At first glance, there is no doubt that the “contract of the century” represents a unique opportunity for the ex–Belgian colony to build up the all-important infrastructure that the usual benefactors have all systematically denied it for one reason or another. The DRC is currently financially unviable, as can be seen from the fact that even Chinese companies, who are famous throughout the business world for their ability to overcome every type of obstacle, usually end up abandoning the opportunities here for logistical reasons.47 We were able to see this for ourselves over the course of our hair-raising journey between Muanda and Kinshasa, on the country’s only overland route to the Atlantic Ocean. It was also evident when we had to fly from the capital to Lubumbashi, the mining epicenter of the country, because there are no roads joining the Congo’s two most important cities and the only alternative is to travel by boat, a journey that would take several weeks.
Kinshasa’s main thoroughfare, the Boulevard du 30 Juin—a name which commemorates the date in 1960 when the former Congo achieved its independence—represents one of the first impacts that the Chinese contract has had on the country. With its four lanes of traffic in both directions, this spacious, spotless asphalt road lined with ministries, shops, hotels and embassies looks like a copy of the Avenue of Heavenly Peace in Beijing which, in 1989, the tanks traveled down on their way to violently crush the student uprising in the area around Tiananmen Square. As well as roads, the African country will also develop its healthcare industry to combat its heart-breaking infant mortality rates and improve its energy network to alleviate the country’s regular power cuts. As such, at a first glance the exchange of “minerals for infrastructure” could not be more tempting for the Congolese government, as China is literally serving up an entire development plan on a silver platter: a remarkable opportunity for a “great leap forward.”
Under these circumstances, Beijing is happy to present the contract as a model co-operation agreement to all and sundry, a shining example of the “win-win policy” that it is currently employing throughout the developing world.48 Of course, no other country apart from China would give the green light to such a gigantic pay-out with such significant long-term risks at a time of political and economic turbulence in the African country. However, a closer reading of the contract, its appendices and amendments—which fell into our hands despite not being available in the public domain—suggests that the intentions behind the document might be quite different from those put forward by Beijing. The main question raised by the deal is one of fairness. For a start, the value of the resources that China will obtain by exploiting the Congolese mines overwhelmingly exceeds its investment. While the state-owned Chinese companies will bring $6 billion to the table via the Chinese Exim Bank, the amount of profit that the cobalt and copper could yield for Sicomines49—the joint enterprise charged with managing the investment, implementing the construction of the new infrastructure, operating the mine and distributing the profits gained from exploiting the resources—will potentially reach between $40 billion and $120 billion—in other words, between six and twenty times the value of the investment.50
A mere glance at these figures makes it crystal clear that in the long term China is set to gain much more from the contract than the DRC, even after deducting the cost of modernizing and maintaining the mining operation, a process which will stretch to several billion dollars. Secondly, the contract establishes that during the credit repayment period—part of which must be returned at a market interest rate of 6.1 percent—the Chinese businesses involved will be exempt from any kind of tax payments, including royalty payments.51 Some sources, such as the activist Jean-Pierre Okenda, argue that this arrangement is illegal. Furthermore, once the credit has been paid off, the “commercial exploitation” of the mine will generate a flow of taxes that will revert to the joint enterprise Sicomines rather than to the Congolese state. The contract sets out that these taxes will go towards the cost of constructing a second wave of infrastructure, but does not go into any detail about what this might involve. As a result, the DRC, which relies on mining as its main source of economic resources, will lose out on earnings of around $20 billion.52 Moreover, if the mining continues at the expected rate, the country’s copper and cobalt reserves will be completely exhausted in less than three decades.
Finally, the contract does not stipulate who is going to acquire the minerals, or how much they will be sold for. This means that the Chinese state will have de facto control over the entire commercial process, thanks to its majority stake in Sicomines. As the Chinese credit will be repaid with minerals, it is in Beijing’s interest to fix the price as low as possible, so that the infrastructure that it builds in the country will yield the highest possible return in copper and cobalt. This represents a dangerous situation, to say the least, in which lender, seller and client are all the same legal entity: the Chinese state. Faced with the inherent weakness of the Congolese state and its institutions, how will it be possible to stop China from doing whatever takes its fancy in order to carry away the maximum amount of resources in return for the smallest possible investment? When the Congolese government is incapable even of ensuring peace throughout its own territory, how will it ensure that the Chinese companies spend as much as they promised to spend on cement, lorries and roads?
“China was aware that the contract violated current legislation in the country and so it demanded that the national assembly should approve a new law” in order to validate the contract, to “legalize the illegal” as Okenda explains, referring to article 15.1 of the contract.53 In order to defend its own interests and minimize the risk involved, Beijing used a contractual clause to force through what was quite clearly a violation of its policy of “no interference in domestic affairs,” another favorite motto of Chinese diplomacy. It was not the only violation of this kind. The contract also awarded Beijing the right to be a preferential creditor and required that the Congolese state should back up this simple commercial contract with sovereign guarantees54—a clause that was later amended after the intervention of international financial organizations, which argued that it would lead the African country into a high-risk debt situation.
“I don’t think the contract will have any lasting effect on the country. The idea of building roads was conceived not for the development of the nation, but in order to win more votes,” said the Congolese MP Jerome Kamate when we interviewed him in Kinshasa. Kamate interprets the use and effects of the contract in electoral terms: the re-election of President Joseph Kabila.55 The head of state promised voters a revolution in terms of infrastructure known as “the Five Works” and is reliant on China to achieve this. This explains why the construction of infrastructure was divided into two phases, the first of which was due to finish just before the elections in November 2011, won by Kabila. “It is thought that building new infrastructure will help create small businesses which in turn will help develop a new middle class, as has happened in China. However, 90 percent of my voters are illiterate. Where is this middle class supposed to come from if there isn’t even a basic level of education in this country?” Kamate asks. His analysis of the situation leaves no room for doubt: “China will take away all the resources and the infrastructure will not be used.”
The first indications of this can already been seen in the country, particularly in the case of newly built hospitals and universities which remain unused because the DRC is unable to supply them with electricity, doctors or lecturers.56 Meanwhile, China is meeting all its objectives. It is guaranteeing its long-term supply of copper in order to fuel its production of electric cables, fiber-optic materials and armaments, and its supply of cobalt, a highly valued raw material that is used predominantly in the production of batteries for mobile phones, laptops and cars.57 However hard Beijing and Kinshasa try to label the contract as a “co-operation agreement,” its doubtful degree of fairness and far from favorable conditions clearly indicate that this is in fact a mining contract, pure and simple, without any tr
ace of the benevolence described in China’s official rhetoric. In other words, not only does the “contract of the century” seem to be tailor-made for Chinese interests, it also highlights the very real gap that exists between China’s official discourse and its real-life activity in the developing world.58
4
China’s “Black Gold” Offensive
“If the water is too clear, you will never catch a fish.”
Answer given by Li Ruogu, president of the Chinese
Exim Bank, in response to a question regarding
accusations of corruption by Chinese businesses1
Mehri is nudging her husband silently with her knees. She is doing it as subtly as she can, but even so the tablecloth rises slightly with every onslaught. Her husband, Artem, does his best to ignore her and to carry on with his story as if nothing is happening, although he does begin to look a little confused. After a while she starts hitting him harder. At that point he breaks off in mid-sentence and for a moment everything is silent. Then we all exchange conspiratorial glances and smiles: between them and between us. Mehri, who is clearly nervous and upset, offers us more water. On her way to the kitchen she instinctively looks out of the window for the umpteenth time to make sure nobody is listening. Artem, good-natured and stocky, turns around to check on her. “I’m sorry,” he explains. “My wife doesn’t like it when I talk about politics.”
We are in the outskirts of Ashgabat, the capital of Turkmenistan. In this country the size of Spain, nestled between Afghanistan, Iran and the Caspian Sea, the desert takes up 90 percent of the territory and the sale of gas pays for the delusions of grandeur held by the only two presidents who have ruled the country as yet in its short history. Our voyage through the “Chinese world” and China’s demand for hydrocarbons has brought us to this most surreal of all the former Soviet republics, a state which might well be classified as the most extravagant, paranoid and brutal dictatorship on the planet if there was not such a long list of competitors.
The Jepbarovs (not their real name) live in a modest apartment with a spacious living room dominated by a striking carpet, a fine example of Turkmen craftsmanship.2 Artem lovingly shows us a treasure trove of antiques and books from the Soviet era which are hidden away in one of the bedrooms: cigarette cases decorated with Lenin’s face, glass statuettes of Stalin and drawings illustrating the roles and traditions of the former Soviet Union, which Artem refers to with a certain degree of nostalgia. “Our lives have got worse since independence. We used to have better lives before. Now we’re living in a dictatorship,” he argues, temporarily freed from the censorship imposed on him by the violent nudges of his wife.
While the life of the Jepbarovs is not exactly squalid, it is certainly not easy whichever way you look at it. Artem can barely keep his family going on his earnings from the market, where he sells souvenirs based on the Soviet era and the mandate of the country’s first head of state, the narcissistic Saparmurat Niyazov, also known as Turkmenbashi, or “father of the Turkmen people.” Meanwhile, Mehri’s name is just one more on the country’s long list of the unemployed which, according to unofficial sources (the official ones are either unreliable or non-existent), includes around 60 percent of the population.3 If the paternalistic state did not massively subsidize electricity, water and gas prices, rents and a monthly allowance of 120 liters of petrol, existence would be simply impossible for this family—as it would be for the rest of the country’s 5 million inhabitants. “I barely make 300 dollars a month,” Artem complains. “How am I supposed to feed four people on that?” This is how “new communism” works in Turkmenistan: the state supplies the basic needs of the people and the people do what they’re told. Anyone who doesn’t conform suffers the consequences.
However, visitors to Ashgabat are unlikely to get any sense of this hardship at a first glance. Based in a valley surrounded on all sides by a sandy and mountainous landscape, the city has the look of an oasis in the middle of a desert. It is full of imposing official buildings made of white marble, imported especially from Italy on the president’s orders, and spacious boulevards with up to twelve lanes, such as the one leading to the residence of the head of state. The city is also dotted with splashes of gold: domes, gates, fountains and, above all, murals, busts and statues of Turkmenbashi. Everywhere you look there is evidence of abundance, majesty and an enormous cult of personality. However, the splendor of the city, which is lit up by thousands of spotlights every evening, is nothing but a façade hiding the country’s sad reality. The Turkmen people live in clusters of houses built in the style of the Soviet era and spend their time in indoor courtyards where children play football on miserable pitches, men repair their battered old Lada cars, and women gather in groups to discuss the hardships of daily life. This city may look like a museum but it has no glamour at all for Ashgabat’s 650,000 inhabitants.
Instead, the long shadow of the regime stretches into every aspect of life, from microphones hidden in hotels—a practice inherited from the Soviet era that we were warned about by certain diplomats—to censorship and control of the media. Barely 10 percent of the population has Internet access, making it very difficult to get information from the outside world. Repression is a visible, everyday occurrence: with batons in hands and whistles at their lips, policemen can be seen everywhere on the streets of Ashgabat. They jealously watch over every inch of the city, fully alert despite the blistering 50 degrees heat of the summer. Everything is forbidden here, from taking photographs to ballet shows. As for foreigners, the openly xenophobic regime has gone so far as to ban the hundred or so Westerners living in the capital from falling in love with any of the locals.
“After 1992, they threw me out of the university. I was a lecturer there. I love the humanities. But they fired me, along with many of my colleagues, because we’re not from the Tekke tribe. That’s the tribe that the president comes from, as well as most of the authorities,” Artem explains, bitterly, referring to the blatant discrimination that the government actively promotes. “Everything here functions on the basis of corruption. A place to study at the public university, which is supposedly free, actually costs between 20,000 and 80,000 US dollars in bribes. And as if that weren’t enough, the lecturers are terrible. You have to pay to do any kind of job. Everything is completely corrupt. How am I supposed to get enough money to send my children to university if I only earn 300 dollars a month?”4
The country’s real beneficiaries are the bureaucrats and the government elites, who run the state as if it were their own feudal kingdom. They control 85 percent of the economy through state-owned companies and, with the president at the helm, refuse to lift a finger unless there is some kind of bribe or commission involved. “In order to make an appointment with the president—who approves and controls everything in this country—you have to pay out a minimum of 20,000 dollars,” explains one expert in the country. This amount apparently increased by between “10 and 15 percent” after Gurbanguly Berdymukhammedov succeeded Turkmenbashi as the head of state following two farcical presidential elections in 2007 and 2012.5 It is therefore hardly surprising that Turkmenistan is ranked 177 out of 183 in the 2011 Corruption Perceptions Index produced each year by Transparency International.
CHINA LANDS IN TURKMENISTAN
We are busy haggling over the price of a bottle of local cognac with a photo of Turkmenbashi on the label, when all of a sudden a horde of television cameras and bodyguards comes bursting into Ashgabat’s Russian Bazaar. The cameramen and photographers—both Chinese and locals—are all looking expectantly at He Guoqiang, at that time one of the nine members of the Politburo Standing Committee of the Communist Party of China,6 who has kindly volunteered to take part in this performance. “What enormous watermelons! They are fabulous!” he exclaims to an overwhelmed fruit seller, who laughs nervously, clearly not sure what to say. His translator and assistant quickly set up another shot in which He, considered one of the most important men in China because of his position on the
body that effectively pulls the strings in the country, puts on a traditional Turkmen hat while a trader hands him a basket of fruit. Everyone is smiling, hugging and nodding happily, all of which is captured in minute detail by the cameras.
By pure coincidence, we happen to have arrived in this country with its golden statues and ridiculous personality cult at the same time as a high-ranking Chinese official. His presence in Ashgabat, however, is certainly no accident. This chemical engineer has not come to Turkmenistan in order to learn a local recipe for fertilizer, or even to give advice on how to combat corruption, a role that he has had in China ever since he was made head of the Central Commission for Discipline Inspection in 2007. Instead, his visit has everything to do with the great wealth hidden in the very heart of Turkmenistan: hydrocarbons.7 This is a treasure of such strategic importance for China that Beijing has jumped with both feet into this quagmire of bribery and hereditary succession, this backyard of Russia where at times it is impossible to tell the difference between reality and fiction.8 The proof of China’s commitment to this project can be seen in the form of a pipeline over 7,000 kilometers long, built and financed by China in order to connect Turkmenistan’s gas deposits with the kitchens of Canton and Shanghai.
However, in order to follow the lead of this giant pipeline there is one more step we need to take. It is a step that will carry us as far as the edge of the Karakum desert, forbidden territory that is off the official radar. This means breaking the strict Turkmenistan laws by escaping from our persistent guide and flying to the northeast of the country, on the border with Uzbekistan.9
China's Silent Army Page 14