African states fighting China in defense of natural resources

By Adam Nossiter  /  NY Times News Service, NIAMEY

Sun, Sep 22, 2013 - Page 9

In Niger, government officials have fought a Chinese oil giant step by step, painfully undoing parts of a contract they say is ruinous. In Chad, they have been even more forceful, shutting down the Chinese and accusing them of gross environmental negligence. In Gabon, they have seized major oil tracts from China, handing them over to the state company.

China wants Africa’s oil as much as ever, but instead of accepting the old terms, which many African officials call unconditional surrender, some cash-starved African states are pushing back, showing an assertiveness unthinkable until recently and suggesting that the days of unbridled influence by the African continent’s mega investor may be waning.

For years, China has found eager partners across the continent, where governments of every ilk have welcomed the nation’s deep pockets and hands-off approach to local politics as an alternative to the West.

PUSHBACK

Now China’s major state oil companies are being challenged by African governments that have learned decades of hard lessons about heedless resource grabs by outsiders and are looking anew at the deals they or their predecessors have signed. Where the Chinese companies are seen as gouging, polluting or hogging valuable tracts, African officials have started resisting, often at the risk of angering one of their most important trading partners.

“This is all we’ve got,” Nigerien Minister of Oil Foumakoye Gado said. “If our natural resources are given away, we’ll never get out of this.”

Below Gado’s seventh-floor office — accessible through a dark stairwell because there is no working elevator — his fellow citizens are living in mud brick houses without electricity and washing their clothes in the river. Oil production in Niger began nearly two years ago, but has yet to make a dent in living standards.

“We’ve got to fight to get full value for these resources,” Gado said. “If they are valued correctly, we can hope to bring something to our people.”

More than 1,000km away in the oil-producing region, Chinese refinery workers and engineers mass boisterously at a crumbling and otherwise unused airport for their quarterly holiday flights out, one of the many costs Gado said that Niger — at the bottom of the UN Human Development Index — could not afford.

A private auditor hired by Niger recently found bloated costs and unfair charges by the China National Petroleum Corp, providing the country with ammunition for its next round of tense negotiations in Beijing, Gado said. Tens of millions of dollars have already been scored off the Chinese through such painstaking revisions.

Across the border in Chad, officials have taken a harder line with China National Petroleum, reflecting growing confidence after 10 years of oil production that has brought the country new roads and public buildings, a revamped army and a strengthening of the government’s grip on power, despite little change in its low poverty ranking.

Chadian Minister of Oil Djerassem Le Bemadjiel shut down the Chinese operations in the middle of last month after discovering that they were dumping excess crude oil in ditches south of the capital, N’Djamena, then making Chadian workers remove it with no protection.

“Just dumped in the open,” said Antoine Doudjidingao, an economist who helps lead an oil watchdog group in N’Djamena. “This is a serious case, the first of its kind. You can’t just shut your eyes in the face of it. It’s a responsible reaction.”

Last month, Le Bemadjiel refused to allow the Chinese to resume operations, even expelling the company’s local director-general and his assistant. There would be no resumption until the Chinese built remediation and treatment facilities, the Chadian government said.

“Regardless of the actual spillage, which the Chadian government would normally not care much about, this seems to be a warning, which just goes to show that even the prototypical weak state in Africa can have serious leverage and that African-Chinese relations are not as unbalanced as is sometimes argued,” said Ricardo Soares de Oliveira, a politics professor at the University of Oxford and an expert on African oil.

In Gabon, the government has surprised the oil industry by withdrawing a permit for a significant oil field from a subsidiary of another Chinese state-owned company, Sinopec, and turning it over to a newly created national oil company. Gabonese officials were quoted last month as threatening to cancel permits to other fields as well, accusing the Chinese of environmental missteps and mismanagement, as in Chad. Some analysts said Gabon’s motive was merely to reap more of the rewards from these fields.

“The Chinese are genuinely unprepared for this degree of pushback,” Soares de Oliveira said.

The Chinese Ministry of Foreign Affairs rejected the notion that its role had been anything but fruitful. In Niger, it said it has improved the economy, hired local residents and is building schools, digging wells and carrying out other “public welfare activities.” In Chad, it said it has urged companies to protect the environment and will seek to resolve the dispute through “friendly negotiation,” while in Gabon, as elsewhere, it said it supports cooperation “on the basis of equality, amity and mutual benefit.”

‘OIL DREAMS’

Few nations in the world are as weak as Niger, where nearly half of the government budget comes from foreign donors. Yet the nation long had unfulfilled oil dreams that were largely ignored by major companies. In 2008, former Nigerien president Mamadou Tandja and China National Petroleum came together secretively and signed an unpublicized deal that seemed to give both parties what they wanted.

However, far less clear, then and now, was whether Niger — one of the world’s most impoverished countries, regularly threatened by famine — would substantially benefit from the deal.

Tandja got a costly oil refinery in an area of Niger that he needed to win over with the promise of development, but the need for such a project in the low-energy-consuming nation has been sharply questioned by experts, not to mention the mysterious US$300 million “signing bonus” that Tandja’s administration received.

In return, the Chinese company got access to untapped oil reserves in the remote fields on Chad’s border on terms that still make Nigerien oil officials wince. Beyond that, local residents have protested that the Chinese presence has brought few jobs, low pay and harsh working conditions.

Tandja is long gone, deposed in a 2010 coup by army officers suspicious of his grab for expansive powers, but the contract remains, as does the white elephant oil refinery. It sits at the border with Nigeria, a nation awash in subsidized oil that crosses into Niger as contraband. The refinery has a capacity that is three times Niger’s consumption and the overall cost should have been only US$784 million, according to a UN expert. Niger must still pay 40 percent of the original cost, with money lent to it by the Chinese.

“In the context of this fight, we are revisiting these contracts to correct them,” Gado said. “In the future, we will pay closer attention, to not make the same mistakes.”

The fight has carried Gado, a soft-spoken chemist, to Beijing several times to haggle with the Chinese.

“I wouldn’t say we are at daggers drawn,” he said carefully. “But we discuss, sometimes over long months. Every time we discover something, we make an adjustment.”

Already, the original loan for Niger’s portion of the refinery — 10 years, at commercial rates — has been knocked down to a more manageable 25 years at 1 percent and deferred for seven years.

For Niger, the constant struggle with the Chinese is to keep costs down so it can sell its oil cheaply in a region where Nigeria’s subsidized oil is king.

“We’ve got to recover what we’ve invested before the state can hope to gain something,” Gado said.

For a time, oil at the refinery was piling up because the high price kept buyers away. The Chinese wanted to charge for piping the crude from the oil fields to the refinery, but Niger is refusing. The Chinese wanted to charge export-level prices for the crude oil at the refinery, but again, Niger is balking. The Chinese maintain a substantial benefits-freighted payroll at the refinery — another cost Niger is expected to carry — but that is being rejected too.

“This is a lesson we are giving to the Chinese: We are keeping a close lookout on them,” Nigerien Ministry of Oil secretary-general Mahaman Gaya said.

Gado has not made his last trip to Beijing.

Niger’s lesson is being applied elsewhere as well: African governments, grateful as they are for Chinese-built roads and ministry buildings, are no longer passive partners.

“Are we going to continue to ignore what the Chinese companies are doing?” Doudjidingao said. “I think this is the beginning of a change between African states and the Chinese. It’s a consciousness raising, so they won’t be guilty in the face of history.”