American-Chinese struggle over Africa

In the context of continuous struggle to dominate the world’s economies and be labeled as the unbreakable mega power, the U.S. and China are keeping close eye on the African continent, the land of yet-to-find black gold.

Oil is the most important lure, with competition between foreign states and companies to secure resources so intense it attracts more than 50% of all foreign direct investment. It is to note that in the year 2006, annual foreign direct investment raised to a historic high of $38.8 billion, exceeding record levels of 2005, which represented a growth of 78 % from 2004. According to the U.N. World Investment Report, Foreign Direct Investment cash was concentrated in a few industries, notably oil, gas and mining, mainly in six oil-producing countries (Algeria, Chad, Egypt, Equatorial Guinea, Nigeria, and Sudan).

The U.S. is interested in the region as a cheap and reliable alternative to the increasingly volatile Persian Gulf. West Africa already supplies about 12% of U.S. crude oil imports, and America’s National Intelligence Council predicts that this share will rise to 25% by 2015. As is often the case with oil, military involvement follows behind trade. In February 2007, the U.S. set up an Africa command, established bases and signed access agreements with Senegal, Mali, Ghana, Gabon, and Namibia. Africa is becoming strategically important to the U.S. because of its oil production and China’s increasing regional influence.

Africa is a key source of raw materials, especially crude oil of which China is now the world’s second largest consumer, with over 25% of its oil imports coming from Sudan and the Gulf of Guinea. According to the Chinese Customs figures reported by the BBC in January 2006, in the first 10 months of 2005 trade between China and Africa rose by 39% to over $32 billion, largely fuelled by imports of African oil, mainly from Sudan. According to the US Energy Information Administration [EIA] China accounted for over 40% of the total growth in global oil demand over the past four years.

According to some estimates, Sudan has oil resources rivaling those of biggest producers, as well as huge reserves of natural gas, uranium and copper. One cannot be confident of the existence of such rich oil resources without a more detailed geological survey, but the proven reserves have almost caused a new cold war to break out between the U.S. and China over the “black gold.” It is clear that the Sudanese oil is the point of attraction for the U.S., which has been trying to interfere in the country’s oil policy. For two decades, the U.S. has supported the separatist movement in southern Sudan, where large reserves of oil have been discovered. The long civil war drained the resources of the government, and it adopted the Comprehensive Peace Agreement.

The U.S. continues to act as a neutral mediator and has, by more or less successfully playing the genocide card, retained its influence on the government with the goal of obtaining greater oil concessions, at least in the future. China in its turn has not concerned itself with humanitarian issues and, up to a point, has supplied Sudan with technologies for oil production and pipeline construction while buying oil in relatively large quantities.

What can China find attractive in Darfur? China’s huge and growing demand for oil has forced Beijing to conduct aggressive “dollar” diplomacy. With foreign exchange reserves exceeding $1.3 trillion in the Peoples’ National Bank of China, Beijing has begun engaging in active petroleum geopolitics with Africa as its main target and the Sudan-Chad region as its highest priority region on the continent. Beijing has played its cards more effectively than Washington. Darfur would become the main field of battle for oil between the two giants.

China currently imports 30% of its crude oil from Africa. This explains the jump in Chinese foreign policy initiatives, which will displease Washington. China provides interest-free loans to African nations, including Sudan, and uses its own funds to build roads, schools and hospitals, while the U.S. attempts to control the African economy through the World Bank and the IMF by setting harsh economic and political conditions. Not surprisingly, the Africans prefer to cooperate with China. China has already taken on the U.S. in Nigeria, Angola and Mozambique by giving those countries loans and grants, starting in 2006, that are four times greater than those provided by the World Bank to all of sub-Saharan Africa for the same period. Now, China has set its sights on Sudan and Chad.

Since April 2005, the Sudanese government announced that oil deposits had been discovered in South Darfur and will produce 500 thousand barrels per day once they come on stream, but the world press ignored.

Acting as the world’s policeman, in February 2006, the U.S. Senate adopted a resolution demanding the introduction of NATO troops and UN peacekeepers into Darfur with a clearly articulated mandate. Washington learned that the region of Sudan from the Upper Nile to the border with Chad is rich in oil long before it was known to the Sudanese government.

The China National Petroleum Corporation (CNPC) is Sudan ‘s largest foreign investor; since 1999, China has invested over $15 billion in Sudan and it controls 50% of the oil refinery operations at plants near Khartoum. CNPC has already built an oil pipeline that runs from the south, where several Chinese concessions are located, to the Red Sea. They get 8% of its oil from South Sudan and receive 65 to 80% of the approximately 500 thousand barrels of oil recovered daily. In 2008, Sudan became China ‘s fourth largest source of foreign oil.

Back to 1979, Sudan invited Chevron to develop oil production in the country, which found large petroleum deposits in South Sudan. But, in 1992, the company sold its Sudanese oil concessions. In 1999, the Chinese started their operations in the oil fields that exceeded the production expectations. However, Chevron did not move far from Darfur. Recently, in association with other oil giants such as Exxon Mobile, Chevron built a $3.7 billion oil pipeline in neighboring Chad that conveys 160 thousand bopd from the Doba region in central Chad near Darfur through Cameroon to Port Kribi on the Atlantic Ocean for shipment to the U.S.

The U.S. currently has a production base in Chad, and in principle, once the political situation they are currently working to create becomes favorable, they will be able to begin development of the Darfur oil, possibly having somewhat pushed aside the Chinese.

Situation in Chad and Angola
The construction of the Chad-Cameroon oil pipeline is part of a great American scheme to gain control of Central Africa’s oil wealth from Sudan to the Atlantic coast. Therefore, in early 2006, Chad needed funds to finance military operations and build up its army, the World Bank president without long thought gave Chad a number of loans under terms favorable for an African country. In this volatile environment, Chinese representatives showed up in Chad with a determination to help the country. China began importing oil from Chad in addition to Sudan.
In Angola, according to the Oil and Gas Journal, as of January 2010, Angola has

proven oil reserves of 9.5 billion barrels while statements made by the Angolan oil minister in December 2009 put total reserve numbers as high as 13.1 billion barrels, the EIA website said. The country is currently producing 2 million barrels of crude oil per day and is expected to ramp up production to 3 million barrels per day by 2015. Angola, which won independence from Portugal in 1975, and was then embroiled in a civil war that went on for over two decades, is vying with Nigeria to become Africa’s largest oil producer.
Currently, China has not a considerable share in Angola. Sonangol, an arm of the Angolan government that grants exploration rights, had blocked an attempt by Chinese firms to buy Marathon Oil Corp’s 20% stake in another oil block for $1.3 billion about a year ago, exercising its right of first refusal.

Hence, the interests of the U.S. and China overlap in areas with the greatest accumulation of “black gold.” Darfur and Chad are an extension of America’s “Iraqi” policy for control of oil wherever possible. And also wherever possible, China will undermine this control, especially in Africa. The confrontation between the two countries is gradually turning into a new and undeclared cold war for oil.

Despite its own big backyard, China is generally resource-poor and Africa offers the natural resources vital to fuel its rapidly growing economy. China looks to the Democratic Republic of Congo and Zambia for copper and cobalt, to South Africa for iron ore and platinum, and to Gabon, Cameroon and the Republic of the Congo (Congo-Brazzaville) for timber. For oil, it has been wooing Nigeria, Angola, Sudan, and Equatorial Guinea. China is now the second largest consumer of crude oil after the U.S., and was responsible for 40% of the global increase in demand between 2001 and 2005. After the independence of the southern part of Sudan and the birth of a new country, the situation will be critical for Beijing. At the same time, the U.S. will sharpen its teeth to pounce upon the lamb sooner or later.

By Mostafa Mabrouk, Vice Chairman Assistant for Economic Affairs, Ganope


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