US and China Negotiations with Oil Producing Countries
Disclaimer: This work has been submitted by a student. This is not an example of the work written by our professional academic writers. You can view samples of our professional work here.
Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.
Published: Wed, 28 Feb 2018
The start of the twenty first century signaled a new beginning for the United States and China in their quest for oil diplomacy with African oil producing countries. One of the characteristics of this venture is the difference in approach both countries follow to attain this natural resource. This research work, therefore, examines the diplomatic measures of the US and China in their negotiations with oil producing countries in Sub-Saharan Africa, hereafter referred to as (SSA). In particular, the results they expect or the preferences over outcomes are analyzed. It is not the intention of the study to present a comparative analysis of US and Chinese import figures or to look at their reciprocal relationship. The question is what strategic choices do the US and China make in their interaction with oil producing countries and in what way does such interaction shape oil diplomacy? An important finding is that the US and China develop different strategic paths and policy frameworks which strengthen the assumption that the two countries compete for SSA oil. Along these lines, the study investigates the oil diplomacy of the US and China in SSA using the strategic-choice approach as an analytical framework.
In the last decade, the US and China has moved their search for oil security to the African continent. The US and China arrive on the SSA oil scene with their own motives and interests. Their single most important interest is to engage in oil diplomacy with petroleum producing states and secure the safe import of oil from the region. African states traditionally were influenced by colonial powers. However, with the rise of China and its increasing involvement in Africa, the situation is changing. The US focuses on humanitarianism, good governance and democratization of petroleum producing states in their oil diplomacy approach. China, the world’s fastest growing economy, views SSA as a welcome offloading ground for its products in exchange for oil. An economic approach focusing on enlarging its commercial interests is the driving factor for China’s engagement with petroleum producing states. China needs more raw materials to supply in its increasing domestic demand. Instability in the Middle East, oil dependency and securing its energy interests drives the US to SSA. Keeping a watchful eye on China’s involvement and monitoring its influence with petroleum producing states is another reason the US is devoting much of its time to this part of Africa. The US interest in the region focuses on the procurement of oil and gas, but with the establishment of the US African Command (AFRICOM), US involvement in SSA shifted in a large degree to the fight against terrorism and safeguarding of American oil operations.
Lake & Powell (1999) formulated an approach that makes it easier for students of international relations to explain the choices actors make, whether these actors are states, parties, ethnic groups, companies, leaders or individuals. This approach is used in the paper to explain the strategic interaction of the US and China with oil producing countries and not the strategic interaction between the US and China. The argument is that both countries have independent influencing power and exercise an asymmetric relationship with oil producing countries. In SSA the preferences and beliefs of the US and China in conjunction with the strategic environment are the core attributes on which the strategic-choice approach is based. In the SSA oil environment, there are many beliefs and preferences which have an effect on interaction and the formulation of policy frameworks.
What are the oil security preferences of the US and China in SSA, and how is it influenced by the environment? Changes in the behavior of actors are often difficult to perceive in the strategic-choice approach (Lake & Powell, 1999). Whenever changes in the behavior of actors do take place, it is primarily done through learning, through changes in the actors’ environment or by analyzing the actors as more basic actors Lake & Powell, 1999). In this study, the methodological bet would disaggregate the actors into more basic actors, such as the individual beliefs of the energy departments, national leaders, multinational oil corporations, bureaucrats and individuals.
Frieden (1999: 50) mentions the concept of actor’s preferences over choices, and how the outcomes affect strategic interaction between actors in the same setting. The preference in a particular setting leads the agent to devise a strategy. Analysts of international relations have long debated how preferences and the strategic environment affect outcomes, jointly and separately. Many debates in the field have to do with whether outcomes are primarily the result of the constraints of the international system or of differences among national preferences (Frieden, 1999:50). A strong variant of realism, for example, implies that state preferences are so overwhelmed by the pressures of interstate competition that all states must pursue essentially identical strategies. A strong domestic, dominance perspective might, on the other hand, argue that different state strategies flow primarily from different national characteristics and preferences.
Due to the continuous rise of new issues in SSA oil politics, the argument is that preferences are shaped by environmental factors and thus not static. It will be difficult, therefore, to separate the preferences of the actors from the strategic environment. The assumption is that a cycle of interaction is proposed deriving from the interplay of preferences and strategies. In the SSA oil setting, the US and China in deciding what preferences over outcomes they desire, have to take political environmental constraints into consideration, because the oil-induced political environment is constantly changing. Instability of oil producing countries, corruption, the negative consequences of having oil reserves, bad governance and terrorism are contributing factors to this changing environment. In more stable, homogenous oil environments, the actor’s preferences are more constant.
The environment in North Africa is a region with a more or less stable oil infrastructure, where actors formulate clear, definable goals, separate from such environmental influence. The North African oil producing states of Libya, Algeria, Morocco, Tunisia and Egypt have a strong unifying Muslim culture, and they can shape their preferences around a common goal. In SSA, the environment and the choices actors make are separated, because of ethnic division, religious differences, corruption, instability, bad governance and the gross mismanagement of oil revenues. These factors then make it difficult for leaders to shape preferences without interference of political constraints. In reality, leaders of oil states will base individual preferences on self-enrichment and state goals on the dynamics of interplay between actors in the strategic setting.
The main energy security debate for the American and Chinese government in the twenty first century focuses on the concept of oil dependence. Diversification of import channels, safe delivery of imports and establishing reasonable prices are factors that influence the decision-making of policymakers.
US-Sino oil diplomacy in SSA thus follows different paths. Because both countries arrived relatively late on the oil scene in this part of Africa, were not previous colonial masters, and had limited strategic ties with petroleum producing states, SSA now presents new challenges to the US and Chinese governments in their quest for oil. Engaging in diplomatic talks broaden oil horizons and establish measures along which oil security is negotiated. From the perspective of increasing oil imports and acquiring new exploration and drilling licenses, oil diplomacy is vital for sustaining negotiations on a continuous basis. However, for diplomacy to be an effective tool, the US and China need to formulate preferences or policy beliefs. The next section presents a brief overview of US and Chinese expansion into the SSA oil fields in the last couple of years. The aim is to identify the major oil producing countries with whom the US and China have signed deals and not to present import and export figures. Looking at the allocation of exploration contracts to the US and China by SSA oil producers, it becomes clear that these countries are siding with either the US or China. The point is that diplomacy and strategic interaction are deciding factors influencing the relationship. For example, Nigeria and Angola as two of SSA’s major oil producing countries have strong relationships with both powers, but their interaction differ.
US and Chinese Expansion into Sub-Saharan Africa Oil Fields
The growing expansion of Chinese national oil companies into Africa’s oil markets is perhaps the aspect of Sino-African relations that most concerns the international community (Taylor, 2009: 37). Chinese firms are actively seeking resources of every kind: copper, bauxite, uranium, aluminum, manganese, iron ore, and more. However, the issues surrounding oil are of particular interest to Western policymakers studying China’s rise (Lyman, 2006). Indeed, although China and the US do not rely on one another for energy supplies, the possibility that oil will be the subject of future disagreements between them is arguably high and thus has a bearing on much of the commentary on Sino-African energy policies (Zha, 1999: 69). Certainly, there is concern that Beijing’s procurement of energy supplies will pose a challenge to the global dominance of Washington at a time when levels of cooperation between the two governments on matters of energy are at best weak (Dreyer, 2007: 461). In contrast to the days of Maoist solidarity, contemporary China’s economic dealings with Africa are, in the main, based on an unfriendly evaluation of commercial potential. Indeed, to reiterate, China’s rapidly developing oil requirements have helped propel Sin-African trade at the turn of the millennium (Taylor, 2009: 44). A select listing of recent contracts signed by China’s national oil companies gives a flavor of the geographical extent of Chinese interest in SSA oil. In 2004, Total Gabon signed a contract with Sinopec for exporting Gabonese crude oil into China. Angola received a US$ billion loan in 2005 in exchange for oil deals with China, which added another US$1 billion to the loan in March 2006. Also in 2005, the Nigerian National Petroleum Corporation signed a US$800 million deal with PetroChina to supply 30,000 barrels of crude per day to China. In 2006, CNOOC agreed to pay US$2.3 billion for a stake in a Nigerian oil and gas field (Taylor, 2009: 45). Chinese oil companies also reportedly signed contracts to begin offshore oil exploration and production in Congo-Brazzaville and began oil exploration in northern Namibia with the intent to establish an oil refinery. In addition, Nigeria announced that that it would give the first right of refusal on four oil exploration blocks to CNPC in exchange for a commitment to invest US$4 billion in infrastructure (Taylor, 2009: 46). Clearly, China’s energy interests in Africa are growing exponentially. Indeed, in 2006, China imported 920,000 barrels a day of crude oil, or 31 percent of its total crude imports, from Africa. Moreover, Chinese national oil companies are still relatively small players on the continent. “The commercial value of the oil investments in Africa of China’s NOCs is just 8 percent of the combined commercial value of the (international oil companies) investments in African oil and 3 percent of all companies invested in African oil” (Downs, 2007: 42). A central criticism of these contracts revolves around the tactics and strategies by which Chinese corporations enter into them. For instance, on February 16, 2006, Chinaafrica, an official Chinese publication, quoted Wang Yingping of the China Institute of International Studies (CIIS), as asserting that “Chinese businesses pay greater attention to protecting the environment when building factories and exploring for Africa’s rich reserves in oil”; two months later, it cited, without comment, the assertion by Sierra Leone’s ambassador to China that “the Chinese just come and do it. They don’t hold meetings about environmental impact assessments, human rights, bad governance and good governance. I’m not saying it’s right, just that Chinese investment is succeeding because they don’t set high benchmarks” (Taylor, 2009: 47).
The US is obsessed with oil imports from the Middle East and pays little or no attention to SSA. This region supplies as much black gold to the US as the Persian Gulf States. According to (Donelson, 2008) the region also lend itself to just as much (if not more) danger of unexpected supply disruption. For this reason AFRICOM, the new US military administrative headquarters [one of six regional headquarters (HQs) worldwide] was established. The military demand center is devoted to relations with 53 countries (Donelson, 2008). At the end of 2007, SSA accounted for nearly 16% of US daily imports, versus just over 18% for the Persian Gulf States and just over 18% for Canada. The country in seventh place is Angola with 507,000 barrels a day, just behind Algeria. Chad, Gabon, Congo (Brazzaville), and Equatorial Guinea are petroleum suppliers to the US as well, along with minor players including South Africa, Mauritania, Ivory Coast, Ghana, and the Democratic Republic of the Congo (Kinshasa. One country with strong oil reserves is Nigeria, but unfortunately the region is vulnerable to disruption. The destroying of oil pumping stations, pipelines, and other distribution facilities are at the order of the day by rebel groups, opposing the rule of President Umaru Yar’Adua. According to Donelson (2008), The Bold Movement for the Emancipation of the Niger Delta has sent militants in boats through heavy seas to attack the Bonga oil fields more than 65 miles from land, temporarily shutting down production of more than 200,000 barrels a day. But there are also other groups, such as white-collar oil workers threatening the supply of oil if their negotiation demands are not met. But the main issue the US faces is competition from other countries, especially from China. Donelson (2008) points out that the Angola supplied almost as much oil (465,000 barrels daily) to China as they did to the US in 2007 and that number will almost certainly go up as a report by the Council of Foreign Relations states:
“Beijing secured a major stake in future oil production in 2004 with a $2 billion package of loans and aid that includes funds for Chinese companies to build railroads, schools, roads, hospitals, bridges, and offices; lay a fiber-optic network; and train Angolan telecommunications workers” (Donelson, 2008: 2).
The President of Angola, Jose Eduardo dos Santos served as his party’s, (MPLA) representative to China, after receiving his degree from the Azerbaijan Oil and Chemistry Institute in the old USSR. This was shortly before he became president. The relationship between dos Santos and the US is not build on a solid foundation and is to say the least very unreliable. There is no guarantee that the country will live up to its promise of providing the US with a continuous supply of oil, after such a long time of instability and civil war. With two of the top seven U.S. oil suppliers vulnerable to supply disruptions at any moment; is it any wonder that the American military presence in Africa is slated for the major expansion (Donelson, 2008).
In a nutshell, before moving on to the strategic-choice analysis, what are the motivations for the US and China to enter the SSA oil market? Trade and economical intentions are high on China’s African business agenda, offloading Chinese products in the host countries in exchange for oil and other resources. Traditionally, African states relied on western colonial powers for economic aid and influence. However, the situation is slowly changing with the rise of China and its increasing involvement in Africa. The supply of oil in return for investments and other economical incentives are the driving force for petroleum producing states to establish relations with China. SSA is a source of growing importance in the supply of oil. The region is likely to become as important a source of US energy imports as the Middle East. The US is in competition for access to oil, not only to China but also with India and Europe. Therefore, the US interest in SSA includes promoting democracy, good governance and transparency in economies of petroleum producing states, along with establishing a strong military command to protect its oil interests and monitor the actions of militant groups.
However, diplomacy is an effective tool if preferences and policy beliefs are formulated around certain goals. This is what the next chapter is going to achieve, investigating the policy beliefs of the US and China and the way it contributes to effective oil diplomatic measures.
US-Sino Oil Diplomacy in Sub-Saharan Africa: A Strategic-Choice Analysis
During the twentieth century, US and China’s preference thinking regarding Africa was greatly influenced by ideological thinking. The contest between establishing democracy or communism in Africa was evident of US-Chinese intervention on the African continent. The US followed liberalization policies to free oppressing regimes from authoritarian, communist rule, while China viewed Africa as an open domain to introduce communism. A result of these opposing preferences by the US and China was that African countries were introduced to different ideological doctrines, which laid the foundation for African countries to establish their own state goals. Hostility of certain petroleum producing states toward cooperation with either the US or China, favoring one state over the other because of ideological and economical preferences, domestic conflict in Nigeria, violations of human rights in Sudan, the war on terror in conjunction with Muslim extremism and the general poor living and health conditions in SSA, are factors that limit the American and Chinese governments to implement successful strategies. On the other hand, the US and China can certainly benefit from the individual preferences of state leaders and actors in the oil industry. For example, the goals of multinational oil corporations and the individual beliefs of business leaders contribute to the formulation of a national grand strategy for SSA.
In analyzing the strategic interest of the US in the SSA oil setting, the ideological preference of the US to promote democracy and good governance in African countries is a condition when strategies based on democratic principles are to be devised. “Oil is where you find it. Oil companies cannot always invest in democratically governed countries. It would be ideal if it could be guaranteed that the head of an African country where a US oil company invested was, in fact, an advocate of democracy and always respected human rights. Unfortunately, that is not a realistic expectation in today’s Africa or in most other oil producing regions of the world. It is important to urge and cajole and to nudge the leaders of the oil producing countries towards establishing inclusive democracies and good governance” (Wihbey, & Schutz, 2002: 4). This is the task of US diplomacy. In Sudan, the US government is supporting the initiatives of the Extractive Industries Transparency Initiative (EITI) (The Extractive Industries Transparency Initiative, 2007).
Countries that underwrite the initiatives and programs of the EITI have preferences toward establishing good governance principles in countries that depend on the extraction of natural resources, and to eradicate the exploitation of these resources. Initiatives that seek to promote good governance principles can only be successful if the supporting countries maintain these same good government principles at home. The SSA oil strategic setting allows for many actors, whether they are governmental institutions, non-governmental institutions, non-state actors or individuals, such as the residents of the Niger delta and Southern Sudan and the multitude of multinational oil corporations (MNCs), to formulate their own goals and pursue unique strategies.
However, environmental constrains, such as transportation difficulties and inaccessibility of areas in the Niger Delta, further accentuates the problem actors experience to reach solutions on common grounds. Then there are also religious divisions between Muslims and Christians, ethnic conflicts between the different tribes living in the Niger Delta, the self-interested or ambitious goals of MNCs in the central government. These factors are all having an immoralizing effect on the negotiation process. Rebel groups operating from the Niger Delta, some of which pursue their own agendas and others, which are in unison with the goals of religious and ethnic groups, are at the moment taking the main stage in setting preferences for Niger Delta peace talks. The movement for the emancipation of the Niger Delta (MEND)can be cited as a group that has extremely hostile feelings toward the presence of foreign and in particular western oil companies (The movement for the emancipation of the Niger Delta, 2011). In a January 2006, MEND warned the oil industry: “It must be clear that the Nigerian government cannot protect your workers or assets. Leave our land while you can or die in it. Our aim is to totally destroy the capacity of the Nigerian government to export oil” (Hanson, 2007: 2). One can assume from this statement, that MEND has a preference for the protection of their land from foreign invasion. They voice strong, emotional concern over foreign oil workers occupying their land and will take extreme measures expelling these oil workers from their land. Whether, they really are interested in finding solutions to the ongoing delta conflict is an open question.
Their findings are that anti-government groups, supporting the goals of Muslim extremists and anti-western lobbyists are greatly responsible for the chaos and anarchy characterizing the situation in the delta. Accusations that western oil companies are destroying the natural habitat of certain fish populations and are responsible for the ethnic conflict are treated with contempt by oil companies, such as Shell and ExconMobil, (Howden, 2006) both which invested heavily in the Nigerian oil industry. Oil operations of these companies are conducted in harmony with the natural environment, and that one of their missions is to protect the Niger Delta from over-exploitation and unnecessary pollution. It is all a question of respecting the rights of citizens living in the area and caring about the natural environment, which is an aspect that is neglected by foreign oil companies operating in the Delta. In making a final analysis regarding the preferences of the actors in the Nigerian conflict, it is necessary that common ground has to be found between the actors.
An environment where actors pursue harmonious interests will be beneficial to all. As long as the local residents view foreign oil workers as intruders on their land, pursuing ambitious, and self-interested goals and not returning revenue into local community development programs, the chances that a final solution to the conflict be reached, are small. If one or both of these powers can accept the role of mediator, laying down guidelines for further negotiations, the negotiation process will enjoy a substantial boost.
This mediating role will not only help the conflicting parties, but will in effect put the concept of energy security on the negotiating table. On the other hand, for parties to commence a mediating role, they should have an unbiased attitude toward the conflicting parties. Both these countries have strong and clear intentions to use oil diplomacy to their own benefit and manipulate the results in the SSA oil strategic setting. In SSA, AFRICOM is set out to achieve military dominance on the African continent and establish military strategic partnerships with petroleum producing countries.
Nigeria, Sao Tome and Principe and Angola along the west coast of Africa are the main hotspots for US and Chinese oil interests. Nigeria is the biggest exporter of oil in the region, and in the last five years had allocated valuable oil drilling licenses to US and Chinese oil companies. Nigeria already supplies the oil needs of these two giants, especially to the US. Sao Tome and Principe and Nigeria (Sao Tome, Nigeria sign oil deal with US-led consortium, 2005) signed a milestone contract to give a consortium led by the US based oil company, ChevronTexaco, rights to drill in the two countries’ shared Gulf of Guinea oil exploration zone. China has secured four oil-drilling licenses from Nigeria in the last three years. In exchange, China will invest US$4bn in oil and infrastructure projects in Nigeria (BBC News, 2006).
Nigeria, Africa’s top oil exporter, has long been viewed by China as a partner. From the recent contracts allocated by the governments of Nigeria and Sao Tome and Principe to US and Chinese based oil companies, it becomes clear that US-Sino oil diplomacy in SSA focus on establishing long-lasting relationships (BBC News, 2006). The giant Chinese state-owned China National Offshore Oil Corporation, CNOOC, has reached a deal to buy a 45 percent stake in a Nigerian oil field for more than US$2 billion. The purchase, if approved by both governments, would be China’s first major venture into oil-rich Nigeria. Analysts say the Nigerian bid will not be easy for CNOOC, which has no experience in dealing with Nigeria, a country rated as a difficult place to do business.
The international anti-corruption group Transparency International ranks the country as the sixth most corrupt nation in the world. The American oil company Chevron did not bid on this block, and that would imply they did not believe the values were there. So this is certainly a hurdle which CNOOC will have to overcome. Chinese and Nigerian governments will sign two important agreements: one on economic and technology cooperation and a memorandum of understanding on developing a strategic partnership. China is offering assistance in the form of building new tanker terminals, refineries and possible pipelines to export the oil from remote regions to the coast for easy loading (Ramirez, 2006).
China is streamlining the oil infrastructure in SSA, according to their specific needs. This is an infrastructure that on the one hand satisfies their oil demands, but on the other hand leaves the host country no choice but to become dependent on the Chinese oil expertise.The result is that petroleum producing countries in the long run will be more dependent on Chinese investments to sustain their economies, rather than China being dependent on their oil imports. This interaction clearly indicates that China’s preferences are shaped on establishing some sort of economic superiority over their oil strategic partners and forcing petroleum producing states to be dependent on Chinese intervention. If China has more control over the oil affairs of host countries, it will give them a stronger bargaining base and increase their strategic advantage.
The longterm goal of countries that seek to control the economies of its trading partners is to transform economic gains into security gains, so that in the long run, economics and security are inseparable (Snidal, 1993: 73). When China can control the economies of petroleum producing states, it will have strong incentives to move one step further and create military strategic partnerships. The supply of military equipment, providing of nuclear technology, and perhaps positioning of Chinese troops in petroleum producing states, as overseers of its oil operations, cannot be excluded from its African engagement strategy.
By successfully negotiating with petroleum producing states and gaining diplomatic prestige, the other state will immediately be in a less favorable situation. In doing so, the preferences will have a stronger strategic value and gives stronger bargaining power. Strategic values or interests are valued not for themselves, but for their contribution to the protection or promotion of other interests in the future. They are “interests defined in terms of power”, to recall Morgenthau’s memorable phrase (Snyder, 1997: 23). The motivation for the US and China is to try and establish alignments with petroleum producing states. In this way, they their strategic values will be more clearly defined and they can implement strategies to control certain oil fields, offshore oil rigs, pipelines and sea passages. The indication is that the sea around the west coast of Africa, stretching from Nigeria in the north to Angola in the south, is expected to raise problems concerning the transportation of future oil supplies. Because the US and China both have to use these sealanes to transport crude oil and gas, it might become a point of conflict.
Preference determination is typically specified in one of three ways: by assumption, by observation and by deduction (Frieden, 1999, p. 53). The objective with this section is to explore these ways and determine their analytical value in the context of the actor’s preferences in the SSA oil strategic setting, with the main emphasis being on the US and China. Because the US and China both have energy security interests, they have formulated energy security policies at the national level, and these policies are based on assumptions of realism or liberalism. Determining the preferences of the US and China by deducing preferences from these assumptions will offer one of the most analytically satisfying routes to see what specific preferences they hold in the SSA oil strategic setting. It is easiest to assume preferences. In the principal application in international relations to the preferences of nation-states, the simplest assumption might be that states attempt to maximize national welfare, or assume that states maximize national resources (Frieden, 1999: 53).
A comparison between the preferences of economics and the preferences of international politics shows that there are distinctions with regards to the actors involved and the goals they pursue. In economics, there is limited variation in the cast of characters, particularly firms and individuals. Firms prefer profit maximization and individuals prefer wealth maximization (Niou, Ordeshook. & Rose, 1999: 54).
However, international politics involves individuals, firms, groups, nation-states, international organizations and transnational actors. The preferences of ChevronTexaco and China’s Petroleum and Chemical Corporation (Sinopec), may in general terms be homogenous, they are engaged in every aspect of the oil and natural gas industry in the SSA oil industry, including exploration and production, refining, marketing and transportation, chemicals, manufacturing and sales (The leadership functions of Chevron Texaco , 2007).
However, the reality is that American and Chinese oil companies operating in SSA are in effect not only serving the interests of the oil industry and acting as channels for the procurement of oil imports for their local economies, but they also serve as useful instruments in the hands of politicians to control and manipulate the oil industries of the agent states. Expansion of US and Chinese oil operations in SSA since the start of the twenty first century are providing them with more power on the continent. The direct result of gaining more power in the oil industry is that the petroleum producing states are getting entangled in a web of either American or Chinese influence. This influence is leading to a state of dependency of petroleum producing states on US and Chinese involvement in their oil industries. In terms of economic considerations, the US and China prefer different outcomes in their oil diplomacy with petroleum producing states.
The US regards the pursuing of economical interests a
Cite This Work
To export a reference to this article please select a referencing stye below: