Speaker: Dr. Alex Vines currently Director, Regional Security at Chatham House, London
Chair: Ambassador R. Rajagopalan, Member, IDSA

Dr. Alex Vines, Research Director, Regional and Security Studies and Head of the Africa Programme at Chatham House, presented at this roundtable, his findings on lessons from Asian national oil company engagement in Angola and Nigeria. In analyzing the impacts of and opportunities for Asian investments in West Africa, Dr. Vines presented conclusions based on the Asian interest in African oil, the varying degree of successes of India and other Asian countries in Angola and Nigeria, and recent developments for Asian National Oil Companies (ANOCs) in these regions.

Dr Vines’ research presents that the Asian interest in African oil is suggestive of their desire to lessen dependence on the Middle East for their oil supplies. Asian countries have in the past sourced oil from Nigeria and Angola through government-to-government term supply contracts, through oil traders with lifting quotas, and the spot market. Significantly, between 2004 and 2005, some Asian oil companies began to secure oil blocks in both Nigeria and Angola through direct investment, or oil-for-infrastructure deals. In focusing on China’s activities in this sector, it has been found that Chinese companies have had considerable freedom to operate. Nigeria and Angola have presented different fortunes for ANOCs operating there. Nigeria has been a challenge for most ANOCs; one of the main reasons has been the failure of the Obasanjo Administration to manage the oil-for-infrastructure scheme, in addition to various leaders revoking previously administered decisions, and the security situation particularly in the Delta region. Other obstacles for ANOCs operating in Nigeria include the lack of interest taken by these companies to understand the country’s political situation, the lack of predictability, lack of strategic policy decisions and mechanisms, and institutional capacity. Dr Vines noted that Indian NOCs have been marginally more successful than other ANOCs; Nigeria was the third biggest supplier of crude to India in 2007. The reasons for this success include long-standing ties between the two Commonwealth members, strong trade links and commercial relationships, and regular bilateral visits.

In studying trends in Angola, China has been a consistent oil importer from 2003 to 2007, with Indian imports showing marked increase beginning only in 2006. In the Angolan case, non-Chinese ANOCs have maintained low profiles, while attempting to emulate China’s approach in the country, and viewing investments in Angola as an opportunity for diversification. Dr. Vines proposed that Chinese ANOCs have shown great success, with Angola being the third largest supplier of oil to China in 2009. Chinese companies have also been active in reconstruction projects in the country, and in oil-for-infrastructure deals (dubbed ‘Angola-mode’ by the World Bank). The reasons for the Chinese approach are varied and include efforts to understand local politics, adaptation of strategies and tactics to local contexts, not being risk averse, and initiating joint ventures in various areas (including private interests) to ‘lock-in’ success.

In drawing conclusions from this study, Dr. Vines pointed out that there are no ‘weak’ African states. It is also impossible to generalize about ANOCs in Africa, and existing assumptions about ANOCs in Africa need revision. Understanding the local context and politics of the country in which ANOCs operate is crucial to their success, as indicated by the case of the Chinese NOCs. A key observation is that resource-backed loans mortgage future revenues and reduce the country’s flexibility to use future revenues; this strategy has worked better in Angola though, than in Nigeria. In implementing joint ventures (JVs), it is important to note that JVs in Nigeria were influenced by short-term political trends.

Ambassador Rajagopalan steered the following discussion – Dr. Vines’ policy recommendations for Indian NOCs included reinforcement of the Indian diplomatic mission in Angola, and replicating in the area of oil diplomacy, the Indian success in diamond diplomacy in Angola. Another area of debate included the limitations of China in Africa; Dr. Vines pointed out the lack of use of local resources by the Chinese, instead bringing in their own labor because they are unsure of the variability of local labor. Africa yearns more employment, thus the question to address is why more Angolans are not beneficiaries to the Chinese engagement in the country. India has proved more willing to engage local labor in this respect; Indian companies have done remarkably well in countries like Mozambique. Ambassador Rajagopalan indicated on the Chinese and Indian cooperation in Angola and Nigeria, there has been a recognition that cooperation will prove to be more useful than competition. An additional area of discussion revolved around the choice of the Indian diplomatic representation in these two countries; Dr. Vines suggested that Angola would need high-level diplomacy, but this should also not be the only route used to maintain bilateral relations.

Report by Princy Marin George, Research Assistant, IDSA, New Delhi