China has shifted its position in a lengthy dispute with Burma over the building of the $3.6 billion Myitsone dam, seven sources said, signalling its willingness to abandon the project in exchange for other economic and strategic opportunities in Burma.
Burma’s President Htin Kyaw will discuss a potential deal on the massive Myitsone dam during a trip to China beginning on Thursday, two senior Burmese officials and a person familiar with the matter told Reuters.
Until recently, China had been pushing hard for the 6,000-megawatt project to go ahead despite widespread opposition within Burma, which forced the suspension of work in 2011.
Now, it is discussing alternative options with Burma including developing a number of smaller hydropower projects and securing preferential access to a strategically important port to compensate it for shelving the project, the sources said.
The seven sources include senior Burmese government officials, a person familiar with the original deal and a person close to the Chinese state-owned operator of the dam. They declined to be named due to the sensitivity of the matter.
Executives at the developer, the Sino-Burma joint venture Upstream Ayeyawady Confluence Basin Hydropower, are “deeply concerned” the project will get scrapped, according to a person close to the company.
In a statement, the company said it was looking forward to “an impartial and fair” review by the Burmese government into the environmental and social impact of the project. It said it remained confident of an appropriate solution, without giving details.
Burma’s national security advisor Thaung Tun said the review, led by Htin Kyaw, was in its final stages.
The person familiar with the original deal said the Chinese-owned operator of the dam, the State Power Investment Corp Yunnan International Power Investment (SPICYN) has not been actively pursuing the project over the past six months, in contrast to its more proactive stance previously.
SPICYN declined to comment.
China would maintain communications with Burma to handle “any difficulties encountered in the course of cooperation on the project,” Hua Chunying, a spokeswoman for China’s Ministry of Foreign Affairs, told a regular media briefing.
The Myitsone dam was supposed to send 90 percent of its electricity to China’s neighbouring Yunnan province, angering many in electricity-starved Burma.
But in recent months, China’s appetite for the project has diminished because Yunnan now has an oversupply of electricity as it switches to less energy-intensive industries amid an economic slowdown, sources said.
Instead, China, with its “One Belt, One Road” ambitions of improving links with central Asia and Europe, “wants a face-saving solution” that would allow it to advance its other economic interests if it shelves Myitsone, said a top government official familiar with discussions.
A deal would mark a geopolitical shift away from the West, as Naypyidaw looks to improve ties with China at a time when the United States and the European Union are focussed more on domestic policies.
Beijing is an increasingly important partner for Burmese leader Aung San Suu Kyi, who has made ending decades of ethnic war her top priority. Burma needs Chinese support to stabilise their shared border amid increased fighting with ethnic armed groups.
Burma is likely to be liable to China for compensation on hundreds of millions of dollars already spent on the project, according to the source close to the deal and a person familiar with the government’s position.
Myitsone’s developer and operator did not comment on potential compensation arrangements and it was not clear how that would be handled.
“The compensation doesn’t have to be cash,” said one of the officials familiar with Suu Kyi’s thinking. “China is interested in other infrastructure projects including smaller-scale dams.”
China is also pushing for preferential access to the deep-sea port of Kyaukphyu on the Bay of Bengal, according to two sources familiar with the government’s position.
Kyaukphyu is the entry point for a Chinese oil and gas pipeline and the two countries are close to starting pumping oil through it. The pipeline will provide China an alternative route for receiving Middle Eastern oil.