China-Japan oil rivalry spills into Africa

Posted in Japan , Asia | 17-Nov-05 | Author: Joshua Eisenman and Devin T St| Source: Asia Times

China and Japan - the two giants of East Asia - are competing for energy resources around the globe. Their rivalry in the East China Sea, Russia, Central Asia and Southeast Asia has been well documented. Yet little has been written in Washington about the impact of Sino-Japanese rivalry in Africa.

With one-third of its top 15 oil suppliers in Africa, the United States ignores the challenges of this geopolitical dynamic at its peril. As the world's largest consumer of energy and protector of the sea lanes, the United States plays a critical role in ensuring the free flow of this important commodity.

Currently the United States' top two foreign policy objectives are combating global terrorism and promoting democracy around the world. In Africa and Asia, the number of democracies has increased dramatically over the last 25 years. While some policy experts, such as Francis Fukuyama, argue that strong Chinese economic growth has underpinned democratic transformation in Asia, other experts have identified potential problems emerging from Beijing's search for energy resources in Africa.

A former US ambassador to Nigeria and South Africa, Princeton Lyman, recently asked, "Does China want to be seen in Africa as the defender of rogue states, the more aggressive seeker of Africa's natural resources, without regard to transparency, development and stability there?"

Last year, China displaced Japan as the second-largest importer of African oil after the US, according to The Economist newspaper. Despite falling total petroleum imports, Japan's African supplies grew by nearly 20% in 2004. Over the same period, Chinese imports grew by more than 35%.

Tokyo's approach to its relationships in Africa includes an emphasis on democratic reform and human rights. In 2002, Japan's task force on foreign relations for the prime minister argued, "Bringing about democracy and good governance in Africa is essential for world stability and prosperity." Japan has also supported elections in Nigeria and in the Democratic Republic of Congo and funds African rule of law and human rights initiatives. For instance, last month through the United Nations' Trust Fund for Human Security, Japan donated more than $2 million to provide training on international humanitarian and human rights law to African Union Mission troops in Sudan.

Japan and African nations have not always agreed at the UN, however. A bone of contention has been UN Security Council reform. Japan is part of the G-4 that includes including Germany, Brazil and India. Differing G-4 and African proposals have been a source of disagreement for Japanese and African interlocutors. For its part, China supports Africa's position on Security Council reform and opposes Japan's membership.

In order to secure supplies, Beijing seeks to gain control of African oil at its source. As a result, China's strategy is heavily dependent on bilateral ties to oil-producing states. Beijing's cultivation of relationships with Africa elites facilitates its state-owned oil companies exploring, securing, extracting, processing and shipping African crude.

Africa nations including Sudan, Chad, Libya, Nigeria, Algeria, Gabon and Angola supply China with about 25% of its oil. Although individually these countries make up a modest share of Chinese imports, Beijing's purchases are a significant share of African oil producers' exports. Beijing imports a quarter of Angola's oil, 60% of Sudan's and an increasing percent from Equatorial Guinea, Nigeria and Gabon. These are poor countries and petroleum exports account for a sizable part of gross domestic product in each. As such, the effect of China's approach on these countries domestic political and social development is significant.

In Sudan, Beijing's financial and military support for the Khartoum government during its civil war and genocide in Darfur coupled with Chinese attempts to water down UN resolutions targeting Sudan have been roundly criticized in Western capitals.

In Angola, Chinese loans and aid packages have undermined attempts to improve government transparency and corporate governance in the oil sector. The majority of Angola's roughly 13 million people live in poverty, and elites have siphoned off much of the nation's oil wealth. As part of a larger package in March 2004, China provided Luanda with more than $2 billion in loans in accordance with its principle of non-interference in countries internal affairs. Just last week Jose Pedro de Morais, Angola's finance minister, said he expected future Chinese loans would exceed $2 billion, adding "when we ask our Chinese counterparts if they are willing to provide more loans, they say yes." [1]

Beijing's loans are oil-backed and many are targeted at infrastructure projects that facilitate development of the petroleum industry. Chinese capital has encouraged Angola to refuse International Monetary Fund (IMF) loans that would require the country to open its books to independent scrutiny and reveal and reform the poor African nation's corrupt leadership. Given growing US dependence on African oil imports and the importance Washington places on democracy promotion, policymakers must consider the effects of China's strategy on African suppliers.

China's methods in Africa are not lost on the Japanese media. In February, the Yomiuri Shimbun reported that China is accelerating its search for oil in Africa, and in an August editorial, the Sankei Shimbun warned that China chooses to do business with supporters of terrorism and anti-democratic African states.

But for Washington, the challenge of energy security goes beyond Africa. If disputes over energy resources disrupt trade and investment, Asian economic growth would be undermined and the ripple effect would be felt all over the world. Tensions, such as those in the East China Sea, could escalate into real conflict, putting the United States in an awkward position between its closest strategic ally and the region's rising economic power. Washington would be well served to seek collaboration with Beijing and Tokyo in an effort to ensure energy supplies for importers while encouraging exporters' accountability and good governance.

This collaboration would seek to achieve a standardization of procedures designed to avoid disruption in the supply of oil, further develop alternative energy and energy-saving measures, minimize the cost of extraction and risk of conflict, and maximize the benefits by working to improve transparency and good governance in oil-producing states. As the world's top three oil importers, the US, China and Japan have an opportunity to avoid conflict and underscore the importance of accountability in energy suppliers in Africa and throughout the developing world.

In its annual report to Congress, the US-China Economic and Security Review Commission recommended the formation of a US-China energy working group to mirror the successful US-Japan energy working group. This would be a positive first step for the president to explore during this week's meetings with the Chinese and Japanese leaders.

[1] Reuters, Angola sees new Chinese loans above $2 bln

Joshua Eisenman is the co-editor of China and the Developing World: Beijing's Strategy for the 21st Century and author of the book's chapter on China's strategy towards Africa (M E Sharpe 2006). Devin Stewart is Fellow, Office of the Japan Chair, Center for Strategic and International Studies (CSIS) in Washington, DC.