Oil Interests Push China Into Sudanese Mire

Courtesy of The Washington Post, a report on how China’s growing appetite for energy has led it into the messy politics and tensions of Sudan.  As the article notes:

At a restaurant along the River Nile offering crocodile and ostrich meat, officials of the world’s newest — and desperately destitute — nation hosted a lunch this month for Liu Guijin, China’s visiting envoy for African affairs.

Liu’s visit to Juba, the dirt-track capital of South Sudan, which split from Sudan in July, came at a tense time: Sudan had just bombed a refugee camp, armed militias were mining roads, and troops were clashing in disputed border areas.

The Chinese envoy, however, came here mainly to talk about oil.

The Chinese “are very worried,” said Stephen Dhieu Dau, South Sudan’s minister of petroleum and mining, who attended the lunch with Liu. “Their wish is to see the continuation of production and the flow of the crude. This is their concern.”

China, which gets nearly a third of its imported crude oil from Africa, has invested billions of dollars in the past 15 years to pump crude from this war-scarred land. But the division of what until five months ago was a united country has pushed Beijing into a political minefield in defense of its assets, straining China’s “just business” insistence that it doesn’t get involved in the internal affairs of foreign lands.

China’s involvement revolves largely around the interests of a single company, the China National Petroleum Corp., or CNPC, a state-owned giant that, in its quest to match the global reach of Western oil majors and to feed China’s appetite for fuel, has dragged usually risk-averse Chinese diplomats into one of Africa’s most poisonous feuds.

Across Africa, China is getting tugged into local affairs. In Zambia, China’s involvement in mining — and its close ties to the incumbent president — dominated a September presidential election. China’s man lost. A multibillion-dollar, energy-linked Chinese loan to Ghana caused political ructions there. Leaders in Chad, meanwhile, have been struggling in recent weeks to tamp down public anger over a sudden boost in the price of gasoline produced by a new CNPC refinery near the Chadian capital.

China’s entanglement in foreign nations’ quarrels, however, is perhaps deepest in the desert and bush that flank the Nile. Here, CNPC straddles both sides of a murderously volatile fault line: between Muslim Arabs in the north and black, often Christian Africans who inhabit the south.

Most of the oil lies in the landlocked south, but the only way to get it to market is through Chinese-built pipelines that pass through the north to a Chinese-built terminal on the Red Sea.

When CNPC first took a stake in oil fields here in 1996, China placed all its chips on a brutal regime in Khartoum, selling arms and providing diplomatic cover as President Omar Hassan al-Bashir battled to crush southern rebels. With these same rebels now running ministries in Juba, China is rushing to hedge its bets, offering Khartoum’s foes in the south a package of development aid and low-interest credit that hasn’t been announced but that officials here say could be worth as much as $10 billion.

“During the struggle of the people of South Sudan, China took the side of the government in Khartoum,” said Pagan Amum, the secretary-general of the Sudan People’s Liberation Movement, or SPLM, a rebel outfit during the civil war that is now South Sudan’s ruling party. “But that is history, a troubled history, and we will not allow ourselves to be hostages of the past.”

Amum, who got invited to China last month, said that he raised this “difficult past” during a banquet in Beijing at the corporate headquarters of CNPC and that he was assured that the company wants to “sort things out, to heal” and work closely with Juba.

Pursuit of energy

In the vanguard of China’s pursuit of energy and profit overseas, CNPC began looking abroad nearly two decades ago, just as Chinese industry’s appetite for oil started to overtake domestic production. Since then the company has invested in ventures from Peru and Venezuela to Iraq and Kazakhstan.

But nowhere has CNPC poured in so much money and caused itself — and the Chinese government — so many headaches as in Sudan.

China imported more than half the oil it consumed last year, with Africa its biggest source after the Middle East. The country’s largest African supplier by far was Angola, but most of that oil was simply purchased, not produced, by Chinese companies. In the Sudan region, by contrast, CNPC — the dominant partner in foreign consortiums operating there — actually pumped the oil from the ground.

Chinese customs figures show that China imported 92 million barrels of crude from Sudan last year — or 70 percent of Sudan’s total oil exports as reported by the then united country’s Central Bank.

CNPC, thanks in part to its expansion overseas, now ranks as one of the world’s biggest energy companies. Its listed subsidiary, PetroChina, which trades on the New York Stock Exchange, has a market capitalization just behind that of ExxonMobil, America’s biggest oil company.

Though largely motivated by profit, CNPC won strong state support for its push into Sudan by presenting this and other investments abroad as a boost to China’s energy security: They reduce China’s dependence on Western oil majors that dominate production in Angola, Nigeria and elsewhere. But they’ve also left Beijing struggling to juggle often-irreconcilable interests.

“They want to be close to us and close to Khartoum. But Jesus said you cannot serve two masters,” said Dau, South Sudan’s petroleum minister. “They have to make a choice. They have to be honest and say who is right. That is what the Bible says.”

China has tried to stay neutral but gets sniped at by both sides. “It’s a dilemma for China,” said Cui Shoujun, director of the International Energy Research Center at Renmin University in Beijing. China “tries to balance the south and the north but hasn’t come up with an effective way to do this.”

Amid escalating tension across a new international border, Amum, the head of South Sudan’s ruling party, traveled to the Ethiopian capital, Addis Ababa, last month for talks with officials from Khartoum on pipeline tariffs and other issues. The African Union mediated the negotiations, but China played an active role behind the scenes trying to calm tempers.

When discussions broke down and Sudan threatened to disrupt pipeline deliveries, Amum got a call on his cellphone from China’s ambassador in Juba. The ambassador, Amum said, “is very powerful” and wanted to ensure that oil keeps flowing.

“We talked about threats to our national interest and their national interests,” Amum said.

The Chinese Embassy declined to comment. The Foreign Ministry in Beijing then issued a stern public warning that “China thinks it is crucially important .?.?. to keep normal oil production.”

Sudan, though a close friend of Beijing for years, still held up China-destined oil shipments for several days. Liu, China’s Africa envoy, rushed to Juba and then Khartoum, warning that oil has to keep flowing “because the consequences of stopping .?.?. will be disastrous to everyone.” Oil tankers are now being loaded normally again, but the underlying dispute is far from solved.

As the talks with Khartoum collapsed, South Sudan’s Petroleum Ministry summoned CNPC and its partners from Malaysia and India to a shabby hotel conference room in Juba to confront another nettlesome issue: the rewriting of oil contracts.

The ministry says it doesn’t want the companies to suffer financially but does want them to pay attention to matters that the old, Khartoum-drafted contracts largely ignored: protection of the environment, respect for human rights and social responsibility. CNPC officials in Juba, citing the sensitivity of the talks, declined to comment.

Western firms retreat

The deals South Sudan wants reworked date to when CNPC first plunged into Sudan, taking over fields originally developed by the U.S. company Chevron, which, alarmed by mounting violence, had pulled out. Shortly after this, Washington in 1997 imposed economic sanctions on Sudan, which it declared as a “sponsor of terrorism and a relentless oppressor of its minority Christian population.”

As Western companies retreated, CNPC advanced, boosting production and investing in a pipeline to the Red Sea that, in 1999, allowed the first oil exports from Sudan.

Stories spread of atrocities linked to CNPC’s oil wells, including accounts of Chinese-supplied helicopters gunning down villagers as the Sudanese military moved in to clear and secure oil-producing areas. Not all of the accounts were true, but CNPC, steeped in the secretive ways of China’s ruling Communist Party, which appoints the company’s boss, mostly ignored pleas from outsiders for information and access.

By the time Sudan and southern rebels signed a peace accord in 2005 to end Africa’s longest civil war, “China was the devil in the minds of many people here,” said Alfred Sebit Lokuji, an expert in local development at Juba University.

China also came under withering fire from Western human rights activists, who accused it of complicity in Khartoum’s depredations in the western Darfur region and in the south. They called on investors to boycott PetroChina, CNPC’s listed subsidiary, and dubbed the 2008 Olympic Games in Beijing “the genocide games.”

When the International Criminal Court in The Hague indicted Bashir on war-crimes charges in Darfur in 2009, Zhou Yongkang, a member of the Communist Party’s Politburo Standing Committee and a former CNPC boss who had led the company’s 1990s expansion into Sudan, visited Khartoum to attend the opening of a Chinese-built refinery. He declared himself an “old friend of the Sudanese president.”

Amum, the SPLM secretary-general, said he was assured by CNPC’s boss, Jiang Jiemin, during his trip to Beijing that “if anything bad happened, it was not from them but from the government of Sudan. They said they were not involved in human rights violations.” CNPC in Beijing declined to comment.

China shifts gears

As independence for South Sudan became increasingly likely, China shifted gears, opening a diplomatic mission in Juba and reaching out to the SPLM. CNPC also set about mending fences, funding a computer center at Juba University. When Sudan split in July, the oil company began moving staff members from Khartoum to Juba, setting up offices, a dormitory and a canteen in a cluster of prefabricated huts at a Chinese-run hotel. China’s embassy is in the same compound.

Newly relocated CNPC staff members are shocked by Juba’s primitive conditions. A poster on their office wall warns of “Five Major Hazards” — a list of diseases endemic in South Sudan. But, one staffer noted, at “least they sell beer,” unlike in Khartoum, where alcohol is banned.

South Sudan, which gets 98 percent of its revenue from oil pumped by CNPC-led foreign operators, has tried to woo Chevron, Halliburton and other U.S. oil companies but found no takers, leaving China as its only real economic partner.

“Reality makes us work with people who are not our friends,” said Lual Deng, a southerner who served in Khartoum as petroleum minister before the country split. “We would prefer Western companies, but they are not coming.”

China’s money hasn’t opened all doors. Nihal Bor, the chief editor of the Citizen, a local newspaper, recalled how a Chinese diplomat stopped by ahead of an August visit to Juba by Foreign Minister Yang Jiechi and offered to pay for the publication of “an interview” with Yang trumpeting Beijing’s friendship. But there was a snag: The paper would not get to see the minister, only to publish an embassy-scripted “interview” in return for cash. “We are not that desperate,” said the editor, who declined the offer.

Amum, the ruling party’s head, though, thinks China’s deep pockets offer the best hope for development in a country bigger than France but with only a few dozen miles of paved roads. China, he says, can help not just the oil industry, but also mining, agriculture and infrastructure. “There are no hard feelings,” Amum said. He has learned how to use chopsticks.

This entry was posted on Monday, December 26th, 2011 at 9:14 pm and is filed under China, China National Offshore Oil Corporation, Sudan.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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