Myanmar's Oil Pipeline Faces Dual Crisis from Conflict and Blockade

An oil pipeline carrying imported crude from Myanmar to China is facing a two-front crisis: armed conflict at home and a maritime blockade overseas. The pipeline is connected to a crude oil terminal built to accommodate large tankers transporting fuel from the Middle East. Earlier this year, artillery shells and other munitions reportedly landed in the port town of Kyaukphyu, a few miles from the pipeline and fuel storage tanks. The Myanmar military’s frequent clashes with the Arakan Army, an insurgent group that now controls 90 percent of Rakhine State, pose a threat to China-funded energy projects in the region. A slowdown in tanker traffic from the Persian Gulf has further dented the pipeline’s capacity to supply oil to China’s western provinces. Maritime data firm Kpler reports that China’s oil imports, including deliveries from the Myanmar pipeline, were expected to fall to 6.78 million barrels per day for May, the “lowest level in almost a decade.” Myanmar’s military currently controls only three coastal towns in Rakhine State. The Arakan Army (AA) won pivotal victories in December 2024, when its troops captured the military’s western command headquarters and took control of the 270-kilometer border with Bangladesh. The Arakan Army’s rapid consolidation of territory has “generated unease” in Beijing about the security of China-Myanmar projects in Rakhine State. In February, a power plant connected to the Kyaukphyu Special Economic Zone (SEZ) was dismantled for relocation. Residents told Burma News International that the plant was being taken apart as quickly as possible to avoid damage in the fighting. In February 2025, Myanmar’s State Administration Council passed a law permitting foreign private security firms to operate in the country. The legislation was reportedly passed to give China-affiliated ventures the option of reinforcing security arrangements at conflict-prone locations. In June, Myanmar’s president was invited to Beijing for a state visit. Chinese President Xi Jinping hinted at the unrest in Rakhine State, urging the former army chief to “find a correct path of development that suits . . . national conditions.” A joint statement glossed over the insurgency, focusing instead on “shared prosperity” through “timely implementation” of the China-Myanmar Economic Corridor. Three infrastructure projects were singled out as priority items: the Kyaukphyu Deep-Sea Port, the Muse-Mandalay Railway and the China-Myanmar oil and gas pipelines. The Kyaukphyu SEZ, which includes the oil terminal and pipeline on Maday Island, is a dependable revenue source for the state-owned Myanma Oil and Gas Enterprise. The June 2025 deadline for completion of the project has passed, and satellite photos show limited activity at the main site. China has pursued a “dual-track” approach, engaging with both the Myanmar military as well as the AA. Beijing has come to terms with the AA’s control over Rakhine State and, in a “delicate balancing act,” attempts to restrain both sides from derailing China’s projects. Once a flagship Belt and Road project designed to open China’s landlocked western states to a wider market, the Kyaukphyu SEZ has turned into a de facto war zone.