Chinese megaproject:- While Myanmar’s rebel forces battle the military for control of a key border town in the east, another armed group has been closing in on a Chinese-funded oil and gas terminal in the west that could prove an even bigger prize.

Since breaking off a cease-fire in November with the military regime that seized control of Myanmar in a 2021 coup, the Arakan Army has made steady battlefield gains across northern Rakhine state, also known as Arakan, in the country’s far west.

“The AA has been extremely effective in winning a dominant position over most of the theater, although not all of it,” said Morgan Michaels, who runs the Myanmar Conflict Map at the London-based International Institute for Strategic Studies, which is keeping close track of the fighting.

The Arakan Army and local media say the group now controls eight of Rakhine’s 17 townships and one more in the neighboring state of Chin.

Michaels, whose research includes verifying those reports, said the military still appears to control a few pockets in some of the townships the Arakan Army has overrun.

“But the key point is that they have dismantled the interlocking defenses of the regime. And so even if there is some regime outpost left, they can just circumnavigate it, so they have freedom of movement in these places,” he said. “They can establish their administration, so they’re the dominant player there.”

The Arakan Army is also on the offensive in three more townships including Ann, where the military bases its Western Command, and says it has been closing in on both the state capital of Sittwe and the port town of Kyaukphyu.

Arakan Army spokespoerson Khine Thu Kha told VOA Thursday the group was preparing to take both towns soon.

“We have surrounded Sittwe and Kyaukphyu,” he said. “Our objective is to regain all our ancestral lands. That means the whole Arakan.”

A spokesman for the junta could not be reached for comment.

Formed in 2009, the Arakan Army has quickly grown into one of Myanmar’s most powerful ethnic minority rebel groups. It aims to establish its own government over Rakhine, which once made up most of the former Kingdom of Arakan. Since 2021, it has been among the established rebel groups that have allied with a new crop of local militias seeking to oust the military regime.

The Arakan Army was also a key player in a major rebel offensive in the northeast of Myanmar late last year. Dubbed Operation 1027, it handed the junta its worst string of defeats since the putsch.

If the junta were to also lose Sittwe in the west, it would be the first state capital to fall to the resistance and make for a humiliating symbolic defeat but not a very strategic one, said Min Zaw Oo, who runs the Myanmar Institute for Peace and Security, a think tank that has also been tracking the conflict in Rakhine.

Losing Kyaukphyu, on the other hand, would hit the junta hard strategically and financially, said Min Zaw Oo, who is also an adjunct fellow at the Center for Strategic and International Studies in Washington.

He said Kyaukphyu, which hugs Rakhine’s Bay of Bengal coast, hosts a military radar station and a major naval base with “significant value both militarily and monetarily.”

Kyaukphyu is best known, though, for its billions of dollars’ worth of investment projects backed by Beijing, including the terminus of twin oil and gas pipelines that run from the coast across Myanmar to China’s landlocked Yunnan province. A deep-water port and special economic zone are also in the works.

The route — part of Beijing’s Belt and Road Initiative — gives China a way to import oil and gas that avoids the Malacca Strait between Malaysia and Indonesia, a potential chokepoint if a conflict were to break out between China and the United States.

Additionally, the pipelines are a vital part of Myanmar’s oil and gas industry, the military regime’s main source of revenue.

Should the junta fail to hold Kyaukphyu, Michaels said, “they would lose access to the pipeline terminus, so this has economic and also diplomatic implications for its relationship with China if it doesn’t control this major asset. So, in that sense it would be quite a significant loss for the regime.”

Min Zaw Oo said the oil and gas industry may be bringing in as much as a fifth of the heavily sanctioned regime’s current earnings and that Kyaukphyu’s loss would be “a huge hit,” possibly “worse than Myawaddy.”

The town of Myawaddy sits on eastern Myanmar’s border with Thailand, straddling the main trade route connecting the two countries, and earns the junta valuable tax revenue off the roughly $1 billion in annual trade that passes through. The Karen National Liberation Army, another ethnic minority rebel group, appeared to take control of the town earlier this month before pulling back in the face of a counteroffensive by the military and allied militias.

Given Kyaukphyu’s importance to China, Michaels and Min Zaw Oo say Beijing will likely be putting pressure on the junta and the Arakan Army to agree to a new cease-fire or truce at least around its projects there, possibly one that leaves the junta in charge of the port and splitting the profits with the rebels.

China is the junta’s main weapons supplier, along with Russia, and it is widely believed to be a major source of arms, ammunition and other vital supplies for some of the country’s ethnic minority rebels, including the Arakan Army.

“It’s very likely that Chine will not be happy if there’s fighting in Kyaukphyu, so they may have already communicated [this] to the Arakan Army,” said Min Zaw Oo, noting that there has been relatively little fighting around the port town itself.

Khine Thu Kha would not tell VOA what, if any, talks the Arakan Army has had with China about its Rakhine projects but insisted that the group’s policy was to protect all foreign investments across the state.

The Chinese Foreign Affairs Ministry and the Chinese Embassy in Myanmar did not reply to VOA’s requests for comment. VOA/SP