China Woos Africa with $20 Billion Pledge

China woos Africa with $20 billion pledge

China and Africa solidified their ties last week at the fifth Forum on Chinese-Africa Cooperation (FOCAC) in Beijing. Once again China offered money, this time sweetening the pot by almost doubling the aid from last year’s forum. Chinese President Hu Jintao pledged $20 billion in aid to African countries. According to Hu, the funds will be allocated to aid Africa with infrastructure and agriculture.

Not that this is anything new. China’s African romance can be summed up in one word: Hydrocarbons. For instance, on Thursday July 18 and in town for the forum, Niger’s President Mahamadou Issoufou visited CNPC. According to a CNPC press release President Issoufou had “a friendly talk with Mr. Zhou Jiping [Vice Chairman and President of PetroChina and General Manager of CNPC] on promoting oil and gas cooperation.” Issoufou praised China, attributing cooperation agreements with CNPC for turning Niger into an oil producer and one that can now “boast its own refinery.”

And, just a few months ago, in April, Ghana signed a $1 billion lending agreement with China Development Bank as part of the biggest loan in the country’s history. Ghana’s Vice President John Dramani Mahama said it would provide hundreds of thousands of jobs and develop natural gas.

While America’s energy policy has grown from bad to worse and is now anemic under the Obama Administration, China’s energy grab has kicked into high gear. In just over a decade CNPC, China’s largest offshore oil producer and the parent company of PetroChina, has gained major footholds in nearly a dozen African countries. The list is impressive: CNPC has been present in Sudan since 1996 and now has oil and gas assets and equity in the country, while also providing oilfield services. CNPC entered Tunisia in 2002, got involved in Chad”s oil and gas businesses in 2003 and also Algeria and Niger the same year, Mauritania in 2004, Libya in 2005, Equatorial Guinea in 2006, and commenced oil and gas cooperation with the Nigerian government in 2006. China’s other two oil majors, Sinopec and CNOOC, are also entrenched in Africa. To date, CNPC is operating in 30 countries worldwide.

Recently the ante for Africa’s hydrocarbons has been raised even higher. In the last few months massive gas deposits have been discovered in East Africa. In February, Statoil disclosed that it had found large volumes of natural gas off the coast of Tanzania, while Anadarko Petroleum, Cove and Eni of Italy made even bigger discoveries offshore Mozambique.

“Their two fields combined could contain up to 60 trillion cubic feet (Tcf) of recoverable resources of gas – nearly as much as Kuwait’s entire reserves and enough to turn Mozambique into a key exporter of liquefied natural gas, or LNG, to China and India’s fast-growing economies,” reported the Financial Times in March. Morgan Stanley expects 23 wells to be drilled off Kenya, Tanzania and Mozambique this year, almost double the number in 2011.

According to Reuters, Mozambique could be vying with Algeria as the world’s sixth largest exporter of gas by the middle of the next decade. The 253 Tcf that the U.S. Geological Survey now estimates may lie off Kenya, Tanzania and Mozambique compares to the 186 Tcf for Nigeria, Africa’s biggest energy producer.

Same hydrocarbons, different playbook

Western companies and China both vie for Africa’s hydrocarbons. However they seldom use the same playbook. Western critics claim that China turns a deaf ear to human rights abuses in Africa to acquire the oil and gas it needs, while they refuse to do business with what they consider rogue regimes. China counters, claiming that it always plays by international rules and seeks “win-win situations.” More poignantly, Western critics allege that China is out to colonize Africa economically through concessional loans, grants, debt cancellations and infrastructure projects, although the West had similar ambitions through much of the last century.

China, ever attune to Western criticism, flatly denied these claims two months ago.
China is not planning to colonize Africa economically and industrially through its investments, Chinese officials reiterated at a three-week development conference in Tianjin in May. The conference was sponsored by China’s Ministry of Commerce for 27 delegates from English speaking African countries. Officials said that China, through on-going and planned investments in Africa, intends to assist the continent in its economic, industrial and urban development and transformation.

At the conference, Wu Xiaxong, the Divisional Chief, National Development and Reform Commission of China, defended his country’s increased investment in Africa, stating that China had a foreign external reserve of $3.18 trillion by 2011 from $167 billion in 1978 through a holistic implementation of reforms. He added that the total import and export growth of China had increased from $20.6 billion in 1978 to $3.64 trillion in 2011.

“It would be ideal if, China with all these assets at its disposal, assists Africa to grow industrially with the Chinese government and people sharing their reforms experience with the African continent,” Wu said.

China’s entrance and now dominance in Africa is imposing by any count. The continent that was once subjugated by colonial powers increasingly looks to China. It has been said that African school children no longer run up to visiting foreigners with greetings of “hello.” Instead “ni hao” is the watchword of the day. First, China overtook France’s place as Africa’s second largest business partner and in 2009 bypassed the U.S. as Africa’s biggest trading partner.

China’s insatiable thirst for oil and gas does indeed play out economically, geo-politically and even militarily. According to Amnesty International, in 2006 China became the world’s largest small-arms exporter and much of that is now funneled to support African governments, some with atrocious human rights records, but with resources needed by China. Sudan’s Dafar region is a case in point. China on the other hand usually downplays such findings from Western agencies as politically motivated.

Chinese cash in Africa

China’s investment in Africa may rise by 70 percent to $50 billion by 2015 from 2009, as it seeks to acquire resources, Standard Bank Group Ltd. (Africa’s largest lender) said last year. Bilateral trade between China and Africa will reach $300 billion by 2015, double the 2010 level. In April Bloomberg reported that China’s Export-Import Bank lent $67.2 billion to sub-Saharan Africa between 2001 and 2010, overtaking World Bank lending of $54.7 billion. The numbers are staggering, adding fuel to those that condemn China’s African ambitions.

Liu Guijin, former Chinese ambassador to South Africa and Zimbabwe, said, “China doesn’t have the will or ability to exercise monopoly control over Africa’s development.”
His remarks, coinciding with last week’s forum in Beijing, seemed a preemptive strike against criticism that was sure to follow.

“Western misconceptions of the Sino-African relationship will pose difficulties to the relationship. African leaders, intellectuals and media are deeply influenced by Western ideology.”

He added that China will always have a non-intervention policy toward African countries’ domestic affairs, but its relations with the continent should be seen as developing rather than right.

Criticism and allegations however, whether founded, unfounded or in varying shades of gray, won’t stop China’s energy grab in Africa or any other part of the world for that matter. The Asian super power simply can’t quench its accelerating hydrocarbon thirst. That means that China and Africa are now joined at the hip. President Hu’s $20 billion pledge to African countries last week attests to this fact.

© 2013 Energy Tribune

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