CPEC between China and the Gulf: Logistical Precarity, Contentious Politics, and Energy Transition
China is the world’s largest exporter and second largest importer of products, after the United States, which means that its economic wellbeing is heavily dependent on the smooth physical movement of goods and materials around the world. At a 2003 economic work conference of the Chinese Communist Party, in the first year of a decade-long presidency in which China’s GDP rose from $1.68 trillion to $9.74 trillion, China’s then-President Hu Jintao raised the issue of a Malacca Dilemma: a possible strategic weak point in Chinese economic and geopolitical planning. The Dilemma, named after the narrow corridor between Peninsular Malaysia and the Indonesian island of Sumatra through which nearly 24% of global seaborne trade passed (as of 2023), referred to concerns about the safe passage of ships carrying Chinese imports and exports through the Malacca Strait between the Indian Ocean and the South China Sea.
While debates persist about the credibility of the threat posed by the Malacca Dilemma to China, Hu’s uncharacteristically open discussion of a key vulnerability in the logistics of Chinese economic power certainly played a role in prompting the development of China’s Belt and Road Initiative (BRI) a decade later. One of the most ambitious and crucial cornerstones of the BRI is the China-Pakistan Economic Corridor (CPEC) – a series of special economic zones and infrastructure projects that grant China access to the Indian Ocean by connecting logistics nodes in mainland China with seaports in Gwadar and Karachi. Not only does the Corridor allow Chinese trade with the Gulf, Africa, and Europe to completely bypass the Malacca Strait, but it would also reduce transit times as well.
After a nearly a decade of start-stop progress in realising CPEC, the Pakistan-China Institute reported in 2024 that Pakistan’s National Logistics Corporation (NLC) had began carrying Chinese goods destined for the United Arab Emirates through CPEC infrastructure via Pakistan’s dry port in Sost, Gilgit-Baltistan and its seaport in Karachi. While it would normally take around 30 days for goods travelling from China through the Malacca Strait to reach Dubai, the new route through Sost and Karachi only takes 10.
In addition to moving Chinese goods more quickly, the possibility of more swift transit routes to and from the Gulf also remedies another key concern of the Malacca Dilemma, which is that 80% of Chinese oil imports currently pass through the Strait, and 60% of those imports come from the Gulf. Given that the energy requirements of China’s massive manufacturing base are heavily serviced by these oil imports from the Gulf, it is critical to spotlight another dilemma that has come to prominence in recent months: a Hormuz Dilemma. Unlike the hypothetical risks posed by the Malacca Dilemma, the risks posed by a Hormuz Dilemma are empirical, evidenced by the skyrocketing of global oil prices as an immediate result of the 2026 American and Israeli aggression on Iran.
In addition to the sharp increase in the price of oil and fertilisers, the war exposed the precarity of taking passage through the Strait of Hormuz for granted as if it were not a major chokepoint in global shipping logistics. A key feature of the American-Israeli campaign against Iran has been the Trump regime’s constantly shifting objectives: starting from the question of nuclear weapons, moving towards the matter of regime change, to eventually the opening of the Strait – a problem that did not exist prior to the onset of American and Israeli aggression.
China’s response to the disruptions caused by the weaponisation of Hormuz largely focused on pragmatic diplomacy rather than direct intervention, despite its strong economic and political ties with Iran. Instead of drawing itself into confronting the United States, China threw its diplomatic heft behind Pakistani efforts to mediate de-escalation. A key dynamic to note here is that Iranian retaliation to the American-Israeli attacks has targeted logistical facilities that bypass the Hormuz chokepoint through land connections, thereby undermining efforts at re-orienting trade around Hormuz and further demonstrating the fragility of a world economy that relies so heavily on the movement of goods through and across the Gulf in general.
One of the beneficiaries of this blockading of the gates of the Gulf, whether direct or indirect, has been the Gwadar Port, a key CPEC node physically situated in Balochistan and operated by the China Overseas Port Holding Company. It has become the most popular places to dock and store goods until such a time as the war ceases to cloud the future of the Strait, thereby realising some of the potential that prompted China to invest tens of billions of dollars into its development.
The uncertainty over both the present and future operations of the Chabahar Port, around 210km up the coast from Gwadar on the Iranian side of the border that bifurcates Balochistan, only increases Chinese and Pakistani leverage over the logistics of international trade in the Arabian Sea. India, who had envisioned Chabahar as being a crucial means of circumventing Pakistan in accessing Central Asia, had lost the exemption granted to it by the United States to invest in the Port as part of an expanded regime of sanctions on Iran in early 2026, prior to the outbreak of war.
Even in the case where eventual resolution of the current war returns the Strait to previous operational arrangements, whereby no state sees to the tolling, blockading, or threatening travel through it, the Strait’s precarity has been exposed and the precedent of its weaponisation established. Alongside ecological concerns, Hormuz’s precarity also prompts more direct Chinese engagement with the green transition away from Gulf oil and gas to secure its long-term energy security.
To this end, China has already proven itself to be a major player in the production of solar technology as well as in the extraction and processing of the critical minerals so crucial to the green energy transition. China is, in fact, the world’s leading refiner of 19 out of 20 critical minerals with an average of 70% market share, according to the International Energy Agency (IEA). China’s investments in Pakistan as part of the wider CPEC project also include several projects aimed at critical mineral extraction and energy diversification, including solar and wind energy generation facilities.
Both China’s energy- and logistics-related investments in Pakistan are not without complication, however. A crucial consideration is that many of these investments are in Balochistan, a region in which Pakistan’s own rule is contentious. Both civil society organisations and armed outfits in Balochistan regard foreign-backed projects as a form of exploitation and extraction, in addition to playing a key role in entrenching Pakistani colonial rule. Similarly, the role played by the dry port in Sost, Gilgit-Baltistan in CPEC, exposes Chinese investment to another region in which dissatisfaction with Pakistani rule complicates efforts at sustainably circumventing the Strait of Malacca through Pakistan.
The current geopolitical shifts in the wider West Asia region, extending into Pakistan, bring two key challenges to the fore regarding China’s engagement with the region and its role in Chinese economic planning. In seeking to bypass the chokepoint at the Malacca Strait, China’s BRI has also run into complications with the more precarious Hormuz Strait as a result of American interests in the region. Although the American-Israeli war on Iran has boosted the importance of the China-operated Gwadar Port in the short-term, the precedent the war has established in relation to consequences on trans-Hormuz movement poses long-term questions over the viability of relying on Hormuz for the movement of goods, materials, and energy resources. In reference to the latter, China’s use of the BRI and related investments to gain access to critical minerals and the resources to transition away from trans-Hormuz oil and gas shipments bring a different kind of precarity to the fore – namely, the long-term sustainability of China relying on controlling such resources, and the forging of new trade routes, in places of contentious sovereignty, as is the case for Pakistan in Balochistan and Gilgit-Baltistan.