Wednesday, April 05, 2006

The Africa-China Nexus

It's not uncommon to hear the prediction that China will become a world power within the 21st Century. Rapid development and economic success since the reforms 28 years ago seem to confirm that observation. While news reports on China mostly focus on its love-hate relationship with the United States, many other countries and regions in the world have built significant business relationships, diplomatic ties, and even rivalries with China.

So what's the nexus between the African countries and China?

The oil.

Energy resources have become a viable trade item in the continent. Sudan, Nigeria, Angola, and Congo have traded with China on oil. Equatorial Guinea and Gabon are also oil traders. Africa currently contributes 12 percent of the world's liquid hydrocarbon production, and one in four barrels of oil discovered outside of the U.S. and Canada between 2000 and 2004 came from Africa.

Indeed, it has been reported that Angola has surpassed Saudi Arabia as the number one supplier of oil to China. Angola shipped 456,000 barrels a day to China in the first two months of the year.

If readers remember the CNOOC bid for UNOCAL last year that caused outcries in the United States--well, now CNOOC and other Chinese oil companies have found new courtships with African countries. Sinopec agreed last week to help build a $3bn refinery in Angola. In January, CNOOC agreed to pay $2,27bn for a stake in a Nigerian oil field. Companies from the U.S and India have also made significant investments in the region, hoping to assuage the current oil shortage and diversify reliance on suppliers in the Middle East.

In return for oil, China often offers development aid to its oil trading partners. A report by the Council of Foreign Relation has noted that, "In Angola, which currently exports 25 percent of its oil production to China, Beijing has secured a major stake in future oil production with a $2 billion package of loans and aid that includes funds for Chinese companies to build railroads, schools, roads, hospitals, bridges, and offices; lay a fiber-optic network; and train Angolan telecommunications workers."

Fifteen percent of U.S. oil imports come from Africa; by 2010 this could reach 20 percent.

Investment in Africa does not go without risks. Conflict situations, political instability, organized crimes and terrorism complicate the flow of free trade. Factors external to the African countries may also affect foreign policies. China's continuous courtship with the oil countries in Africa presents larger issues such as China's general tolerance toward authoritarian regimes, the involvement of arms trade as exchange for oil, and human rights violations that China often ignores.


adrienne said...

Thanks for this post, Helen! When I think of what Shell and Chevron have done to the Niger Delta and Ogoni lands (not to mention the execution of Ken Saro-Wiwa), it's hard not to feel concerned when any foreign government or corporation expresses interest in building or buying refineries in Africa. Development aid tied to that kind of project is hard, at least for me, to trust at face value (regardless of the source). That's why I especially appreciate that last paragraph you wrote.

Anonymous said...

Does the world know that China is bringing in Chinese prisoners to undertake work on the railraods they are building in the DRC? They are brought in in containers and live in appalling conditions. When will the press pick up on this?