Asia Time Online - Daily News
Asia Times Chinese
AT Chinese

    China Business
     Oct 12, 2005
The eagle, the dragon and African oil
By Chietigj Bajpaee

With oil prices hitting record levels of US$70 per barrel in recent weeks, major energy consuming countries are engaging in an increasingly heated competition for energy resources on the world stage. Nowhere is this more evident than between the United States and China, the world's first and second largest energy-consuming countries respectively. In the contest for energy resources, numerous "stages" of competition are emerging, including the Middle East, Central Asia, Latin America, and the East and South China Seas. Africa is fast emerging as one of the most volatile of these stages, given its vast reserves of energy

resources and concentration of internal security crises.

Africa owns about 8% of the world's known oil reserves, with Nigeria, Libya and Equatorial Guinea as the region's leading oil producers. 70% of Africa's oil production is concentrated in West Africa's Gulf of Guinea, which stretches from the Ivory Coast to Angola. The low sulphur content of West African crude makes it of further strategic importance.

However, the region is also vulnerable to instabilities ranging from piracy to terrorism, interstate and tribal conflict, AIDS and political uncertainties. Given the weak governments and significant Muslim populations of the region, the African continent may also emerge as a hub for al-Qaeda-linked terrorist groups.

Finally, oil-rich countries in Africa have been unable to escape the "curse of oil," which has fueled corruption, conflict, and environmental degradation across the region. For instance, while Nigeria has earned $300 billion in oil revenues over the last 25 years, per capita income remains below $1 per day. Nigeria is also subject to ethnic violence, oil strikes and sporadic attacks on oil infrastructure by the Niger Delta People's Volunteer Force. Adding Sino-US energy competition to this volatile mix could further destabilize the region.

US-African energy relations
The US currently derives 15% of its oil supplies from Africa as compared to 22% from the Persian Gulf. Within the next ten years, the US could be depending on Africa for a quarter of its oil supplies according to the US National Intelligence Council. Nigeria alone is the fifth biggest source of US oil imports with the United States accounting for half of Nigeria's oil exports. Washington has also re-established its historically important diplomatic and energy relations with Libya, following the removal of economic sanctions in September 2003 after Libya abandoned its nuclear weapons program.

In addition to securing energy supplies in the region, the US has a burgeoning economic relationship with the region and has been increasingly concerned with Africa's security situation, political freedoms and human rights record. US-Africa trade stood at $44.5 billion in 2004, with oil-rich Nigeria being the second-largest destination of US investment on the continent after South Africa. Since the September 11 attacks, the US has also stepped up security cooperation with African states. The US Coast Guard has increased patrols of the region as well as engaged in training, intelligence sharing and public relations exercises with numerous states including Sao Tome and Principe, Cape Verde, Ghana, Benin, and Equatorial Guinea.

Meanwhile, the US State Department's Trans-Sahara Counter Terrorist Initiative has trained troops in Niger, Mauritania, Mali and Chad. Since the September 11 incident, the US has also maintained a military base in Djibouti, from which it coordinates anti-terrorism operations on the continent. Nevertheless, with military assets tied up in Afghanistan, Iraq and the Persian Gulf, the US has not been able to devote the necessary attention to Africa, which in turn has allowed other countries such as China to make further inroads.

Sino-African energy relations
China currently derives a quarter of its oil imports from Africa, with oil interests in Algeria, Angola, Chad and Sudan and increasing stakes in Equatorial Guinea, Gabon, and Nigeria. China's energy interests in Chad are of particular interest, given that Chad still maintains diplomatic relations with Taiwan.

China's growing energy partnership with Sudan represents one of a number of areas where Sino-US energy interests diverge in Africa. China National Petroleum Corporation (CNPC) established oil exploration rights in Sudan in 1995. Two years later, when Washington cut ties with Sudan, China filled the vacuum, making Sudan China's largest overseas production base. More than half of Sudan's oil exports go to China, accounting for 5% of China's total oil imports. CNPC owns a 40% stake in the Greater Nile Petroleum Operating Company and pumps over 300,000 barrels per day in Sudan. Another Chinese firm, Sinopec, is constructing a 1500 kilometer pipeline to Port Sudan on the Red Sea, where China's Petroleum Engineering Construction Group is building a tanker terminal.

As in the case of US relations with Africa, China's relations with Africa are multidimensional. However, in recent years China's political, economic and military relations with Africa have been subordinated to its quest to secure energy resources in the African continent as energy resources are being secured in exchange for aid, arms or infrastructure investment. China's goodwill with African states can be traced back to its support for anti-colonial struggles in the 1960s. However, China's relations with Africa have shifted from holding a strong ideological bias in support of communist regimes and Marxist insurgencies, to being led by market and resource considerations.

Today the only ideological component to Sino-African relations is the "One China" principle, although there are even exceptions to this, as seen in the case of growing Chinese energy interests in Chad, which still has diplomatic relations with Taiwan. At present, only seven African states hold diplomatic relations with Taiwan. African states are also drawn to China by its non-ideological, non-interventionist approach, which contrasts with the Western approach that places an emphasis on democracy, governance, human rights and humanitarian intervention.

China has also appealed to Africa through numerous goodwill gestures. For example, the Chinese foreign minister has maintained a policy of making his first official overseas trip to the African continent every year. For decades, China has also supported numerous infrastructure projects across Africa, as well as sending doctors and nurses to the region, establishing scholarships for African students to study in Chinese universities, providing training to African businessmen and trade officials, and supplying funds to encourage Chinese businesses to invest in Africa.

China also maintains dialogue with Africa through several bilateral and multilateral forums such as the Asia-Africa Summit and the China-Africa Business Council, which was jointly established with the United Nations Development Program in November 2004 to support China's private sector investment in Cameroon, Ghana, Mozambique, Nigeria, South Africa and Tanzania. In 2000, China also initiated the China-Africa Cooperation Forum, comprising 46 of the 53 African countries. Among its accomplishments is canceling $1.2 billion in debt for 31 African countries. China is also engaged in negotiations to create a free trade area with the Southern African Customs Union, as well as coordinating with African states in international organizations such as the World Trade Organization and the United Nations.

On the economic front, Sino-African trade increased by 50% between 2002 and 2003 to $18.5 billion, a total expected to grow to $30 billion by 2006. At present, 700 Chinese companies operate in 49 African countries and eight African countries have been granted the status of "officially approved travel destinations" by China. China has also expanded its military presence in the region, as seen by its deployment of peacekeepers to Liberia in December 2003, which occurred two months after Liberia switched its diplomatic recognition from Taiwan to China. China has also sent a peacekeeping contingent to the Democratic Republic of Congo, as well as providing uniforms to Mozambique's army, helicopters to Mali and Angola, and weapons to Namibia and Sierra Leone.

Many of China's diplomatic initiatives in Africa are in direct conflict with US policy toward the region. For example, Beijing supplied $1 billion in arms to both Ethiopia and Eritrea during their war from 1998 to 2000. Zimbabwe's President Robert Mugabe, whose regime has been isolated from the West due to its forced eviction of slum dwellers, confiscation of white-owned farms, and use of violence and intimidation against political opposition, has also turned to the Chinese regime for aid. Chinese investment in Zimbabwe amounted to $600 million in 2004. China has upgraded Zimbabwe's transport infrastructure, provided roofing material for Mugabe's $9 million palace, and provided the regime with Chinese-made Karakoroum military trainer jets, MA60 passenger planes, and radio-jamming equipment for a military base outside Harare, which has been used to block transmissions by opposition parties.

China is also one of Sudan's leading arms suppliers. Sudan is the largest recipient of Chinese overseas investment, and up to 10,000 Chinese nationals work in the country. The Sudanese government, which has recently concluded a peace agreement with the Sudan People's Liberation Movement/Army (SPLM/A) in the south, is still engaged in a conflict in the Darfur region of western Sudan using proxy militias such as the Janjaweed. In 2004, the UN Security Council was forced to water down a resolution condemning atrocities in the Darfur region to avoid a Chinese veto. China abstained in the vote over the final weaker resolution. With Sudan and Iran together supplying China with 20% of its oil imports, US attempts to contain these regimes bring it into direct confrontation with China's energy security policies.

The United States and China are not the only states vying for energy resources in Africa. Recently, Korea National Oil Corporation obtained 65% oil and gas production rights in two Nigerian offshore blocks, while India's Oil and Natural Gas Corporation Videsh obtained a 25% stake. South Korea and India are the world's fourth and sixth largest energy consumers respectively. India and China both hold stakes in the Greater Nile Oil Project in Sudan, with India having invested $700 million in Sudan's oil sector. China and India have also been engaged in direct competition for African energy resources, as seen in October 2004 when China outbid India to buy an interest in an offshore block in Angola.

Sino-US relations are going through a cold spell as a result of disputes over US quotas on Chinese-made textiles and China's military expenditures, exchange rate policy, intellectual property rights infringements, human rights record, and relations with dictatorial "rogue" or anti-US regimes including Iran, Myanmar, Nepal, Uzbekistan, and Venezuela. The recent postponement of the much-anticipated meeting between Chinese President Hu Jintao and US President George W Bush in Washington as a result of the relief efforts for Hurricane Katrina is seen as likely to add insult to injury among some in Beijing.

While there have been gestures of rapprochement in Sino-US relations, such as the recently initiated Sino-US Strategic Dialogue and the establishment of an energy partnership called the Asia Pacific Partnership on Clean Development, established by the two states along with India, Australia, Japan and South Korea, the competition to secure energy resources on the world stage could add further tension to their already shaky relationship.
The recent failed bid by Chinese energy company China National Offshore Oil Corporation to acquire US energy company Unocal is evidence of this. Facing a plethora of internal crises ranging from poverty to poor governance and civil war, Africa is likely to emerge as a volatile stage of Sino-US energy competition. African states have been drawn to China by its non-interventionist, non-ideological approach in conducting relations, although China's attempts to secure energy resources in conflict-ridden states by offering aid or arms-for-oil could heighten instability in the region.

Chietigj Bajpaee is a researcher for Civic Exchange, a Hong Kong-based public-policy think-tank. He has been a researcher for the London-based International Institute for Strategic Studies and a risk analyst for a New York-based risk management company. Areas of interest include energy security and political, economic and security developments in the Asia Pacific region. The views expressed here are his own. He can be contacted at c.bajpaee-alumni@lse.ac.uk.

Published with permission of the Power and Interest News Report, an analysis-based publication that seeks to provide insight into various conflicts, regions and points of interest around the globe. All comments should be directed to content@pinr.com

India, China: Comrades in oil (Aug 9, '05)

The invisible hand preventing an energy crisis (Apr 14, '05)

China mulls oil pipelines in Myanmar, Thailand (Sep 23, '04)

The oil that troubles US-China waters (Jun 18, '05)

Africa: Oil, Al-Qaeda and the US military (Mar 30, '05)


All material on this website is copyright and may not be republished in any form without written permission.
© Copyright 1999 - 2005 Asia Times Online Ltd.
Head Office: Rm 202, Hau Fook Mansion, No. 8 Hau Fook St., Kowloon, Hong Kong
Thailand Bureau: 11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110