China's Silent Army

by Juan Pablo Cardenal,Heriberto Araujo

  19. Evidence of this relationship can be seen in Édition Spécial, the documentary made by TF1—a private television channel owned by Bouygues—to celebrate the dictator’s visit to France in September 1996. Niyazov, Martin Bouygues and the presidents of TF1, Gas de France and Électricité de France (EDF) all took part in the program, which was directed by the journalist Jean-Claude Narcy. The group of French businessmen are seen singing Turkmenbashi’s praises over the course of the forty-minute program, never daring to contradict or question him on subjects such as corruption, human rights or civil liberties. The program, which was broadcast in Turkmenistan but never shown in France, is available to view at: http://​www.​dailymotion.​com/​video/​xi0uw_​tf1-​bouygues-​et-​le-​turkmenistan; last accessed August 22, 2012.

  For more information about the rising price of business in Turkmenistan as a result of corruption, see “Les Rapports secrets du Département d’État Américain: Le meilleur de WikiLeaks,” op. cit.

  20. The only exception is a pipeline connecting Turkmenistan with neighboring Iran. According to the World Bank, Ashgabat will use this pipeline to transport an annual supply of 20 billion m3 of gas to the Islamic republic over the coming years.

  21. Inside China, Inc.: China Development Bank’s Cross-Border Energy Deals, op. cit.

  22. Within the framework of the peace agreements signed in 2005, a referendum took place between January and February 2011 in the south of Sudan in which 99 percent of the population voted for independence and the creation of a new state of South Sudan, which came into effect on July 9, 2011. However, tensions remain on the border and war once more threatens the region.

  23. When the authors visited Khartoum in July 2010, the CNPC’s local office was based in the Hotel Sudan, a building with 260 rooms and five floors where the company’s main Chinese employees sleep and work. By virtue of being Chinese, the authors’ assistant was able to spend a night in one of the hotel’s spacious rooms and enjoyed a selection of thirty dishes from Sichuan and other regions cooked each day by fifteen Chinese chefs. As well as the Hotel Sudan, situated halfway between the Presidential Palace and the Ministry of Oil on Khartoum’s main road, CNPC had also acquired two more buildings as a result of its expansion in the country. The company was also putting the final touches to a new skyscraper to fulfill the needs of its staff in Sudan.

  24. Thanks to colossal investments estimated to exceed $15 billion, China is certainly the key player in the Sudanese oil sector, although it is not the only one. CNPC owns 40 percent of shares in the Greater Nile Petroleum Operating Company (GNPOC), the consortium in charge of exploiting several oil wells in the country and constructing the 1,500-kilometer oil pipeline that carries crude oil from the south of the country to Port Sudan on the coast of the Red Sea. CNPC also owns a further 41 percent of shares in the country’s second largest consortium, Petrodar Operating Company, where the Chinese Sinopec (a company in which the Chinese state is the majority shareholder) owns an additional 6 percent. The Malaysian state-owned company Petronas and the Indian state-owned Oil and Natural Gas Corporation Limited (ONGC) are also present in the Sudanese oil sector through shares in these consortia, although to a lesser extent than China. Source: “From Non-interference to Constructive Engagement?,” Daniel Large, in China Returns to Africa: A Rising Power and a Continent Embrace, eds. Chris Alden, Daniel Large and Ricardo Soares de Oliveira (Hurst, 2008), pp. 280–84.

  25. Since then and until 2011, Sudan held a place on the list of China’s main oil suppliers. Over a decade later, Sudan is still an important oil supplier for China, providing 5.3 percent of China’s total oil imports in 2010. This is despite the limited production of oil in the Arab country, the poor quality of its crude oil and China’s growing demand. China is in turn the biggest buyer of Sudanese oil, purchasing 12.59 million tons of crude oil in 2010 (around 50 percent of the country’s total output for the year). The current production rate varies between 500,000 and 750,000 barrels of oil each day, according to a Sudanese expert interviewed for this book. Source: Chinese customs office, http://​www.​customs.​gov.​cn/​publish/​portal0/​tab7841/​module24699/​info292637.​htm.

  26. Sudan’s economy grew at a rate of over 10 percent in 2006 and 2007 and at around 5 percent during the years following the 2008 financial crisis.

  27. The conflict in Darfur, a region in western Sudan, broke out in 2003 between Arab tribes (with funding and weapons provided by Khartoum’s Arab regime) and the black population, who accused the Arab political elite of racial oppression. This racial conflict between Arabs and the region’s black population has led to 300,000 deaths and forced over 2.5 million people to leave their homes. The United States has classified the events as “genocide.” Between 2009 and 2010, the International Criminal Court (ICC) of the United Nations issued international arrest warrants against President al-Bashir for alleged war crimes and five other crimes against humanity in Darfur. China has used its power of abstention at the UN Security Council to reduce the international pressure on al-Bashir’s regime on several occasions, and has also publicly voiced its opposition to the arrest of the Sudanese president. Al-Bashir traveled to China in June 2011 and was received with great ceremony by President Hu Jintao, angering human rights groups and United Nations officials.

  28. “China’s Growing Role in African Peace and Security,” Saferworld, January 2011, pp. 49–53.

  29. China tried unsuccessfully to stop this information from filtering through to the press in October 2010. “China Tries to Block Darfur Weapons Report,” Ewan MacAskill, Guardian, October 21, 2010.

  30. BP Statistical Review of World Energy, op. cit.

  31. The tactic used by some Western oil companies is to stay in Iran “finishing off old contracts,” but nobody dares to start working on any new projects. “It’s a strategic way of staying in the country in case the situation improves,” a source working in the sector told the authors.

  32. The US State Department places the total value of investments canceled in Iran’s oil sector as a result of American sanctions at between $50 and $60 billion. “Iran’s Chinese Energy Partners,” Mark Dubovitz and Laura Grossman, Foundation for Defense of Democracies, September 2010, p. 3.

  33. According to experts consulted on the subject, Chinese oil technology is rudimentary. One of its weaker areas is the production of liquefied natural gas (LNG). This is the process of converting natural gas into liquid gas, allowing it to be transported for long distances in shipping tankers in the absence of a gas pipeline. Tehran urgently needs to exploit its offshore South Pars gas field because Iran “shares” gas with neighboring Qatar, a country that is currently exploiting this gas on a greater scale. Despite the fact that experts estimate that China will take “several years or even decades” to catch up with its Western rivals, CNPC took over from Total at South Pars 11 in 2009 after the French company, which had originally secured the contract to exploit these resources, pulled out of the project. Some sources argue that Total was forced to pull out as a result of pressure from the United States.

  34. From its internationally isolated position, Iran’s official figures regarding foreign investment tend to exaggerate the real amount of capital flowing into the country. For example, the Iranian press estimated the value of energy contracts signed by Chinese companies since 2005 at $120 billion. However, experts reject this figure. The real value of Chinese investments in Iran’s energy sector is likely to be closer to the $40 billion announced by Iran’s deputy oil minister, Hossein Noqrehkar Shirazi. As for China, the usual lack of transparency is at work. When the authors contacted the three Chinese oil companies (CNPC, Sinopec and CNOOC), none of them was prepared to give an interview or provide any information about its operations in Iran. Source: “China Invests $40 Billion in Iran’s Energy Sector,” Tehran Times, August 1, 2010.

  35. “The Impact of Iran Sanctions Six Months In,” Trevor Houser, Rhodium Group, June 27, 2012.

  36. Iran currently produces around
4 million barrels of oil each day. However, it is estimated that unless the Islamic Republic invests $120 billion by 2015 this figure could fall to 2.7 million barrels. “Iran’s Chinese Energy Partners,” op. cit., p. 6.

  37. The preamble to resolution 1929 of the UN Security Council, which was supported by China’s vote, admits “the potential connection between Iran’s revenues derived from its energy sector and the funding of Iran’s proliferation-sensitive nuclear activities.”

  38. “US Embassy Cables: China and US Compare Notes on How to Handle Iran,” Guardian, November 29, 2010.

  39. “Iran’s Chinese Energy Partners,” op. cit., p.3.

  40. “How do you deal toughly with your banker?” the US secretary of state is said to have asked the then prime minister of Australia Kevin Rudd, according to WikiLeaks. Here Hillary Clinton is referring to China’s influence at the White House as a result of being the largest foreign holder of American debt, with an estimated total of $1.1 trillion in US Treasury bonds. In spite of this, in January 2012 the United States imposed sanctions on the Chinese state-owned petrochemical company Zhuhai Zhenrong, which Washington says is the largest supplier of refined petroleum products to Iran. Although its a small player compared to the Chinese majors, Beijing reacted angrily to the sanctions. Sources: “WikiLeaks: Hillary Clinton’s Question: How Can We Stand Up to Beijing?,” Ewen MacAskill, Guardian, December 4, 2010; “China Seen as Risk As Holdings Surpass $1 trillion,” Reuters, March 1, 2011.

  41. In 2012 Luanda was placed second, after Tokyo, as the most expensive capital city in the world, according to the consulting firm Mercer. An expat employee at an international organization in Luanda told us that despite a US$10,000 monthly corporate budget to subsidize the rent on his home, “I still have to pay out at least 15,000 dollars to get access to an apartment that meets international standards, with hot water and 24-hour electricity.” When the authors visited the capital, they were unable to find any accommodation for less than $300 per night for a double room. This is all down to the country’s economic boom caused by the development of the oil industry (including its more harmful effects), the limited services on offer and the absence of any local manufacturing industry—the legacy of twenty-seven years of war—which means that Angola is forced to import all of its goods.

  42. Angola produced 1.7 million barrels of crude oil a day in 2011, exceeded only by Nigeria. BP Statistical Review of World Energy, June 2012. The information on Angola’s oil income is taken from the article “The New Imperialism: China in Angola,” by Rafael Marques de Morais, World Affairs Journal, March/April 2011.

  43. Dos Santos has been in power for over thirty years. In Angola’s last elections in 2010, he won a landslide victory with 82 percent of the votes.

  44. The model used by China in Angola and throughout the rest of Africa is copied from Japan, which carried out numerous projects in China in the 1970s and 1980s in return for Chinese oil.

  45. In her book on China’s role in Africa, The Dragon’s Gift, Deborah Brautigam argues that Germany was the first country to lift the pressure on Angola, by unilaterally writing off the country’s debt in 2003. The Dragon’s Gift: The Real History of China in Africa (Oxford University Press, 2009), p. 275.

  46. “Thirst for African Oil: Asian National Oil Companies in Nigeria and Angola,” Alex Vines, Lillian Wong, Markus Weimer and Indira Campos, Chatham House Report, August 2009.

  47. The Angolan state-owned oil company Sonangol used its right to veto in order to grant the block to Sinopec, despite the fact that Shell had selected as a successor the Indian state-owned Oil and Natural Gas Corporation Limited (ONGC) to take up 50 percent of the shares. “China in Angola: An Emerging Energy Partnership,” Paul Hare, China Brief, 6, May 2007.

  48. “The main factor in the success of the strategies used by Chinese oil companies in Angola is the interconnection between business and diplomacy,” argues one of the best reports written on bilateral relations between the two countries. “Thirst for African Oil,” op. cit. Figures provided by the Chinese ambassador in Luanda, Zhang Bolun. Source: “China Lends Angola $15 bn but Creates Few Jobs,” Agence France-Presse, March 9, 2011.

  49. Based on publicly announced figures, experts estimate that CIF has lent a total of between $2.9 and $9 billion to Luanda in credit to be repaid with oil. “Thirst for African Oil,” op. cit.

  50. For a detailed diagram showing the composition of the conglomerate and its associates, see “Thirst for African Oil,” op. cit., p. 86.

  51. CSIH and SSI (a company which is part-owned by a subsidiary of the Chinese state-owned company Sinopec) own shares in eight out of the twenty-nine oil blocks which Luanda has put out to international tender since June 2011. Source: www.​sonangol.​co.​ao.

  52. Many African experts see Guinea as a “narco-state,” acting as a bridge on the drugs route between Latin America and Europe. It is here that CIF and CSIH have jointly signed a contract with the military junta led by Captain Moussa Dadis Camara to build infrastructure worth $7 billion in return for exploiting the country’s mineral reserves. The agreement was made on September 28, 2009, just days after Camara’s troops killed over 150 civilians and raped dozens of women while suppressing a demonstration at Conakry’s main stadium. In Zimbabwe, the two companies jointly signed an agreement with Robert Mugabe’s regime in November 2009 to exploit the country’s platinum and gold mines and oil resources, in exchange for an $8 billion investment in infrastructure. In both cases, the Chinese state-owned company South Locomotive and Rolling Stock Corporation (CSR) participated in the agreements by supplying material. Source: “CIF, Beijing’s Stalking Horse,” Africa-Asia Confidential, 3 (7), May 2010.

  53. “The Chinese government has nothing to do with the business [carried out by CIF], and does not know any details about the company,” the spokesperson for the Chinese Foreign Office Ma Zhaoxu said on October 19, 2010. In an interview in Beijing, ambassador Liu Guijin, China’s special representative on African affairs, assured the authors that “CIF is definitely a Hong Kong–based private business company. I don’t think the government can have any kind of relationship with it or ask the CIF to front the interests of the Chinese government. There is no such understanding or links … The CIF is a headache for me and my [government] colleagues because there are so many negative comments and reports … I am also trying to understand why they are so influential in Angola or Guinea. Maybe it’s because they are a private company and can use all kinds of measures to try to get contracts from the governments there. But [Chinese state-owned oil companies] based in mainland China are restricted by government regulations and cannot act freely … They have to consider the impact on relations between the two countries.” Source: “CIF, Beijing’s Stalking Horse,” op. cit.

  54. Born in Algeria, Pierre Falcone is an influential middleman who in the past has lent his services, via his various companies, in the negotiation of oil and arms contracts. He can currently be found in a French prison after being sentenced to six years’ imprisonment for his role, along with the son of the former French president François Mitterrand, in the sale of illegal arms to Angola in the 1990s. He is linked to the binomial CIF-CSIH through his consultancy company, Pierson Asia.

  55. “Data Reveal Huge Sums Spirited Out of Angola,” Reuters, April 4, 2011.

  56. This is the address of both the Ministry of Public Security and the headquarters of the Chinese foreign intelligence services. Source: “The 88 Queensway Group: A Case Study in Chinese Investors’ Operations in Angola and Beyond,” Lee Levkovitz et al., U.S.–China Economic & Security Review Commission, July 10, 2009.

  57. As well as the presence of Sonangol’s president, Manuel Vicente, on the board of directors for various companies linked to CIF, the Angolan president’s son, José Filomeno “Zenu” Dos Santos, is CSIH’s representative in Angola.

  58. “CIF, Beijing’s Stalking Horse,” op. cit.

  59. Venezuela possesses the world’s greatest crude oil reserves, particularly
in the Orinoco Belt area to the southeast of the country. BP Statistical Review of World Energy, op. cit.

  60. El poder y el delirio [Power and Delirium], Enrique Krauze (Tusquets, 2008).

  61. Ibid., p. 278.

  62. As is often the case in Venezuela, the conditions of these loans are somewhat opaque. The authors managed to gain access to part of the contract and confirmed that half of CDB’s $20 billion loan is provided in dollars while the rest is provided in yuan. The repayment is to be made with oil over a ten-year period and represents “the first time that Venezuela seems to be making a long-term commitment in terms of its oil,” according to experts consulted by the authors on the subject.

  Beatriz de Majo, an expert on relations between the two countries, explained to the authors that China has tied its loan to the purchase of its own products: this is partly done by granting half of the total amount in yuan, which must be spent entirely on Chinese products and services. In terms of the remaining $10 billion, de Majo asserted that “40 percent will go towards Sino-Venezuelan projects while China will control the remaining 60 percent.” In other words, Beijing will decide what this money will be spent on.

  In terms of arms sales, China has managed to sell eighteen K-8 fighter aircraft to Venezuela, a country that has embarked on an arms race worth billions of dollars in recent years, with invaluable support from Russia.

  63. Venezuela’s oil reserves are the largest on the planet. Experts estimate that the reserves are “infinite,” in the sense that by the time the world stops using oil as its main energy source as a result of the development and pre-eminence of alternative forms of energy, Venezuela will still possess reserves of crude oil in the Orinoco Belt. It costs the same to fill a car’s petrol tank for a year in Venezuela as it does to fill it just once in Europe.

  64. Sales of Venezuelan crude oil to the United States have fallen significantly in recent years. Although Washington still buys an estimated 45 percent of Venezuela’s crude oil, or around a million barrels per day, this figure has been known to reach 1.5 million barrels per day in the past.