Michael Richardson: Black gold from dark continent

China's Prime Minister Wen Jiabao is in Africa this week, shopping for energy deals to fuel his country's turbocharged economic expansion and expand its diplomatic influence.

China's push into the resource-rich continent is geared heavily to securing access to one key item: oil.

With China and the United States locked in an uneasy relationship in Asia, Africa is becoming a new arena for contention between the world's leading power and one of its rising giants.

Mr Wen's tour of seven African nations is part of Beijing's quest to ensure future supplies of energy and raw materials. This is making China not just a commercial competitor but also a geopolitical adversary of the US, the European Union and Japan.

Chinese President Hu Jintao visited earlier in the year, going straight from the US in April to oil-rich Saudi Arabia, then on to Morocco, Nigeria and Kenya.

Trade between China and Africa has more than trebled since 2000, rising to US$35 billion last year from US$10 billion five years earlier.

Chinese investment in Africa is also growing fast, with about 800 Chinese firms doing business on the continent. Companies from other parts of the world have been deterred by graft, red tape, poor infrastructure and other obstacles to efficient business.

China's voracious appetite for raw materials is helping push sub-Saharan economies to their fastest growth in three decades. In turn, Chinese-made products have lowered prices for African consumers.

However, some Governments are concerned about whether they will be able to protect Africa's weak industrial base from the flood of cheap Chinese goods and worry this will increase unemployment. These issues will be a major topic at a China-Africa forum scheduled for November.

Once the biggest oil exporter in Asia, China became a net importer of oil in 1993 as domestic demand grew and local production of crude oil plateaued. It now imports more than 40 per cent of the oil it consumes. About 25 per cent of those oil imports are from Africa.

China has oil investments in Angola, Sudan, Nigeria, Chad, Algeria, Gabon and Equatorial Guinea. In Nigeria in April, President Hu secured right of first refusal for China's largest state-owned petroleum company, CNPC, on four new oil-drilling licences, and paved the way to buy a controlling stake in an oil refinery. Nigeria is Africa's leading oil producer and the world's 11th-biggest.

In Kenya, Hu signed a deal that allows another state-controlled firm to prospect for oil in coastal waters and along the border with Sudan and Somalia.

The inclusion of Angola on Mr Wen's itinerary is significant. It is the second-ranking oil producer in Africa. About a quarter of its oil output goes to China.

The US is closely watching Beijing's focus on West Africa. Some 15 per cent of America's oil imports come from this region, a figure expected to rise to around 25 per cent over the next decade.

Western oil companies have long dominated the area. They have better technology and more experience than Chinese firms.

But China's thrust into Africa has other attractions: generous loans, technical assistance, trade and investment deals, debt forgiveness, aid packages and arms supplies. In Angola Chinese engineers are refurbishing three railway lines, government buildings and a new airport for the capital, Luanda, all paid for by a credit line worth some US$2.5 billion from Eximbank.

Without Chinese support, these and other development projects would not have proceeded. Angola lacks a financing agreement with the International Monetary Fund, partly because of IMF concerns about how it accounts for the massive revenues it receives from oil.

Beijing justifies this approach by saying that it is upholding the principle of non-interference in other countries' internal affairs. However, China's aid-for-resources deals undermine efforts to curb corruption and increase transparency and good governance in Africa.

The US makes allowances for authoritarian states that are important energy partners or allies. But China goes further. By selling arms and military equipment to repressive or conflict-prone countries such as Sudan and Zimbabwe, it buys short-term favours for long-term instability.

* The writer, a former Asia editor of the International Herald Tribune, is a visiting senior research fellow at the Institute of South East Asian Studies in Singapore.