Although the Chinese development initiatives have helped the troubled infrastructure of Angola, pragmatically they have done little to help the two-thirds of Angolans who earn less than two dollars per day and live in ghastly urban slums. Projects such as the construction of stadiums for the 2010 African Cup of Nations do little to improve the welfare of the population. China is not helping Angola to build a sustainable economy—an economy with the potential to mature into self-sufficiency. On the contrary, she is acquiring as much oil as she can at the minimum cost.
After the 2004 loan, China has continued to provide the Angolan government with further low interest oil-tied-loans. It is estimated that the total value of the initial $2 billion loan has been extended to between $10 billion and $12 billion.
Trade and Investment
But the oil-loans are just a part of China’s scheme to secure a steady flow of oil. Trade and investment is another.
China is Angola’s biggest trade partner, making up more than half of Angola’s global trade total. In recent years, the trade volume between the two countries has increased spectacularly. As of 2014, the Sino-Angolan bilateral trade stood at $34.1 billion, whereas in 2008 it was worth $25.3 billion (2).
Angola imports Chinese agricultural machinery, electrical equipment, vehicles, and military hardware, and predominately exports oil. In 2014, Angola imported close to $6 billion worth of goods from China and exported to China goods worth of $24 billion; approximately 99% of all her exports to China were oil commodities (3), notwithstanding a decline in her oil production output of about 4%, between 2010 and 2014.
Angola still remains the second largest exporter of oil to China after Saudi Arabia (4). Moreover, what makes Angola so strategically valuable to China, is the quality of her oil.
Most of Angolan oil is light, thus making the refining process simpler than if using heavier oil from elsewhere. And although many Western petroleum companies are active in Angola, the most energetic are Chinese. But what do we know about these companies?
In 1997, China’s Communist party decided to restructure the preexisting state oil companies in order to achieve her newfound “Going Abroad” strategy.
The result of this restructure were the China National Petroleum Corporation (CNPC) and the Chinese National Petrochemical Corporation (Sinopec).
Both companies are responsible for producing, trading, importing, and processing oil.
Although their roles frequently overlap, the former is more focused on exploration and production contracts, and the latter on refining foreign imports.
A third, smaller company, called The China Offshore Oil Corporation (CNOOC) specializes in offshore investments.
Sinopec and CNPC are currently the second and third largest corporations in the world, with a revenue amounting to almost $1 trillion. Although these companies are profit orientated, the fact that they are stated-owned essentially makes them enforcers of China’s foreign policy around the world.
From the two companies, Sinopec has been the more active in Angola.
In 2004, Sonangol, Angola’s national oil company, and Sinopec came together and created Sinopec International Ltd (SSI). In this joint venture Sinopec has a controlling share of 55%. And here the fun begins.
Although seemingly a private company, since 2004 SSI has received considerable oil-field concessions by the Angolan government—often in spite of better offers from other, less asian, companies.
An example of this preferential treatment is the sale of Block 18 in 2004. Block 18 is a considerable offshore oilfield that used to belong to Shell. In 2004, Shell wished to sell 50% of Block 18 to the Indian ONCC Videsh. The Indian firm was offering the Angolan government $200 million for the rebuilding of Angola’s railroad system, on top of the $620 million for the actual oilfield rights (5).
Shell’s wishes notwithstanding, Angola exercised her preferential rights and sold the shares to SSI.
Evidently, China’s no-questions- asked loans to the Angolan government are proving rather helpful.
However, the Sino-Angolan relationship hasn’t been all fun and games. Lately, the Angolan government seems to have come to the realization that it would be more profitable to diversify her investing portfolio, rather to solely depend on China.
But is that possible?
Unfortunately, no.
Angola’s recent request for a two-year suspension of payments on her $20 billion debt to China, a request that was mainly triggered by the falling oil prices, and the current unsustainable state of her economy, show such diversifications in the foreseeable future to be unlikely indeed.
Furthermore, China owns 41% of Angola’s external debt and the survival of the regime—whose leadership benefits financially from this relationship—largely relies on China’s continuous support (6). We now saw how China secures a steady flow of oil. But what about her other goal, i.e., international legitimacy?
Featured Image courtesy of Reuters
1) Hanson, Stephanie. “Angola’s Political and Economic Development,” cfr.org (21 July 2008).
2) Thompson, Reagan. “Assessing the Chinese Influence in Ghana, Angola, and Zimbabwe: The Impact of Politics, Partners, and Petro” (Honours Thesis, Stanford University, 2012).
3) European Commission, “European Union, Trade in Goods with Angola” (2015); Corkin, Lucy.
“Angola’s Relations with China in the Context of the Economic Crisis,” China monitor 38,
(2009).
4) Central Intelligence Agency, “The World Factbook: Angola,” CIA.gov; Thompson, Reagan.
“Assessing the Chinese Influence in Ghana, Angola, and Zimbabwe: The Impact of Politics,
Partners, and Petro” (Honours Thesis, Stanford University, 2012).
5) Rotberg, Robert. “China Into Africa,” (Washington, D.C., Brookings Institution Press, 2008).
6) Basu, Indrajit. ‘’India Discreet, China bold in oil hunt,” Asia Times (29 September 2005).
7) Muzima, Joel Daniel, “Angola2015” (2015).
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