|Sino-Sudanese Relations: The Importance of Oil and the 2011 Referendum|
|Written by Denine Walters (1) Friday, 30 April 2010 17:37|
Much controversy surrounds Sino-Sudanese relations, which have existed since 1959 when Sudan first established diplomatic relations with China. Many critics of this relationship, such as international NGO Human Rights Watch, have claimed that China’s rising imports for Sudanese oil coincides with the sales of Chinese small weapons to Khartoum, and that these weapons sales have only exacerbated the already deadly conflict in Sudan’s western region, Darfur. Since China shares close ties with Sudan, this newsletter will discuss China’s relationship with Sudan. It will also examine the 2011 referendum to be held in Juba and how this may possibly alter Beijing’s relationship with this African state.
The Chinese approach to foreign relations is termed “non-interference in domestic affairs”. Chinese leaders view human rights as relative, stating that each country should be allowed their own definition and timetable for reaching a good record of human rights. Moreover, this Asian Tiger has argued that attempts by foreign states to discuss democracy and human rights violate the rights of a sovereign country. However, it seems that China’s foreign policy is evolving as it realises the need to protect its economic interests. For instance, in 2007, it altered its policy of blocking United Nations (UN) Security Council resolutions authorising peacekeepers for Darfur and placed modest pressure on Khartoum to allow a UN peacekeeping deployment (2).
Additionally, Beijing continues to share an active bilateral relationship with Khartoum including frequent high-level Government visits and missions. For example, a senior official of the Communist Party of China (CPC), Zhou Yongkang, paid a goodwill visit to Sudan at the invitation of Sudan’s ruling National Congress Party (NCP) in November 2009 (3). This visit also coincided with the 50th anniversary of the establishment of China-Sudan diplomatic ties. Yongkang and newly re-elected Sudanese President Omar al-Bashir also discussed how these two nations could advance their relationship and agreed to further oil and agriculture cooperation.
Economic relations and oil
Sudan is China’s third largest trading partner in Africa. In turn, China is Sudan’s largest trading partner, since it purchases 71% of Sudan’s global exports. Foreign activity in Sudan’s oil industry comes mainly from Asian investment, since Western oil companies have been reluctant to work in the country due to sanctions and higher risks associated with the instability in this state. During the years of civil war (from 1983 until 2005), Western companies were under intense shareholder pressure to exit Sudan. Foreign investors still face the risk of kidnappings and instability despite the Comprehensive Peace Agreement (CPA) that was signed in 2005 between the Northern and Southern regions of Sudan. For example, in October 2008, nine Chinese oil workers were kidnapped in the southern Kordofan province – the third such incident to have occurred in that year alone (4). Five of these kidnapped workers were killed by the Darfur rebel group, Justice and Equality Movement (JEM), two were reported missing, and the other two escaped (5).
Furthermore, China’s investment in Sudan is substantial, specifically with regards to the energy sector. More than 60% of Sudanese oil output is purchased by China and this accounts for more than 6% of Chinese imported oil. Since China is the largest investor in Sudan, these investments present the greatest benefit to Khartoum. This is illustrated by the fact that approximately 80% of Khartoum’s revenue comes from oil, which is produced and bought by the Chinese. The Chinese state-owned oil company, China National Petroleum Company (CNPC), is the largest stakeholder in Sudan’s biggest energy consortium, the Greater Nile Petroleum Operating Company, through its 40% stakes. Chinese companies are also active in other energy-related sectors of Sudan’s economy. These activities include the construction of oil pipelines, electricity and hydropower facilities, as well as infrastructure development.
Sudan and Chinese supplied military weapons
China views weapons sales as a means of enhancing its status as an international political power and as a means to increase its ability to obtain access to significant natural resources, such as oil in Sudan. In the period 2003 to 2006, China’s arms sales to Africa made up 15.4% (about US$ 500 million) of all conventional arms transfers to the continent. Notable weapons sales include those to Sudan, Equatorial Guinea and Ethiopia amongst others.
Since 1996, Beijing has been Khartoum’s main supplier of weapons, military supplies, and weapons technology. Since 2005 this has been in direct violation of the UN imposed arms embargo that was imposed that year. Moreover, Khartoum has purchased large quantities of military aircrafts, heavy artillery, tanks, and armoured personnel carriers by using Chinese-generated oil-revenues. These weapons and military supplies have been sent to Darfur to aid the Sudanese Government forces and Janjaweed militia in the conflict with the opposition forces in the area. China has also helped to improve this Government’s production capacity with the result that Khartoum is largely self-sufficient in building small- and medium-sized weapons.
South Sudan, the 2011 referendum and China
Conflict in Sudan broke out again in 1983 (after the first civil war which ended in 1972). This second war was rooted in the northern economic, political and social domination of the largely non-Muslim, non-Arab Southern Sudanese. Fighting in the oil-producing areas between the Southern rebels and Khartoum-sponsored Southern militias became an essential part of the war in the 1990s. Peace talks gained momentum in the period 2002 to 2004 with the signing of several peace agreements. The last of these agreements, the CPA, was signed in January 2005. The CPA gives the South its own semi-autonomous government, headed by former Southern rebels. After a six-year interim period, a referendum for Southern independence is scheduled to be held in January 2011. Since 80% of Sudan’s oil fields are located in Southern Sudan (this figure could increase to 95% depending on where the border will be drawn between the North and South), the results of the referendum pose the question: how will China’s relationship with Juba, the capital of Southern Sudan, change?
A post-referendum independent Southern Sudan would undertake a review of contracts that have been signed between Khartoum and international oil companies. Luka Biong Deng, the Presidential Affairs Minister in the semi-autonomous Government of Southern Sudan (GoSS), has cited concern over excessive profit taking on the part of the international oil companies, environmental damage and a disregard for local communities as reasons for the review. Since these contracts have been signed with the Government in Khartoum during the state’s civil war, the GoSS would have to ensure that the terms of the agreements are appropriate once they have full control over Southern Sudan, and subsequently, the oil fields.
Thus, a newly independent Southern Sudan will be eager to assert control over its oil industry. This may have a major effect on the competitive landscape in a new Southern Sudan. For example, sanctions against Khartoum and the risk of operation in the war-torn state have prevented active participation in the country on the part of Western international oil companies. The result has been that Asian national oil companies have since dominated Sudan’s oil industry. Deng’s statement thus suggests that this situation may change after the referendum and review of international oil companies. This new Government could also ask for current active participants to give way to newcomers, since Western investment would be welcomed. However, it seems unlikely that the three dominant players, namely China’s CNPC, Malaysia’s Petronas and India’s Oil and Natural Gas Corporation (ONGC), will sell large stakes to Western firms, since Sudan is extremely important for these companies and by extension, their parent countries. Western companies, in turn, would welcome the opportunity to invest in Southern Sudan as it is a fresh opportunity for them to access Sudan’s significant oil reserves while avoiding dealing with the current regime in Khartoum, which has been the focus of restrictive sanctions and criticism from the West.
China, realising that they needed to gain a foothold in Southern Sudan, started to develop a good relationship with this region after 2005. China is also determined to tap into greater economic potential from the underdeveloped region and to protect its economic interests in the area, and thus, opened a new consulate in Juba in August 2008 (6). China has also decided to assist Juba with the implementation of the peace process, particularly in the area of coordinated development of Southern Sudan to enhance development. Moreover, Beijing sent a special envoy to Southern Sudan in 2008 to look for cooperation opportunities, watch over their business interests; China is also prepared to fund a series of development projects in Southern Sudan, including hydroelectric facilities, roads, housing, stadiums and cultural centres.
So, how would China’s relationship with Sudan change should Southern Sudan become the newest African country? On realising Southern Sudan’s strategic importance, China may (and has already to some extent) try to further implement the peace process between the North and South and provide extra support for the referendum to establish an autonomous Southern Sudan. Thus, China may give greater support and assistance to Juba, since it would benefit more from its oil investments in that region. Juba may then become a more important partner for China in the future, especially since the country is very much dependent on external oil. Another possibility is that China may realise that it needs a good relationship with Juba (to protect its interests), but decide that it may benefit more if Sudan (both North and South) are one united country. Reasons for this include the possibility of renewed armed conflict between the two regions over oil fields should Southern Sudan become independent (especially since the demarcation of the border between these regions is still unclear). Nonetheless, only post-2011 will reveal the altered relationship between Beijing, Juba and Khartoum.
(1) Denine Walters is an Analyst in Consultancy Africa Intelligence's Asia Dimension Unit (