Gawadar Port and Sino-Pak Relations

Topic: – Gwadar Port and Sino-Pak relations. Table of Contents:- a . Introduction b . Background c . Historical Location Chapter #1 a. Pakistan China relations b. Strategic Cooperation c. Economic Forecast Chapter # 2 a. Geographical Importance b. Advantages of Gwadar Port Chapter #3 a. China’s Involvement in Gwadar project b. China’s Gain Chapter #4 a. Gwadar port as development Project b. Construction c. Port Operation Conclusion [1] Introduction :- Gwadar port is located at Gwadar city at the entrance of the Persian Gulf on Arabian Sea and about 460 km west of Karachi from Balochistan , Pakistan .

Gwadar port , is a deep –sea warm water port ,being constructed in two phases with heavy investment from china . Gwadar has had huge geostrategic significance on my accounts. In 1993 ,Pakistan started technical and financial feasibilities for the development of Gwadar port . The Gwadar port project started on 22 March 2002a. The first phase has been completed but officials expect the port’s initial three berths to be operational in the later months of 2007 . Gawadar port was inaugurated on March 19,2007 . Gawadar port is Pakistan’s first deep port that has the capacity to serve virtually all sorts of cargo ships of any size.

Background :- Gwadar is located on the southwestern coast of Pakistan,close to on the persain Gulf. More than 13 million of oil pass through the strait . It is strategically located between three increasingly important regions : the oil –rich Middle East, heavily populated south Asia and the economically emerging and resource –loaded region of central Asia . The Gwadar port is expected to generate billions of dollars in revenues and create at least 2 million jobs. In 2007 the government of Pakistan handed over port operations to PSA Singapore for 25 years,and gave it the status of a Tax Free Port for the following 40 years . Historical Location :- The Makran region surrounding Gwadar by ancient Bronze age people which settled in the few oases . It later became the Gedrosia region of the Achaemenid Persian empire . It later became the Gedrosia region empire . It is believed to have been conquered by the founder of the Persian empire ,Cyrus the Great. During the home ward march of Alexander the great ,his admiral ,Nearchus,led a fleet along the modern –day Makran coast and recorded that the area was dry , mountainous, and inhabited by the Ichthyophagoi an Greek rendering of the Persian “Mahi Khoran ’’( which has itself become the modern word “ Makran” ).

After the collapse of Alexander’s empire the area was ruled by Seleucus Nicator ,one Of Alexander’s generals . The region then came under “ local rule ” around about 303 BC and the region remained on the sidelines of history for a millennium ,until the Arab – Muslim army of Muhammad bin Qasim captured the town of Gwadar in AD 711 and over the intervening amount of time the area was countested by various powers , including the Mughals the safavids.

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Portugese explorers captured and sacked gwadar in the late 16th century and this was then followed by almost two centuries of local rule by the various Balochi tribes . In 1783 , the Khan of Kalat granted suzerainty over Gwadar to Taimur Sultan , the defeated ruler of Muscat . This governor was then ordered to control the nearby coastal town of chah Bahar ,where the Gwadar fort was built during Omani rule. In 1958 , the Gwadar farm was transferred to Pakistan . It was then made part of the Balochistan province in 2002 , the Gwadar project was begun in the town .

The government of Pakistan intends to develop the entire area in order to reduce its reliance in shipping on the port of Karachi . In addition to expanding port facilities , the projects aims to build industrial complexes in the area and to connect the town via a modern highway to the rest of Pakistan . By the end of 2004 the first phase had been completed . [2] Chapter # 1 Pakistan – China Relations on Gwadar Port :- Gwadar Port & Karakoram Highway scheduled to be inaugurated on 30th June 2006, . fter the Chinese agreed to provide $ 198 million of the $248 million required for phase 1 of the 26th project. Here is important to note that in the beginning china was not ready to hold this project but finally agreed to fund it provided that it had “ Sovereign guarantees to the port facilities” . Just 250 miles from the state of Hormuz ,through which nearly 40 % of the world’s oil supplies flow, the port is strategically located to serve as a key shipping point in the region .

It is of the great strategic value as it augments Pakistan’s imports in the region ,while allowing china to expand and secure its crude oil import routes and simultaneously gain approach to the Persian Gulf . According to MOU signed between China and Pakistan ,China is also to built a 90 km link connecting the Chinese side of Karakoram highway to the Russian built highway network that connects all the five Central Asian Republics . This regional highway network will directly Gwadar to Xinjiang and the landlocked Central Asian 28 Republics .

The Karakoram highway and the coastal highway will both serve as vital trade routes and considering that the existing Karakoram highway already connects Western China to Pakistan ,any further expansion of the line along with prospective linkages to Gwadar road would make it the shortest and most viable route connecting Gwadar 29 to western china . This shows china’s attempt to exert its influence far beyond its borders to sustain its security interest ,as well as merge its friendship with Pakistan through large scale joint projects. Through the construction of the Gwadar port ,Beijing also will gain considerable influence in the region . giving it a strategic entrance to the Arabian Sea and the Indian Ocean, while allowing it to closely monitor US naval activity and US – Indian maritime cooperation . The doubtlessly is a cause for alarm and unease to both India and US as the port will enable China to monitor its energy shipments from the Persian Gulf. American suspicion of Chinese intentions at Gwadar is corroborated by an internal report prepared for the Pentagon entitled Energy futures in Asia Which states that Beijing has already has set up electronic eavesdropping posts at Gwadar which monitor ship traffic through the Strait of Hormuz and the 30 Arabian Sea .

In addition , the port and the other supporting infrastructure will help mix Pakistan in to the Chinese economy by out sourcing low tech ,basic production and manufacturing jobs , making it into a giant factory floor for China . Having invested $400 million in the project , the port will be available for Chinese imports and export through overland links that stretch across the Karakoram 31 Highway . For Pakistan as well ,the benefits are profound ,where to quote President Musharraf , “ as and when needed the Chinese navy could be in Gwadar to 32 give befitting replies to every one . This statement was further reinforced by Pakistan’s recent designation of the port area as “ a sensitive defense area” . Gwadar would inhibit India’s ability to blockade Pakistan , and permit China to supply Pakistan by land and sea during wartime . Essentially , Pakistan is interested in the project to gain strategic leverage so that it is less vulnerable to the dominant Indian navy . The construction of the port and the highway, by making Pakistan a regional trade –hub for commercial traffic ,will also boost domestic economic development ,and influence the geo – strategic environment of the region .

The port will enable the transfer of Central Asia’s vast energy resources to world markets , earning Pakistan significant profits in transits fees, as well as attract considerable investment into Balochistan . In addition , discussions are already underway to designate the Gwadar port as a free trade ,while some members of the Pakistani business community advocate the eventual designation of the Gwadar port as an export processing zone with special incentives extended to Chinese companies .

Moreover ,the opening of international trade through Gwadar can create new stakeholders in Afghanistan who will become beneficiaries of the transportation trade to Central Asia . Gwadar thus presents a good opportunity for fostering good neighborly relations between Pakistan and the region to its immediate northwest . However, the success of the port and ,in general ,the effectiveness of the agreements signed between the two nations will depend essentially on internal development in Pakistan. [3] Strategic co-operation:-

Gwadar is the height of Sino-Pakistani strategic cooperation . It is a modern port city that is supposed to link Central Asia, western china, and Pakistan with markets in Mildest and Africa . It’s supposed to have roads stretching all the way to China. Some reports in the American media , however , have accused Pakistan and China of building a naval base in the guise of a commercial seaport directly overlooking international oil shipping lanes . The Indians and some other regional actors are also not comfortable with this project because they see it as commercial competition.

What Mr. Bugti’s regional and international supporters never expected is Pakistan moving firmly and strongly to nip his rebellion in the bud. Even Mr . Bugti himself probably never expected the Pakistani state to react in the way it did to his betrayal of the homeland . He was killed in a military operation where scores of his armed force surrendered to Pakistan army soldiers . US intelligence and their Indian advisors could not cultivate an immediate replacement for Mr Bugti . So they moved to plan B.

They supported Abdullah Mehsud, a Pakistani Taliban fighter held for five years in Guantanamo Bay, and then handed over back to the Afghan government, only to return to his homeland, Pakistan, to kidnap two Chinese engineers working in Balochistan, one of whom was killed during rescue operations by the Pakistani government . Islamabad could not tolerate this vague figure , who was creating a following among ordinary Pakistanis camouflaged as a Taliban while in reality towing a vague agenda . He was rightly eliminated earlier this year by Pakistani security forces while secretly returning from Afghanistan after meeting his handlers there. 4] Economic Forecast :- The government declared port a “ Special zone” in the budget ,2003-2004 . All banks will open their branches ,five star hotels will be built ,offshore banking will be started ,factories, warehouses, and storage will be set up ,the tourism industry will be promoted in the area ,an export processing zone will be set up , making Pakistan a very attractive place for direct foreign investment ,and Gwadar port a regional hub of trade and investment activities. Chapter# 2 Geopolitical Importance: The Gwadar port is emerging as a place of great strategic value.

It is enhancing Pakistan’s importance in the whole region. It is extending from the Persian Gulf through the Indian Ocean to South Asia and the Far East. Gwadar is located on the Southwestern coast of Pakistan. It is very close to the important Straits of Hormuz, through which more than 13 million bbl of oil passes. It is strategically located between three increasingly important regions of the world: heavily populated South Asia, the oil rich Middle East and the economically emerging and resource rich Central Asia. The construction of The Gwadar deep sea port is just one part f a larger development plan which includes building a network of roads connecting Gwadar with the rest of Pakistan, such as the 650 km Coastal Highway to Karachi and The Gwadar-Turbat road(188 km). This network of roads connects Pakistan with China through the Indus Highway. China, Kazakhstan, Kyrgyzstan, Pakistan and Uzbekistan are developing extensive rail and road links from Central Asia and the Chinese province of Xinjiang to the Arabian Sea Coast. The Pakistani Government has initiated several projects with china’s technical and financial assistance.

These projects are inaugurated to develop Gwadar’s strategic location as a good transit and trade point. The primary project is the construction of deep sea port at Gwadar, which would enable high –volume cargo movement to and from the landlocked Central Asian States. The new port will also include conversion facilities to allow for the movement of natural gas as a part of plans for the termination point for the Turkmenistan-Afghanistan-Pakistan natural gas pipeline. The secondary project is coastal highway which is connecting Gwadar to Karachi.

Its cost, $200 million will be completely financed by Chinese. Gwadar will serve as a port of entry for gas and oil to be transported by land to Western regions of China. The significance of Gwadar port is great to both, Pakistan and China. In near future Pakistan will be able to make strong strategic plans because in past Indian navy made it very difficult for Pakistan navy base at southwest Karachi. China is going to be recipient of Gwadar’s most accessible international trade routes to the Central Asian republics and Xiajiang.

Beijing can receive cargo to and from Gwadar through shortest route, Karachi to Peshawar, by extending its East West Railway from the Chinese border city of Kashi to Peshawar in Pakistan’s North West. To supply oil from the Persian Gulf to Xiajiang, the rail network could also be. Internal rail network of Pakistan can also provide china with rail access to Iran. Rail access will however be hampered somewhat by difference in gauge: Pakistan-1676; Central Asia-1524mm; China and Iran-1435mm. Advantages of Gwadar Port:

Gwadar is located on the Gulf of Oman which is close to the entrance of Persian Gulf. It is about 460 km west of Karachi. Pakistan started feasibility studies for the development of a major deepwater sea port at Gwadar in 1993. The port project began on 22 March 2002. Its first phase completed in December 2005. The construction of the port has prompted other major infrastructure projects in area. This includes the 700 km Makran Coastal highway which is now complete. The road links Karachi with several ports along the coast including Pasni, Ormara and Gwadar.

It will be extended to Iranian border in future. The Highway has reduced travel time to Karachi from 48 hrs to only 7 hrs. Other road projects include the Gwadar-Quette-Chaman road which is completed now, and a road link to the town of Khuzdar in Eastern Balochistan. There are plans for a terminal for passenger ships. The Civil Aviation Authority of Pakistan has embarked 3000 acres of land for Gwadar International Airport . It will be built 26 km away to the northeast of existing airport towards Pasni. Its cost approximation is between $200-250 million.

The new airport would be given International status. It will operate under open sky policy. There are also plans to improve facilities at the existing airport. Railways: In 2005, Minister of Railway said,” The government is focusing on laying the Havelin-Kashghar (China) and Quetta-Kandahar (Afghanistan) railway tracks”. In 2006. Minister of railway announced that Gwadar will be connected to Pakistan Railway network at an expected cost of $1. 25 billion (Rs. 75 billion)[5] Chapter# 3 China’s Involvement in the Gwadar port: Chinese Premier Wen Jiabao inaugurated the Gwadar deep sea port.

Through which china would be able to take a Giant Leap Forward in gaining a foothold in the Persian Gulf region. It will advance what a recent Pentagon report describes as Beijing’s “String of Pearls” strategy that aims to protect China’s energy security at home and project Chinese power overseas. Gwadar is a fishing village on the Arabian Sea Coast in Pakistani province of Balochistan. Balochistan shares border with Iran and Afghanistan to the west. Gwadar is just 72km from Iranian border. The important thing is Gwadar’s closeness to the Persian Gulf.

It is situated near the entrance of this strategic body of water, and about 400 km from the Strait of Hormaz, a major channel for global oil supplies. Pakistan identified Gwadar as a port site in 1964. But significant steps toward making the proposal a reality were taken in 2001, when China agreed to participate I n the construction and development of Gwadar deep sea port. The arrival of United States in Afghanistan in 2001, at China’s doorstep encouraged Beijing to step up its involvement in the Gwadar project. Chinese vice premier Wu Bangguo laid the foundation for Gwadar port in March 2002.

China’s involvement in the project is immense. The total cost of the project is estimated US$1. 16 billion, of which China has contributed about $198 million for the first phase, almost four times the amount Pakistan has invested for this phase, which include of three multi-purpose ship berths. China has invested $200 million for building a highway, which connects Gwadar port with Pakistan’s largest city, Karachi (an other sea port on the Arabian Sea). The second phase which may include nine more berths, an approach channel and storage terminal, will also be financed by China.

Beside its financial help China has sent 450 engineers and provided technical expertise for the project. In recent year, bilateral trade has steadily increased between China and Pakistan. Both countries have highlighted the immense economic returns that development of Gwadar port holds out for them, as well as others in the region. China’s Gains:- Zia Haider, an analyst at the Washington-based Stimson Center, writes that Gwadar provides China “a transit terminal for crude-oil imports from Iran and Africa to China’s Xinjiang region”.

The network of road and rail connecting Pakistan with Afghanistan and Central Asian republics that is envisaged as part of the Gwadar project and to which China will have access would provide Beijing an opening into Central Asian markets and energy sources, in the process stimulating the economic development of China’s backward Xinjiang region”. [6] For China, Gwadar’s strategic value is because of its closeness to the Strait of Hormuz. About 60% of China’s energy supplies come from the Middle East.

China has been anxious that the US, due to its high presence in region, could stop these supplies. “Having no blue water navy to speak of, China feels defenseless in the Persian Gulf against any hostile action to choke off its energy supplies,” points out Tarique Niazi, a specialist in resource based conflicts, in the Jamestown Foundation’s China Brief. [7] A presence in Gwadar provides China with a “listening post” where it can monitor US naval activity in the Persian Gulf, Indian activity in the Arabian Sea.

A recent report titled “Energy Futures in Asia” produced by defense contractor Booz Allen Hamilton for the Pentagon notes that China has already setup electronic eavesdropping posts at Gwadar, which are monitoring maritime traffic through the Strait of Hormuz and the Arabian Sea. Drawing attention to China’s “string of pearls” strategy, the reports point out that “China is building strategic relationships along the sea lanes from the Middle East to South China Sea in ways that suggest defensive and offensive positioning to protect China’s energy interests, but also to serve broad security objectives”. 8] The port and naval base in Gwadar is part of “string of pearls”. The other “pearls” in the string include facilities in Bangladesh, Myanmar, Thailand, Cambodia and South China Sea that Beijing has acquired access to by diligently building ties with governments in these countries. The Pentagon report sees China’s efforts to defend its interests along oil shipping sea lanes as “creating a climate of uncertainty” and threatening “the safety of all ships on the high seas”. This perception neglects the fact that China’s “string of pearls” strategy has been prompted by its sense of insecurity.

The United States irresistible presence in the Gulf and the control of its exercises over the Malacca Strait, through which 80% of China’s oil imports pass, has added enormously to Beijing’s fears that Washington could stop its oil supply, in the event of hostilities over Taiwan. China’s foothold in the Arabian Sea has set off alarm bells in India, Iran and US. For India, China-Pakistan collaboration at Gwadar and China’s presence in the Arabian sea intensifies its feeling of hold by China from all sides.

Iran sees the development of Gwadar port in its neighborhood as likely to grind down the significance of its ports, especially Chabahar port that India has helped to construct-to central Asia and Afghanistan. However, Iran’s good relations with Central Asian Republics and Afghanistan would help it to maintain its advantage Pakistan’s Gwadar port. Ultimately, the extents to which Pakistan and China are able to reap economic and strategic gains from Gwadar project depend on the challenges to it from within their borders.

Chapter# 4 Development Projects: Oman: Oman has offered $100 million aid for the development of social and infrastructure facilities in Balochistan. Out of $100 million, Oman has provided $7 million for extending of runway at Gwadar Airport, construction of jetties, up gradation of Gwadar Hospital and construction of power house. Oman is also financing construction of Gwadar Hoshab Road, water supply scheme in Gwadar area and construction of irrigation dams.

Pakistan and Oman have signed a number of agreements which include Avoidance of Double Taxation, Promotion and Protection of Investment, Cultural, Educational and Technical Co-operation, Agreement on cooperation between Oman Chamber of Commerce and Industry and FPCCI, Maritime Boundary Agreement and Agreement to establish Pak-Oman Joint Investment Company. The closeness to Oman is an advantage to Pakistan. Around 70,000 Pakistani citizens are participating in the development of Oman. Omani assistance for construction of Gwadar port is going a long way in promoting economic relations between Gwadar-Pakistan and Central Asian States. 9] Pakistan: Pakistan is linking Gwadar with Karachi through networking of roads. It’s also enabling Central Asian States in north, to use Gwadar as a port for their trade. Water supply is being improved, seven jetties are being constructed and local fishermen are being given motor engine run boats. The local hospital is also upgraded. A number of electric power generation projects are also being carried out in Gwadar and its surroundings. The Quetta Electric Supply Company (QESCO), a subsidiary of Wapda, has geared up the work for the building the power transmission line.

It is expected to be completed soon. Airport: Gwadar has a small airport which is basically meant for Fokker aircraft. But the need is to expand this airport and enlarge its runway to facilitate the landing of wide body aero-planes. CAA has upgraded the Gwadar Airport for the landing of Airbuses. Gwadar airport is open air and after its inauguration the jet planes are also landing at it. A sum of 2. 3 million dollars is being utilized from Omani grant. The Pakistan government and the Civil Aviation Authority are also contributing Rs563. 35 million for this purpose.

Dry Port: China wants to set up a dry port near the Pakistan-China border, so that Western China could also benefit from Gwadar seaport. It will create the ribbons of economic activity and hundreds of new jobs along proposed highway linking Gwadar with the Karakoram highway in the north. Construction: Dubai ports World, announced on June 1, 2006 that it will spend $10 billion to develop transport infrastructure and real estate in Pakistan. Dubai port World is also discussing the possibility of the company taking over operational management of Gwadar port in Balochistan.

Emaar Prosperities, announced on May 31, 2006 there real estate developments in the cities of Islamabad and Karachi in Pakistan. The projects, with a total investment of $2. 4 billions, will include a series of master planned communities that will set new benchmarks in commercial, residential and retail property within Pakistan. In addition the conglomerate signed a exceptional $43 billion deal to develop two island resorts, Bundal Island and Buddo Island, over the next decade. Port Operations:

Port of Singapore took over the management of Gwadar port by the end of January 2007. Port of Singapore was the highest bidder for the Gwadar port after Dubai Ports world backed out of the bidding process. Originally, the chairman of DP world, Sultan Ahmad bin Sulayem, who met President Pervez Musharraf on May 5th 2006, expressed a strong hope for the management of facilities at the strategic Gwadar deep-sea port and development of infrastructure in the southern port city everywhere in Pakistan. But a decision was taken not to bid, when India’s Security Council voiced concerns bout DP World’s projects in India, alongside its plan in Pakistan, and Sultan Ahmad bin Sulayem assured the Indians their pull out was well considered and Indian need not have any security concerns. The port will now be in competition with Dubai. Conclusion: The project of Gwadar port which was commenced on 22 March 2002, by China will enhance co-operation between Pakistan and China in the field of engeering and technology. The significance of this project is great for both countries. Gwadar is located on the Gulf of Oman close to the entrance of Persian Gulf.

China is going to be the beneficiary of Gwadar’s most accessible international trade routes to Central Asian Republics and Xinjiang. Pakistan’s rail network can also provide China with rail access to Iran. For Pakistan, the economic returns from Gwadar port stem from its location near the Strait of Hormuz, through which 40% of the world oil passes. Gwadar could emerge as a key shipping point, bringing Pakistan desirable income, and when combined with the surrounding areas could become a trade hub, once rail and road links connect it to the rest of Pakistan, Afghanistan and Central Asia.

A road from Gwadar to Saindak is the shortest route between Central Asia and sea. Gwadar would provide landlocked Afghanistan and the Central Asian republics with access to sea. Goods, oil and gas reserves from these countries could be shipped to global markets through Gwadar port. The development of Gwadar could bring economic gains to backward Balochistan. The infrastructure development of the province could make it an attractive investment destination. Bibliography: 1) Stefan Helders, World Gazetteer. “Gwadar”. 2) Daily Times. Gwadar deep seaport to generate two million jobs”. 3) Khaleeq Kiani, “Dawn. 40-year tax relief for Gwadar port operators”. 4) Jona Lendering, Livius. org. “Gedrosia”.. 5) Dott. Beatrice Nicolini, Oman Studies Centre. “International trade networks: The Omani Encalve of Gwadar” 6) Gwadar vision , http://www. gwadar. com. pk/new/gwadar. asp? var=vision 7) Development projects http://www. gwadar. com/new/gwadar. asp? var=devppojectsver the next decade 8) Latif, S. M. 1892. Lahore. Lahore: New Imperial Press, reprinted 1981, Lahore: Sanndhu Printers. ) Low, D. A. The Political Inheritance of Pakistan. London: Macmillan. 1991. 10) Papanek, G. F. Pakistan’s Development: Social Goals and Private incentives. Cambridge, Massachusetts: Harvard University Press. 1967. 11) Ziring, Lawrence. Pakistan: The Enigma of Political Development. Boulder, Colorado: Folkestone. 1980. 12) Pakistan among Top 10 Reformers (September12, 2005). Retrieved on 2006-03. 13) World Bank Country Classification Groups,(July 2006 data) Pakistan economy profile 2007. 14) http://www. cia. ov/library/publications/the-factbook/rankorder/2003rank. html 15) http://www. cia. gov/libraray/publications/the-worfactbook/rankorder/2087rank. html 16) http://www. cia. gov/libraray/publications/the-worfactbook/rankorder/2078rank. html 17) Business, Stakeholders and Strategic Responses in Pakistan Article written by Imran Ali of Lahore University of Management Sciences. 18) Gwadar: China’s Naval outpost on the Indian ocean Tarique Niazi, The Jamestown Foundation, China Brief 2/28/2005 19) Decoding India –Pakistan-China relations by Rajinder Puri Sep 13,2006. 0) Concluding Remarks at the Pakistan Development Forum 2006 by John Wall, World Bank Country Director for Pakistan (html). World Bank. 21) http://www. forbes. com/lists/2005/03/30/05f2000land. html. 22) http://www. asianresearch. org/articles/2528. html. 23) http://www. nationmaster. com/encyclopedia/Gwadar-port 24) http://www. travel-culture. com/pakistan/gawadar. shtml 25) http://livenreal. com/news/index. php/history-of-gwadar/ ———————– 26) [1] http://www. nationmaster. com/encyclopedia/Gwadar-port 7) [2] http://livenreal. com/news/index. php/history-of-gwadar/ [3] Gwadar vision , http://www. gwadar. com. pk/new/gwadar. asp? var=vision [4] Development projects http://www. gwadar. com/new/gwadar. asp? var=devppojectsver the next decade [5] www. wilkipedia. com/pakistan/gwadar-port/html [6] www. atimes. com/atimes/south_asia/gc04df06. html [7] http://www. asianresearch. org/articles/2528. html [8] www. atimes. com/atimes/south_asia/gc04df06. html [9]http://www. travel-culture. com/pakistan/gawadar. shtml

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