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China's New African Oil Ties Create Concerns

China's need for oil has led it to West Africa's oil fields in the Gulf of Guinea, and to Central Africa, where oil production in several countries is also coming on line. Growing Chinese interest in the region has created a surge of oil-related investments, and has been welcomed by governments and some analysts. But it worries others.

In China this month, Gabon's President Omar Bongo received military honors as he arrived for a state visit.

Speaking through his French interpreter, Chinese President Hu Jintao said he hoped Mr. Bongo's ninth visit would be a success. Even though Mr. Bongo has been visiting China for decades, ties have recently become more than just formalities.

Chinese Foreign Ministry spokesman Kong Quan says trade between Africa and China has risen by nearly 50 percent this year compared to last. That is a faster increase than Chinese trade has had with any other area. Mr. Quan said the development of these relations is mutually beneficial -- what he called a "win-win" situation.

The Chinese President visited Gabon earlier this year. There, Chinese companies are working on building a new senate building, a multi-media center and a port. Some Gabonese commentators accuse Western companies of cultivating what they call destructive ties with Africa - buying natural resources and then selling weapons, alcohol and cigarettes. The commentators say although China wants Africa's oil, Chinese companies generally invest in businesses that are more beneficial for the continent.

This shoe factory in the industrial district of Abidjan is typical of new Chinese-owned businesses in West Africa. Industries with a growing Chinese presence include everything from household goods to pharmaceuticals, with an emphasis on lower priced items.

But other analysts, such as Thalia Griffiths from the London-based Africa Confidential newsletter, fear doing business with China will make African governments more corrupt. She says China is paying with large sums of advanced credit or loans for infrastructure development, making it more difficult to ensure that oil revenues benefit the people of the countries that produce the oil.

"We're seeing a lot of Chinese funding deals with an oil element and there's concerns in some quarters because, of course, dealing with Chinese companies doesn't come with the same ethical conditions as dealing with Western companies who have N-G-Os on their backs and shareholders asking awkward questions," she says.

A Washington-based industry analyst Gal Luft says what he calls the 'Chinese way of doing business' could reverse progress on fighting corruption and delivering benefits to ordinary people, which has been so difficult to achieve in Africa's dealings with western companies.

"The Chinese are much more prone to do business in a way that today Europeans and Americans do not accept - paying bribes and all kinds of bonuses under the table. These are things that have been rampant throughout Africa, particularly in Nigeria, Angola and Equatorial Guinea and to a certain extent Chad and Gabon. I think that it will be much easier for those countries to work with Chinese companies rather than American and European companies that are becoming more and more restricted by this 'publish what you pay' initiative and others calling for better transparency," he says.

Chinese diplomats and journalists in West Africa refused to comment for this report, saying it is a matter for authorities in Beijing to discuss.

In recent interviews, China's deputy foreign minister Zhou Wenzhong has said China will pursue its oil interests in Africa without political restrictions or concerns. He has been quoted as saying China tries "to separate business from politics."

The state-owned China National Petroleum Corporation is even developing oil projects in Chad, which has diplomatic ties with Taiwan.

West Africa's oil currently comes mainly from Nigeria, Equatorial-Guinea, Congo-Brazaville and Gabon. Other countries like Ivory Coast, Mauritania and Niger are also trying to develop oil production. Chinese companies are signing oil contracts in many of these countries, even though few of the deals are getting much publicity.

During President Hu's visit to Gabon, though, one new arrangement was made public. TheChina Petroleum and Chemical Corporation refinery, Gabon and France's Total Gabon signed agreements guaranteeing China a steady flow of Gabonese oil.

Nigerian analyst Layi Abegurin says China's growing oil interests could well be a "win-win" situation, as the Chinese spokesman said.

"If there is honest and democratic competition economically, that is good for the Africans. Take for example if the Africans are setting the pace of the discussions, that is if the African leaders are setting the pace that U.S. multinational corporations and Chinese corporations or Canadian corporations compete over the exploration of our oil in West Africa, that is good," he says.

But experts say the overall impact of Chinese companies in Africa remains limited because they don't have the financial power or technology to access the continent's biggest oil fields, which are off-shore.

Oil expert Ian Gary from the U.S.-based aid group Catholic Relief Services has done a lot of work on Africa's oil industry and its impact on Africans.

"A lot of the new oil that is being brought online is being developed in deep offshore waters and a lot of those fields are only capable of being exploited by western companies both because of their access to proprietary technology as well as the large amounts of financial capital that are needed to exploit those fields," he says.

As far as off-shore oil is concerned, Mr. Gary says, Chinese companies mainly operate as buyers, not investors.

In addition, oil industry analyst Gal Luft says it's important to put West Africa's proven oil reserves in context.

"If you look at the proven reserves of West Africa it's about four percent of global reserves. We're not talking about a Middle East or even the Caspian in Russia. We're not talking about a huge energy supplier here," he says.

As a result, Mr. Luft says West Africa is not likely to be a major point of conflict between Chinese and U.S. oil interests.

Still Mr. Luft and the other analysts agree China's growing interest in West African oil should be watched closely. This should be done especially by Africans, they say, because the oil industry here has already had many problems with accusations of human rights violations, spurring ethnic violence, corruption, and a lack of accountability that tends to leave local people poor while foreign investors get rich.

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