23 October 2018
The Ugandan government has set a target of producing 30,000 barrels of crude oil daily by 2020. Photo: Reuters
The Ugandan government has set a target of producing 30,000 barrels of crude oil daily by 2020. Photo: Reuters

Scramble for African oil tests Beijing’s resolve to stay clean

The people of Hong Kong were shocked when news came out last week that former home affairs secretary Patrick Ho Chi-ping, along with the former foreign secretary of Senegal Cheikh Gadio, was arrested by US authorities for allegedly having bribed the president of Chad and the foreign minister of Uganda to gain exclusive oil drilling rights on behalf of a Chinese energy company.

The US Department of Justice didn’t mention the name of the company in question; all it has disclosed so far is that the firm is based in Shanghai and has been granted “special consultative status” by the United Nations Economic and Social Council (ECOSOC).

However, the fact that Patrick Ho is currently the secretary-general of a non-profit organization known as China Energy Fund Committee, “which was founded by China CEFC Energy Company Limited”, and which also has “special consultative status” with the ECOSOC, is simply a dead giveaway.

We aren’t 100 percent sure if CEFC China is indeed the company the US Justice Department was referring to, but so far all the details released by the US government have suggested that Ho could have served as some kind of an intermediary between a Chinese energy company and the two African countries in an effort to facilitate oil deals between the two sides.

In the meantime, a spokesperson for China’s foreign ministry, Lu Kang, has expressed concerns about news reports on Ho’s arrest, and stressed that China has long been enforcing an official policy under which all Chinese companies are strictly required to abide by local laws in any foreign country where they have overseas business operations.

China CEFC Energy has also issued a statement denying any investment initiatives in Uganda, and dismissed allegations of having any relationship that involves business interests with the Chad government.

The company also stressed that Ho, as secretary-general of China Energy Fund Committee of Hong Kong, has never participated in the company’s actual business operations.

While Ho’s fate remains uncertain, the saga reflects a big diplomatic picture that is going to have far-reaching implications in world politics: every great power is now aggressively eyeing the vast crude oil reserves in Africa, and their gloves are off in the course of scrambling for this untapped treasure.

China is desperate to get its hands on African oil in order to reduce its reliance on the Middle East.

Many major oil-producing countries in the Middle East such as Saudi Arabia are staunch US allies. That explains why China, which is now pressing ahead with its One Belt, One Road plan at full throttle, is seeking to break free from US containment by turning to Africa for stable oil supply.

Uganda, for one, has an estimated oil reserve of 6.5 billion barrels, which, if explored and drilled properly, can bring the impoverished country billions of dollars in revenues. In fact, its government has set a target of producing 30,000 barrels of crude oil daily by 2020.

Unfortunately, political instability and rampant corruption in Uganda have made it almost impossible for the country to conclude any agreement on drilling rights with foreign investors.

In the Corruption Perceptions Index (CPI) published by Transparency International, Uganda is currently ranked 151th among the 176 countries in the world in terms of the rampancy of corruption.

The situation in war-torn Chad is quite the same. Ranked 159th in the CPI, Chad faces a corruption problem so rife and deep-rooted that local officials are routinely milking Chinese entrepreneurs doing business in the country for bribes and perks.

Chad and many other African states appear to be stuck in a perpetual cycle of the “oil curse”. Despite having abundant natural resources, these countries have been unable to get out of poverty because of their dysfunctional governments and political volatility.

True, Africa may have a lot of potential to become China’s strategic energy stronghold in the long run. But before Beijing’s leaders can achieve that ultimate strategic goal, the first big and fundamental task lying right in front of them is to figure out how to gain drilling rights lawfully and achieve a win-win situation with their African partners.

This article appeared in the Hong Kong Economic Journal on Nov. 22

Translation by Alan Lee

[Chinese version 中文版]

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