Sunk Costs: China and the Pirates

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Sunk Costs: China and the Pirates

China’s response to piracy has had broader implications for its overall foreign policy. Part one of a two-part series.

Maritime piracy is one of many non-traditional security challenges that confront China and other states in the 21st century. After flourishing for over two decades, why has piracy elicited a greater response from China than have other security threats? The answer lies in the confluence of strategic, political and economic factors – particularly the last: in recent years, China has developed a burgeoning “ocean economy.” Across all three of these dimensions, the People’s Liberation Army Navy (PLAN)’s robust presence in the Gulf of Aden (GoA) through fifteen deployments since December 2008 demonstrates Beijing’s growing realization that inaction is becoming less affordable in the maritime commons. As China’s GoA approach shows, it has recognized the imperative of actively protecting its ocean economy lifeline.

Attacks in and around the GoA have produced the greatest threats to sea lines of communication (SLOC) stability for much of the 21st century, though Somali piracy plummeted during 2012-13 from its 2010 peak, largely because of coordinated naval operations in the region. Despite positive results, pirate attacks continue to trend subtly upward in less-governed maritime regions such as the Gulf of Guinea, and navies remain vigilant about the threat of global piracy. States concur that piracy is largely rooted in the failure of domestic governance institutions, which, in places like Somalia, are still extremely volatile and unstable. As China’s deputy permanent representative to the UN emphasizes, military action can only mitigate the scourge of Somali piracy.

Yet with no nation willing to intervene systematically on land, seaborne mitigation is the order of the day. Piracy threatens to disrupt SLOCs through which 90% of the world’s trade flows, creating major challenges for seafaring states. China is no exception. Antipiracy operations thus represent a critical test for Beijing, not only operationally, but also in terms of policy and symbolism. The economic incentives are perhaps the strongest.

The economic drivers behind the PLAN’s deployment to the GoA and its sustained presence there are inevitable products of China’s “going out” policy. In particular, China’s economy, even more than its military, is increasingly looking to the seas for new growth outlets. That in turn makes the links between SLOC security and the stability of China’s growing “ocean economy” ever more critical.

China’s first ocean economy linkage is energy security. China’s tenth, eleventh and twelfth five-year guidelines (for the years 2001-05, 2006-10 and 2011-15, respectively) emphasized the need to address environmental concerns and diversify energy supplies. More specifically, the plans called for China to boost natural-gas consumption and find new sources of oil to reduce its coal reliance. That would entail a significant increase in both oil and gas imports in the near future, making secure SLOCs even more critical for safeguarding energy supplies to fuel China’s economic growth. Virtually all of China’s transportation runs on oil, with no immediate substitute available. Oil is also irreplaceable as a fuel for the majority of China’s military air and naval assets, not to mention trucks and off-road machinery crucial to economic growth. Since China became a net oil importer in 1993, its oil import dependence has risen steadily to roughly half of its needs at present, with 80 percent of it delivered by sea. In other words, China currently relies on maritime transport for 40 percent of its oil. Domestic estimates project Chinese oil import dependence in 2030 to be between 65-80%. Moreover, China became a net natural-gas importer in 2007, and imports of shipborne liquefied natural gas (LNG) have begun to compete with traditional fuels in coastal China, both for residential use and in the booming shipping industry.

Increases in overall Chinese port traffic constitute the second element of China’s ocean economy. As Ju Chengzhi, Department Head, Department of International Cooperation, Ministry of Transportation (MoT), explains, “China has become a ‘Maritime Shipping Power,’ with a national shipping fleet containing over 3,300 vessels with an aggregate carrying capacity of 84,840,000 tons, ranking fourth in the world.” Ju also stated that in 2009 China relied on maritime shipping for 90% of its international goods trade, and added, “Now Chinese vessels may be seen at ports throughout the world. We have 40,000 crewmen [working] on the oceans. We are also a ‘seafarer power’; the government has a responsibility to protect them.” Port traffic statistics tell a similar story: A 2000 PLAN study estimated that aggregate port throughput would surge from 1.8 billion tons to three billion tons by 2010. By 2009, total throughput had already reached seven billion tons. The numbers suggest that China is here to stay as a maritime commercial power, meaning that piracy and other disruptive seaborne threats have added significance for Chinese maritime planners.

If macroeconomic reliance forces Beijing to emphasize non-traditional maritime security threats, so too does the geographic nature of its SLOC reliance. China not only relies broadly on stable SLOCs; it also depends heavily on sealanes that are some of the world’s busiest and most vulnerable to pirate attacks. Five SLOCs account for 86 percent of China’s foreign trade, the Strait of Malacca being the most important: 80 percent of China’s oil imports pass through it, and over 60 percent of the ships that transit the strait daily are Chinese. Adding to these routes’ strategic importance, 20 percent of China’s imported oil, over 2 percent of its national energy supply, comes from Saudi Arabia. Yemen’s instability following the 2011 Arab Spring uprisings, for example, raises the prospect of a Yemeni collapse and refugee exodus, which could unleash major domestic economic and political consequences for Saudi Arabia and subsequently threaten its oil exports. Perhaps more significantly, an unstable Yemen could “worsen the risk of piracy or terrorist attacks in or near the [Bab al-Mandeb] strait.”

Beyond the ocean economy, piracy has created unprecedented internal and external political challenges for China’s regime. For example, Beijing’s deployment of naval antipiracy forces has satisfied China’s need to demonstrate to domestic and foreign audiences its resolve in protecting overseas interests, while also bolstering its image as a responsible stakeholder. And as Beijing has quickly learned, incidents involving Chinese citizens, companies or military forces abroad offer excellent opportunities to portray China as a responsible stakeholder. Moreover, China’s leadership has, on numerous occasions, discovered that individual pirate attacks on commercial vessels that generate media coverage have a greater impact on Beijing’s domestic and international political image than do abstract statistical trends. As long as pirate threats persist, states like China will be wary of taking public relations risks that carry major economic and political implications. Wei Xueyi, a commander in the sixth escort flotilla, recapitulated the international political angle of PLAN antipiracy missions: “Warships are mobile national territory, the escort flotilla is a name card for China’s image. While carrying out escorts in the Gulf of Aden, we not only need to guarantee the safety of escorted ships, but need even more to display the elegance of the Chinese navy, [and thereby] display an image of China being a responsible power.”

However, non-traditional security contingencies such as piracy present political and public relations challenges that are complex and risky for a cautious Chinese leadership. Specifically, antipiracy operations involve the risk of embarrassing failures at the hands of unprofessional militants. Additionally, the PLAN’s GoA antipiracy mission has exposed inherent tensions between China’s traditional noninterventionist foreign policy and mounting domestic pressure on the Chinese government to protect its citizens and interests overseas within the context of poorly defined international maritime laws and norms concerning piracy. But if failure brings serious repercussions, success breeds inflated expectations. Thus Beijing’s recent antipiracy forays have sparked fundamental debates within China, with some policymakers eager to reap the benefits of the mission and others hesitant to depart from a conservative foreign policy.

Several events underscored the political significance of antipiracy deployments to Beijing. The deployment on December 26, 2008 of China’s first antipiracy flotilla was preceded by several Somali pirate attacks that threatened the lives of Chinese merchant sailors and the profits of Chinese shipping companies, magnifying domestic political pressure to respond. From January to November 2008, according to China’s foreign ministry, of 1,265 Chinese-owned, -cargoed, or -crewed ships transiting Somali waters, seven were pirated. Makeshift measures advocated by MoT, such as evasive maneuvering and deployment of water cannons and improvised explosives, were proving inadequate. While ships operated by China Ocean Shipping (Group) Company managed to avoid being pirated entirely, their model defense measures and all-Chinese teams could not be extended completely to many China-connected ships. In 2009, Ju Chengzhi of the MoT recalled that before China’s initial warship deployment, “when encountering such problems,” namely the pirating of Chinese ships, “we relied primarily on foreign diplomatic channels, coordinating with local governments and the International Maritime Organization (IMO) to seek solutions, but [this] was not very effective.” As attacks mounted, commercial sailors were facing mounting insurance premiums and re-routing costs, not to mention riskier journeys without guaranteed protection. Shipping companies became obligated to provide sailors extra incentives, as stipulated in collective bargaining contracts negotiated with the Hong Kong Seamen’s Union. For instance, sailors crewing Hong Kong-registered ships that transiting high-risk waters such as the Gulf of Aden were entitled to doubled salaries and injury reimbursements during each day they spent there. Roughly one thousand Hong Kong-registered vessels and foreign-registered vessels owned by Hong Kong shipowners were covered by these contracts. In “high-risk areas,” if a shipping company chose a route that would divert its vessel from internationally designated safety corridors in the Gulf of Aden, sailors were entitled to disembark beforehand, and the company would be responsible for covering the cost of their travel fees. Effectively addressing the surging piracy problem clearly required not uncoordinated stopgaps but decisive, comprehensive action from Beijing.

Internationally, China’s announcement that it would dispatch an escort flotilla to the Horn of Africa came as a surprise to few, particularly since several other nations had already undertaken, or were preparing to undertake, similar actions. For example, Russia, NATO countries and India had already announced antipiracy deployments. Of course, Chinese naval officials were extremely cautious in announcing the PLAN antipiracy mission, stipulating that it would protect specifically commercial vessels from mainland China, Hong Kong, Macau and Taiwan, the only addition being “ships of international organizations [such as the UN World Food Program] that are carrying humanitarian supplies to Somalia.” This posture conveniently allowed China to end its status as the only permanent United Nations Security Council (UNSC) member not contributing to global maritime security and thereby to enhance its international resume as a responsible stakeholder.

As its ocean economy and international role expand, China will increasingly encounter security challenges that create different types of costs, depending on whether and how Beijing chooses to address them. Modern piracy is one of the first of many challenges that will require Beijing to step outside its foreign policy comfort zone. This is because nontraditional security threats demand a multidimensional calculus for which China’s previous static foreign policy approaches have proven progressively inadequate. The GoA experience is positive because it not only reflects China’s understanding of this development, but its realization that more often than not China and its partners in the maritime commons are “in the same boat.”

This article draws on the authors’ monograph “No Substitute for Experience: Chinese Anti-Piracy Operations in the Gulf of Aden,” Naval War College China Maritime Study 10 (forthcoming 2013). It reflects solely their personal views.