At its inception in 2007, the Port of Gwadar should have been a success. Its strategic position at the mouth of the Strait of Hormuz, an important waterway that opens into the ocean and through which passes over one sixth of world oil production and one third of the world’s liquefied natural gas (LPG), would have had to attract international shipping, trade and industry to the port.
However, these expectations did not materialize. While 15-17 million barrels of oil pass through the waters just off the coast of Gwadar every day, the port itself has remained silent with very little activity.
There are several reasons for the lack of activity at Gwadar Port. The first of these is the political instability and armed insurrection in the province of Balochistan over the past two decades. But the current low capacity of the port’s cranes, docks, moorings, warehouses and other infrastructure and facilities is also a major obstacle in making the port a successful “gateway” to the China-Pakistan Economic Corridor (CPEC).
However, through the expansion of the port facilities, the construction of the free zone and the East freeway in Gwadar, both Pakistan and China tried to do so attract commercial exchanges and agreements with foreign companies. One such agreement in sight is the one with the Canadian Barrick Gold Corpone of the largest gold mining companies in the world.
Barrick plans to mine for gold in Balochistan from an area about 1,000 kilometers from the port of Karachi and 650 kilometers from the port of Gwadar. Currently, Chinese companies, which are extracting minerals from northwest Balochistan, are transporting them by truck to the already busy port of Karachi.
As the Barrick team and the Gwadar Port Authority (GPA) discussed in their recent meeting, using the port of Gwadar would reduce the distance, time and cost of transportation. Half the distance between the gold reserves and the port of Gwadar can be reached via the M8 motorway. A new highway will need to be built for the rest of the route.
Barrick’s interest in investing billions of dollars in the gold mining project and the port of Gwadar, and in using the latter to ship minerals, appears to be an opportunity for Gwadar to exploit its long-term economic potential. expected.
But past experiences with international investors and mining mines in Balochistan arouse a lot of skepticism. This skepticism is not without foundation.
Barrick plans to work on Reko Diq Gold mines in the district of Chaghi, in Balochistan, which borders Iran and Afghanistan (the nuclear tests of Pakistan in 1998 were carried out in Chaghi).
The Pakistani government, the provincial government of Balochistan and the Barrick Gold Corporation have reached a preliminary agreement under which the company will invest 7 billion dollars in the mining project and owns 50 percent of the shares, while the remaining 50 percent will be split equally between the federal and Balochistan governments.
The Reqo Dik area reportedly contains the the fifth largest gold deposit in the world, as well as many other minerals. Its mineral wealth and the high profits it promises have prompted international companies to take the risk of investing here despite the fragile political situation and multiple security threats they face here.
Their interest began as early as 1961 after the Geological Survey of Pakistan and the US Geological Survey identified the region as rich in minerals. Larger studies in 1971 and 1974 confirmed the results of previous surveys.
The two main areas that these investigations identified in the Chaghi district were Saindak and Reko Dik. A Chinese company signed an agreement with Pakistan and started mining in Saindak in 2002. Regarding Reqo Dik, the Balochistan Development Authority and an Australian mining company BHP minerals signed an agreement in 1993 under which the Chaghi Hills Exploration Joint Venture was formed to explore the Reqo Dik area for minerals.
When BHP’s feasibility study confirmed Reqo Dik as one of the largest undeveloped copper and gold fields in the world, he said 75 percent of the fee in overall discoveries for the next 56 years. However, the company hasn’t started mining for several years.
Then in 2000, BHP delivered the Reqo Dik agreement with Tethyan Copper Company (TCC), a joint venture between Antofagasta of Chile and Barrick Gold Corporation. Both of these companies spent $ 200-400 million to take full lead of the project in 2006. Meanwhile, in 2010, media investigations publicized the terms of the deal, which angered Baloch nationalist activists and politicians as the terms were seen to allow “outsiders” to exploit and benefit from the natural resources of Balochistan even as the people of the province struggled with extreme poverty.
Under pressure from the nationalists, the Balochistan government refused to convert the exploration permit into a mining license, thus ending the agreement with TCC. In 2011, the TCC took the case to the Supreme Court of Pakistan which ruled favor of the government of Balochistan. The TCC did not give up and took the case to the World Bank the same year as part of the International Center for Settlement of Investment Disputes. In 2016, TCC won the lawsuit and Pakistan was required to pay billions in damages for breach of the agreement and refusal of a mining license to TCC.
To avoid paying the penalties, Pakistan engaged in out-of-court negotiations with the TCC for several years. Finally, in early 2022, announced an agreement on the case but through a new agreement under which Antofagasta has given up on reinvesting or restarting any project related to Reqo Dik. However, Barrick Gold Corporation is back in the game.
As of now, Barrick plans to invest not only in mining, but also in the port of Gwadar for maritime purposes and in the development of the social sector of the Gwadar area and wider Balochistan. The mining works are expected to start in 2027-28. The first investments are expected to create thousands of jobs in the region, particularly in Chaghi and Gwadar. But it remains to be seen whether the local population will benefit from this.
Several studies, including a the recent one by scholars from the China Maritime Studies Institute (CMSI) of the US Naval War College, point out that the extraction and export of Baluchistan’s mineral resources are a huge business opportunity for the region. These studies point out that large numbers of shipments and quantities of exports, especially of high-value resources, can bring unprecedented profits to Pakistan and make the port of Gwadar one of the key ports in the region.
But the fact that Barrick has taken Pakistan to court earlier in cases that have spanned more than a decade and could have cost Islamabad billions of dollars does not bode well. It is a fact that Pakistan allowed Barrick to return only to escape the payment of huge penalties.
Gwadar may indeed emerge as an important port, but first the Pakistani and Chinese authorities and now the Barrick Corporation must improve the port’s access to water, electricity and other basic facilities. Importantly, Barrick, the federal and provincial government and the port authority of Gwadar should make the details of the agreement public so that people are aware of what is happening to their assets and the port and where they fit into the big picture.