The Geopolitics of China-African Oil
By Shelly Zhao
Apr. 13 – Since the mid-1950s and 1980s, China has expanded its relations with Africa as part of its broader strategy of developing friendly relations with the “Third World.” In recent years, China has achieved deeper ties with many African countries, and the issue of Chinese energy security and geopolitics in Africa has received more attention. This article offers an overview of the Sino-African oil relationship to provide a foundation for future analyses.
China’s growing energy needs
China’s pursuit of energy resources has generated great interest in the last decade, and energy concerns are indeed a vital national security interest for China in order to sustain both economic growth and economic development. According to the International Energy Agency (IEA), as of July 2010, China surpassed the United States as the world’s largest energy consumer. Analysts say that for China, energy security is crucial for its economic health and directly relates to the legitimacy and survival of the Communist Party. China’s push to secure energy resources and raw materials is part of its energy security diversification strategy, which is also evidenced in other regions such as the Middle East, Latin America, and Central Asia.
Oil, or petroleum, is only one component of the energy resource picture, though an increasingly important one. China remains dependent on fossil fuels such as coal, oil, and natural gas. In 2008, China’s oil consumption made up just under 20 percent of China’s total energy use.
China is currently the second-largest consumer of oil in the world, and more than half of its crude oil is imported. By 2020, official sources estimate that China will import about 65 percent of its crude oil. China does produce oil domestically, though in 1993, China became a net importer of oil and has since increased its dependency on foreign imports. According to the EIA, China was the second largest net oil importer in the world in 2009; official statistics also record China’s oil imports at 204 million tons in 2009, and crude oil accounting for 52 percent of China’s oil consumption.
China’s presence in Africa to secure oil resources has been increasing. It is important, however, to contextualize these relationships, and not overestimate China’s oil demands. For example:
- China still produces much of the oil it consumes
- China imports most of its oil from the Middle East (Saudi Arabia, Iran, and Iraq), Africa, as well as Asia (Russia), Latin America (Brazil, Venezuela), and North America (Canada)
- Africa reportedly only accounts for 9 percent to 10 percent of global oil reserves
- China imports an estimated one-third of its oil from Africa
For China, the Middle East remains the most important source for oil. While Chinese oil imports from the Middle East are projected to increase in the future, China also seeks to reduce its dependence on Middle Eastern oil. While African countries are neither the top oil-producing nor the top oil-exporting countries in the world, there are opportunities for future expansion and production.
Key aspects of Sino-African oil relations
In discussing Sino-African relations, there is perhaps a tendency to consider the African continent as one entity. While one can make broader observations about China’s relations with Africa, there is also much diversity and complexity in the many countries with which China has oil relationships. Below are some of the important points in contextualizing the China-Africa oil relationship.
- While a country may have large oil reserves, they may not be developed, or internal conflict may prevent stability of development and production.
- While the presence of Chinese National Oil Companies (NOCs) is expanding in Africa overall, it should be considered relative to Western presence and not overestimate their influence. It would be an overstatement to say that Chinese oil companies would supplant Western presence in the near-term.
- Oil is one component of China’s growing reach into Africa. Other resource extraction includes copper (Zambia, Democratic Republic of the Congo), cobalt (Democratic Republic of the Congo), and iron ore (Liberia).
The Sino-African oil relationship can become complex due to other linked areas of concern. Oil, as part of China’s desire to acquire more natural resources, has brought criticism of China’s “neo-colonialist” presence in Africa, and questions whether China’s presence benefits governance and the African people. Some of the related areas of interest include:
- Foreign aid: Chinese aid to developing countries can be attractive because of their no-strings attached conditions, in contrast with aid from Western countries or institutions such as the World Bank. (The “tied aid” from Western lenders may involve economic, political, social, or environmental penalties, as well as other “strings” such as democracy promotion or human rights concerns.) Chinese loan policies also tend to be less transparent and easier for recipients to use.
- Infrastructure: Linked with aid, China’s infrastructure projects in Africa can involve concessional or low-interest loans as well as direct financing. In addition, China can promote economic projects in areas in Africa deemed too risky or unfeasible by other governments or multinational corporations.
- Arms sales: China’s ties with many authoritarian regimes in Africa have continued to receive criticism about its lack of consideration for governance and human rights issues. China maintains a foreign policy position of “non-interference in domestic affairs,” and China’s arms sales to certain regimes in Africa have received international criticism. Notable cases are Sudan, Zimbabwe, Liberia, and Nigeria.
Main African sources of oil for China
The following chart provides information on the five African countries that are China’s largest sources of oil in Africa. With the exception of Sudan, Western oil companies are the largest players. In these cases, oil relationships point to comprehensive arrangements that involve trade and infrastructure as well as oil extraction and export.
Other African sources of oil for China
This chart briefly outlines other countries in Africa that provide sources of oil. In many of these countries, China has focused on entry and exploration of potential oil resources, again often seeking comprehensive development and economic arrangements.
- Previous Article China-India Business Update: Apr. 12
- Next Article China Briefing Releases New Transfer Pricing Guide