoring.

This report is compiled and written by Abdur Rehman Shah, Research Associate at the Center for Research and Security Studies (CRSS), and edited by Zeeshan Salahuddin, Senior Research Fellow at CRSS, Islamabad.

[1] Dawn.com. (2016, November 29). Russia dismisses reports of secret negotiation on CPEC. Retrieved on November 30, 2016, from https://www.dawn.com/news/1299402/russia-dismisses-reports-of-secret-negotiation-with-pakistan-on-cpec

[2] News. (2016, November 29). Comment by the information and press department on Pakistani media reports about the Russia’s alleged involvement in the China-Pakistan Economic Corridor project. Retrieved on December 1, 2016, from http://www.mid.ru/en/foreign_policy/news/-/asset_publisher/cKNonkJE02Bw/content/id/2538669

[3] APP. (2016, December 1). CPEC attracting regional states. Retrieved on December 1, 2016, from http://epaper.dawn.com/DetailNews.php?StoryText=01_12_2016_005_008

[4] Xinhua. (2016. November 30). Pakistan PM says China helped revive Pak economy. Retrieved on December 1, 2016, from http://news.xinhuanet.com/english/2016-11/30/c_135870893.htm

[5] News Desk. (2016, 2 December). Rail, sea freight service open with China. Retrieved on December 2, 2016, from http://tribune.com.pk/story/1250948/rail-sea-freight-service-open-china/

[6] PTI. (2016, December 1). Pakistan, China start direct rail and freight service. Retrieved on December 2, 2016, from http://www.thehindu.com/news/international/Pakistan-China-start-direct-rail-and-freight-service/article16737060.ece

[7] Dawn.com. (2016, December 1). China launches direct rail, se freight service between Kunming and Karachi. Retrieved on December 2, 2016 http://www.dawn.com/news/1299838/china-launches-direct-rail-sea-freight-service-between-kunming-and-karachi

[8] Dunya News. (2016, December 3). Two percent interest to be paid on CPEC loans: Ahsan Iqbal. Retrieved on December 5, 2016, http://dunyanews.tv/en/Pakistan/363879-Two-percent-interest-to-be-paid-on-CPEC-loans-Ahs

[9] Our Correspondent. (2016, November 29). ‘CPEC as vital as country’s atomic programme’. Retrieved on December 2, 2016, from http://epaper.tribune.com.pk/DisplayDetails.aspx?ENI_ID=11201611290140&EN_ID=11201611290051&EMID=11201611290019

[10] Shahid, Slaeem. (2016, November 30). Dr Hayee expresses misgivings about CPEC. Retrieved on December 2, 2016, http://epaper.dawn.com/DetailNews.php?StoryText=30_11_2016_003_008

[11] Web Desk (2016, November 30). Thousands learning Chinese to reap CPEC benefits. Retrieved on December 2, 2016, from https://www.thenews.com.pk/latest/168800-Thousands-learning-Chinese-to-reap-CPEC-benefits

[12] Staff Reporter. (2016, December 4). PPP lambasts Nawaz for ‘unfair’ CPEC sharing. Retrieved on December 5, 2016, from http://epaper.dawn.com/DetailNews.php?StoryText=04_12_2016_176_008