International Politics Quarterly Issue 4, 2006
China’s Oil Interest in Africa: A Subject of International Politics
Zha Daojiong
School of International Studies, Peking University
Summary:
Africa is an indispensable source of energy supply for China, providing about 30% of China’s oil imports in 2005; therefore, securing Africa’s oil while heeding the intricate international relations on issues such as Darfur has become a crucial subject of China’s international energy diplomacy.
In relations to the three petroleum trading patterns, energy diplomacy can make an effect in three ways: 1) equity oil trade: a government can encourage, allow or forbid the co-investment or co-development of oil companies from a certain country according to its strategic concern; on the other hand, the investing country can employ this exchange of interest to influence the political and economical environment of the resource country in which it invests; 2) long-term supply contract: though the value of oil is largely determined by global oil market, companies inevitably seek political safeguard from the government; a government may also lay out settlement conditions of a long-term oil supply contract; 3) crude oil trade on the international market: a government can exercise an embargo or anti-embargo, and make domestic policy adjustments under an embargo.
Africa’s oil supply to China has been on the rise since 1992 when this continent exported crude oil to China for the first time. In 2005, China imported oil from nine African countries, among which are its biggest suppliers - Angola, Sudan, the Republic of Congo, and Equatorial Guinea. China intends to establish a “Big Oil Industry” which will utilize both domestic and foreign resources and develop both markets. Based upon this objective, China National Petroleum Company (CNPC) was founded. Leading the Greater Nile Petroleum Operating Company, a consortium that also includes other companies like India's ONGC, Malaysia's Petronas and Sudan's state-owned Sudapet, CNPC achieved its greatest success in Sudan. This is, so far, its only comprehensive project that engages both upstream and downstream, from engineering to production, operating according to the framework of international oil companies. This company retrieved more than 60% of the investment within two years of operation, which could be attributed to two factors: first, China’s diplomatic relations with Sudan leads to the investment opportunity; second, government’s financial support – considering the oil project as the top financial aid project to Sudan, Ministry of Foreign Trade and Economic Cooperation and The Export-Import Bank of China provided CNPC with a preferential loan.
On the Darfur Crisis, China embraces the U.N. framework of crisis solution and peacekeeping in Sudan by sending 135 engineering, medical and transportation personnel along with military observers and other officials in May 2006. However, China disagrees with the United States on posing economic sanctions on Sudan, abstained vote of such resolutions, because as a permanent member of U.N. Security Council, it had to consider whether CNPC’s continued investment in Sudan would be against U.N. resolution. In the meantime, China urges the Sudan government to improve the situations in Darfur through bilateral diplomacy.
China recognizes that the domestic instability interferes its oil exploration and production in Sudan, and the pressure from the international media has caused negative impact on its oil companies in the stock market. The energy need behind China’s booming economy means that China’s oil companies would have to expand into more oil-production countries. China would have to find a balancing point between the economic gains by opposing U.N. sanction against an African oil-production country and the certain loss in soft power by being at the receiving end of the United States’ accusations.
The original article in Chinese:
China's Oil Interest in Africa Zha Daojiong 2006
