Name:Zhao Juan Student Number:s07332

Research paper supervisor:Dr.Seku Conde

Minzu University of China

Anthropology Department

2007-2008 Academic Year

    

 

Abstract: In this paper, the topic is about the oil trade between China and Angola. As we know, Africa is very large, it includes five parts: North Africa, South Africa, East Africa, West Africa and Central Africa. In Africa, there are about 20 oil production countries, the oil output of Nigeria、Algeria、Libya、Angola and Egypt accounts for about 84 percent of the total output of Africa. And Angola is the new member of OPEC and it is the second-largest oil production countries in sub-Saharan Africa after Nigeria. Today, Angola is china’s most important partner on the African continent and it is the largest source of Chinese crude oil imports. Also, there is a friendly relationship between China and Angola since the civil war. And China gives their aid to the restructure of Angola after the civil war. So there is a long relationship between the two countries. But different people and countries have different views about the oil trade between China and Angola which are based on their own benefits. After the analysis, I think we should take an opening view to the oil trade between the two countries. From the world view, the oil trade between China and Angola and the energy cooperation between China and Africa are mutually influences and are the model of the win-win policy in China and Africa.

Keywords: oil trade, oil production, win-win policy

Introduction: In this paper, I will talk about the oil trade between China and Angola. The paper consists of four parts. In the first part, it is about the oil production in Africa, especially in Angola. By right of the abundant reserves and the predominant geography location, Africa has become a very important role to influence the contrast of the force between different oil production countries and also become a new battlefield for the international oil magnate to competition. At the same time, Angola is the second-largest oil production countries in sub-Saharan Africa after Nigeria and it is the most important partner of China in Africa. So the Africa absorbs many countries to investment and competition. In the second part, it is about the development of the oil trade between China and Angola. In January 12th 1983, China and Angola found the foreign relations. After the civil war of Angola in 2002, the bilateral relations of the two countries enter into a new developmental phase. China gives their aid to Angola government and enterprises in order to help Angola’s reconstruction. In the third part, it is about the different views toward the oil trade between the two countries. Some countries think that the oil trade between China and Angola is benefit to the development of Angola and the Africa, not only for the economy development but also for the political stabilization and the development of the whole world. However, some countries and people have the opposite views. They think that what is China done to Angola is due to its own benefit, such as improve its international status and get the sustain from African continent. The entire parlance is based on its own benefits. After the analysis, I give my recommendation about this topic. From the world view, the oil trade between China and Angola and the energy cooperation between China and Africa are mutually influences and are the model of the win-win policy in China and Africa. Both the two countries can benefit from the cooperation, not only the economic development but also the political status. So we should take an opening view to the development of the two countries, especially during the oil trade.

 

The oil production in Africa, especially in Angola

During these years, with the roily situation of Middle East, the participation of the west force such as American, the demand of the oil for the world market and the shortage of the supply of the oil, the price of crude oil in the international market is always very high. “The price of every barrel is from 25 dollars average in 2001 to about 65 dollars in 2006.” [1]In order to guarantee the supply of crude oil and realize the diversification of the oil production, all the oil consumption countries put their eyes to Africa. By right of the abundant reserves and the predominant geography location, Africa has become a very important role to influence the contrast of the force between different oil production countries and also become a new battlefield for the international oil magnate to competition.

As we know, Africa is very large, it includes five parts: North Africa, South Africa, East Africa, West Africa and Central Africa. In Africa, there are about 20 oil production countries, the oil output of Nigeria、Algeria、Libya、Angola and Egypt accounts for about 84 percent of the total output of Africa. West Africa is one of the fastest-growing oil production regions in Africa and Mauritania, Mali and Niger will be among the list of oil producers in the next few years. “In Africa, the oil was first found in Algeria and Nigeria in 1956, according to the World’s Energy Statistics Data published on June 2007, up to the end of 2006, the oil reserves in all the countries of Africa was 117.2 billion barrels, which was just inferior to Middle East and Europe and in the third place in the world. According to the new materials, up to the end of 2006, the daily output of crude oil in African continent was about 9.99 million barrels, which accounted for 12.1 percent of the world oil production. And in the next five years, 25 percent of the oil output in the world will come from Africa.”[2]

As the new member of the OPEC (The Organization of Petroleum Exporting Countries), Angola is the second-largest oil production countries in sub-Saharan Africa after Nigeria. “Angolan government estimates that in 2008 the Angolan oil production will double in 2008 than in 2006, from 1 million barrels every day to 2 million barrels every day.”[3] Angola is moving to the world major oil-producing countries as its goal. “Their oil reserves which have been proved up are about 12.3 billion barrels.” [4]In the next ten years, Angola will compete the status of the largest oil production country in Africa with Niger. Angola is moving in the world major oil-producing countries of the goal.

Angola’s oil exploration and production activities began in the early 21st century; its crude oil output was less than 100,000 barrels every day until the 1970s. In 1975, Angola got rid of the colonial rule from the Portuguese and obtained national independence. Then Angola declared that all oil resources are owned by the State and issued a petroleum law, and then established the Ministry of Oil and the state oil company. This provides a legal guarantee to attract more foreign oil companies to enter Angola and then Angola’s oil industry is developing rapidly.

The oil producing areas in Angola are mainly distributed in the sea and under the control of the government, the oil production is less interference and the output of crude oil increased rapidly despite the continuous war in Angola. “To the beginning of this century the oil production has reached 800,000 barrels a day. From the 1980s, the Angolan oil exploration and exploitation activities gradually transferred to the deep sea areas and added its concession areas of marginal sea areas to 34.”[5] By 1990s, in Luanda and Kwanza, south of the estuary waters and Benguela Gulf waters, rich reserves of oil and oil fields were found constantly.

“The oil and gas industries, both considered highly promising, have attracted over $20 billion in foreign direct investment since 2003. The economy of Angolan is highly dependent on its oil sector, which accounts for over 40 percent of gross domestic product (GDP) and almost 90 percent of the government’s revenues.”[6]

The development of the oil trade between China and Angola

In January 12th 1983, China and Angola found the foreign relations. And after the foundation of the foreign relations between the two countries, the friendly cooperation relations of the two countries is growing fast, the cooperation and communication in every area is extending quickly. And during the international and regional affairs, the two countries keep favorable negotiation and cooperation too. In June 2006, the premier of Wen Jiabao visited Angola successfully, which was the first time of the China’s premier who gave a visitation to Angola after the foundation of the foreign relations of the two countries. And in November, the premier of Fernando of Angola which leads his group participated in the Beijing Summit of Forum of China-Africa Cooperation. The exchange visits of the two countries play an important role to the development of the two countries. After the civil war of Angola in 2002, the bilateral relations of the two countries enter into a new developmental phase.

2002, Angola’s civil war which was lasted for 27 years ended. During the war, there were about 500 thousand people dead and most of areas in the country became into in ruins. Frequently hampered by the war in Angola, hundreds of things in Angola were destroyed and the Angola government realized that it was a critical period for them to seek the rapid development. “It is for this reason, Angola attracted a lot of the state’s investment because it can be too much room, after all, here there is rich oil resources, which developed countries have a sufficient reason to be moved, as a major oil consumption countries and china is no exception.” [7]

Today, Angola is china’s most important partner on the African continent. Angola’s importance lies in the fact that it is the second-largest oil producer in Africa. In 2004, Angola became China’s largest supplier of crude oil on the African continent. “For instance, during January to March in 2006, Angola became China’s number one oil supplier, which exported 456,000 barrels a day to China, accounting for 15 percent of its total oil imports and surpassing Saudi Arabia.”[8] “During Vice Premier Zeng Peiyang’s visit in 2005, China granted the Angolan government a $6.3 million interest-free loan and additional $2.2 billion in soft loans in early 2006.”[9] In 2006, trade between China and Angola reached the $5 billion mark, making Angola China’s second-largest trading partner in Africa and making China Angola’s third-largest trading partner.

Angola accounted for half of China’s oil imports from Africa in 2005, according to the World Bank. China plays a much more significant role in Angola. “China and the United States are the major buyers of Angolan oil, both importing approximately 500,000 bpd as of late 2006. China is thus the buyer of nearly 40 percent of Angola’s total oil production, which also makes Angola the largest source of Chinese crude oil imports, surpassing Saudi Arabia as the largest source in 2005.”[10]

Different views about the oil trade between China and Angola

Facing the oil trade between chain and Angola, different countries have different views based on their own benefits. Some countries think that the oil trade between China and Angola is benefit to the development of Angola and the Africa, not only for the economy development but also for the political stabilization and the development of the whole world. However, some countries and people have the opposite views. They think that what is China done to Angola is due to its own benefit, such as improve its international status and get the sustain from African continent. The entire parlance is based on its own benefits.

The Angola government and the enterprises in Angola have the same views. They all welcome the oil trade between the two countries.

The civil war of Angola which was lasted for 27years was ended in April 2002, and after the civil war, the economy and trade between China and Angola grow fast and China helps Angola to restructure the basic establishment after the civil war with the loan. Angola was frequently hampered by the war, so it is a critical period for Angola to undertake all the things and to seek the rapid development. China gives their aid to the reconstruct basic establishment of the Angola.

Angola exports 25 percent of its oil production to China, Beijing has secured a major stake in future oil production with a $2 billion package of loans and aid that includes funds for Chinese companies to build railroads, schools, roads, hospitals, bridges, and offices. Chinese companies have also been active in infrastructure projects such as building roads, bridges, schools, shopping centers, office buildings and low cost housing projects. Early in the 2006, Chinese companies were awarded a major contract to restore the Benguela (a city in Angola) railroad at a cost of $300-500 million, which is the country’s major railroad. The Angola government believes that the oil trade between China and Angola can enhance the friendship of the two countries. And at the same time, the numbers of China communities which are indwelled in Angola are expanding. Jose Eduardo dos Santos, the president of Angola said that “We give our highly praise to China’s pragmatic attitude to Angola which can accelerate the establishment of the state.”[11] Marais, the financial minister of Angola said that “we are welcome all the new settlers with getting rid of the entire obstacle.”

The China oil company makes the cooperation with the Angola’s which provides some technology to the development of their company. Angola only has one refinery which was built in the middle 20^th century. Because of the lack of technology, the development of company is very slow.  “By the end of 2004, China’s contracted projects in Angola have reached a total of 776 million U.S. dollars contract to complete turnover of 156 million U.S. dollars. It is understood primarily China National Machinery and Equipment Import and Export Corporation, the Sichuan International Economic and Technical Cooperation Corporation iron. Shanghai Bell Corporation and the China National Machinery and foreign economic and technological cooperation and other related operations in Angola.”[12]

Most of the Chinese-Angolan cooperation agreements signed was related to the energy sector. China is also desperately looking for more secure oil deliveries and Angola is sub-Saharan Africa’s second largest oil producer. The Beijing and Luanda governments signed a general agreement on cooperation in the oil and gas sector and cooperation in the mineral resources sector - seeing Angola as an exporter and China as an importer. In addition to be a major energy import market, China is also one of the world’s main technology centers. One of the agreements therefore foresees a cooperation agreement between the Angolan Ministries of Petroleum and Geology and Mining and China’s National Commission for Development and Reform, focusing on technical aid.

“Sonangol, Angola’s state oil company, agreed on a long term supply of oil to China’s Sinopec oil company. Further, Sonangol and Sinopec are to jointly evaluate Angola’s offshore Block 3. Finally, China and Angola will jointly study plans for a new oil refinery in Angola.” [13]  “On May 10, 2006, Angola’s state-owned oil company Sonangol and China’s Sinopec launched a US$2.2 billion joint bid for blocks 17 and 18; these new blocks have estimated reserves of 3 billion barrels and 1.5 billion barrels respectively. These new blocks are likely to move Angola from the position of third-largest oil supplier to China to that of number two on a long term basis.”[14] So the Angola government and the enterprises think that the cooperation of the two countries is benefit to the development of themselves and they both do their best to accelerate the relationship of the two countries.

Otherwise, in the world some countries have the different views about the the relationship of the two countries. Some countries think that the oil trade between China and Angola is a threat to some developed countries which have the important status in Africa.

While Angola is only the sixth-largest exporter to the United States, supplying four percent of U.S. oil imports, its importance for U.S. energy security should not be underestimated. “This is particularly true in a period when many of the regions that have traditionally supplied the United States with its oil are witnessing significant political instability, such as in the case of Saudi Arabia, Venezuela and Nigeria. The remaining volatile situation in Iraq, and Iran’s continuous hostility toward the United States, further increases Angola’s importance for both powers.”[15]

When Western countries, especially the American, found that there is another competitor in Africa, maybe sometimes feel bad. On one hand, it is because of the benefit competition; on the other hand, it is on the think of strategic benefits. American oil companies have taken an important role in Angola’s oil sector with Angola’s opening to the west. However, China traditionally has maintained good relations with the former Marxist government of Angola, so it remains an important trade partner for Angola. “China’s hunt for oil in Africa has made it essentially the new colonial superpower in the region, surpassing the memories of prior imperial forces such as Belgium, Italy, the Netherlands, Great Britain and France. And it has achieved that status in record time. Trade between China and Africa, which totaled $10 billion in 2000, soared to $39.7 billion in 2005.” [16]

Some countries think that China wants to obtain more supportment from the Africa countries in order to improve its status.

In a paper, it said that: “China is buying off the heart of the leader in Africa in order to get more confederates from developing countries and improve its soft strength overseas.” [17] Critics believe that the availability of the Chinese loan has encouraged Angola to resist pressure from the IMF and Western countries to improve the transparency of its oil sector and make other reforms. Improper use of the loan has in fact become a concern for the Chinese lenders as well, after reports that some of the money was to be spent on government propaganda for the 2006 general election. This led to Chinese intervention to ensure that its assistance was not put to improper use.

Skeptics also question whether China’s oil-backed loan model will deliver sustainable development for Angola, and for Africa as a whole. The Chinese “are bringing a combination of financial and technical power. But with less demands for transparency than the (rest of the) international community,” [18]says Pierre-Francois Pirlot, the Angola representative of the United Nations Development Program. They have a suspicion about whether the cooperation in the oil trade of the two countries can sustain a long time and whether it is the best method for the development for Angola.

Also, some countries make a connection between the help of China to Africa and the arms sales to Africa. A report says, “‘China’s Arms Sales: Motivations and Implications’by Daniel Byman and Roger Cliff for the RAND Corporation, says China’s government exerts strong central control over its arms exports and uses them as a foreign policy tool. Between 1955 and 1977, Le Monde reports, China sold $142 million worth of military equipment to Africa, and the pace of sales has picked up significantly since then. The Congressional Research Service reports China’s arms sales to Africa made up 10 percent of all conventional arms transfers to the continent between 1996 and 2003.”[19] Selling arms to African countries helps China cement relationships with African leaders and helps offset the costs of buying oil from them. They also think that China doesn’t have the same human rights concerns as the United States and European countries, experts say, so it will sell military hardware and weapons to other countries. In fact, China sees Africa as a growth market for its military hardware. “China’s active exploration of oil sources in Africa also leads to a need to ensure security around them, experts say, which has led Beijing to send Chinese military trainers to help their African counterparts. In return, China gains important African allies in the United Nations—including Sudan, Zimbabwe, and Nigeria—for its political goals, including preventing Taiwanese independence and diverting attention from its own human rights record.”[20]

Conclusions

For the relationship of the two countries, we should take an opening view. From the world view, the oil trade between China and Angola and the energy cooperation between China and Africa are mutually influences and are the model of the win-win policy in China and Africa.

First of all, the approximately balance of the economy and trade connections between China and Angola reflect the complementarities of the two countries. The import commodities from Angola in China are mainly the oil due to the demands of the China’s economy development. Angola is mainly importing advanced technological products from China due to the demands of the people in Angola. The intercourse of economy and trade between China and Angola is a bidirectional choice and it fully reflects the complementarities of the economy between the two countries.

Secondly, African countries, such as Angola sells its oil to China based on its free will, it is both a win-win thing and also a commercial behavior. The Angolan national oil company Sonangol is the sole concessionaire for oil exploration and production in Angola. The major international oil companies such as the BP, Chevron, Devon Energy, ExxonMobil, Maersk, Occidental, and Roc Oil take up an important status in Angola. So China does its best to avoid the conflict with the Euramerican companies. If Angola does not sell its oil to China, it also will sell it to other countries.

So the oil trade between China and Angola is not a threat to the Angola government and its enterprises. Although there maybe some conflicts between the two countries in some areas, it is also a favorable environment for the development of the two countries if they take the right attitude. The development of the world needs the cooperation of every country from different places and the development of every country also needs the globalization. It is a interact ional course and we should face this fact and do our best to confront this challenge.

 

References

1、Stenphanie Giry, “China’s Africa Strategy,” The New Republic, Vol.231, No.20, November 2004, P19.

2、Rory Carroll, “Chinese Premier Boosts Trade with Seven-nation Africa Tour,” The Guardian, June 22, 2006

3、“China, Africa, and oil”, Esther Pan, http://www.cfr.org/publication/9557

4、“Chinese American media machine is ‘clean’ African”, http://en.wjj.cc/MarketTrade/TradeInfoDetail.aspx?InfoId=40

5、“China in Africa oil:Guilty as charged?”, Ashild Kolas,

http://www.epsusa.org/publications/newsletter/june2007/kolas.htm

6、“China, Angola sign 9 cooperation agreements”, http://www.afrol.com/articles/15848

7、“How China is winning the oil race? ”, Jon D.Markman, Thursday 27 April 2006, http://www.truthout.org/cgi-bin/artman/exec/view.cgi/60/19484

8、“China and Angola Strengthen Bilateral Relationship”,

http://www.pinr.com/report.php?ac=view_report&report_id=516&language_id=1

9、“Is there a link between oil production and arms sales?”

http://formation.mepasie.org/china-makes-headway-in-angola-with-multiple-trade-ties

10、“The oil trade and cooperation between China and Africa”, 《the international economic cooperation》,

http://www.ccpit.org/Contents/Channel_1089/2008/0213/88068/content_88068.htm

11、“The rapid emergence of the oil industry in Angola”,

http://news.xinhuanet.com/world/2005-02/21/content_2599445.htm

12、http://www.zgjunshi.com/Article/Class4/200803/20080302152531.html

Other Articles: