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Thursday, June 15, 2006

Analysis: China eyes African oil

UPI Energy Correspondent

Chinese Premier Wen Jiabao is preparing to embark on a seven-nation tour of Africa amid criticism that the Asian powerhouse's sole interest in the continent is its untapped oil potential.

Wen's travels from June 17-24 will take him to Angola, Egypt, Ghana, South Africa, Tanzania, the Republic of Congo and Uganda.

In recent years, Angola has increased its oil production to 1.6 million barrels per day, but its daily consumption is estimated at about 46,000 bpd. That difference is likely to attract Beijing's attention.

Chinese officials insist, however, that the premier isn't heading to Africa to prospect for more oil.

"Some people think that energy, the import of oil, is China's sole purpose in developing economic ties with Africa. This view is erroneous and one-sided," said Chinese Assistant Foreign Minister He Yafei, as quoted by the Xinhua News Agency.

He noted that China has spent billions in trade with African nations, $39.7 billion in 2005 alone. China has also doled out nearly $1.2 billion in direct investment in African businesses and has 900 assistance projects throughout the continent.

China has even taken some political measures to help the African nations, including subsidies for imports to balance bilateral trade, he said.

But analysts note the underpinning advantages of strengthened Sino-Africa relations, particularly when it comes to China's near insatiable desire for energy.

Over the past 15 years, China went from oil self-sufficiency to importing about 3 million bpd, during which time the nation's capital -- once only congested with bicycle traffic - has become clogged with 3 million automobiles.

According to estimates, by the year 2020, China will have 140 million vehicles on the road, surpassing the car count in the United States.

In the meantime, China has become the second-largest oil importer in the world, only trailing the United States. In order to slake that thirst for fuel, its leaders have been traipsing the globe, signing deals with numerous developing nations like Brazil and Venezuela in Latin America, and Angola and Sudan in Africa.

The partners in some of the deals - such as Sudanese President Omar al-Bashir - have been criticized by human rights groups, which have also condemned Beijing for its relations with nations that have poor human rights records.

None of that seems to matter at the moment to China, where 10 percent annual economic growth appears to trump concerns about a potential oil partner's political practices.

Enter Africa, where several leaders are eager to attract the foreign investment necessary to extract the crude they couldn't possibly reach without outside assistance. But energy demands are just one component of the China-in-Africa initiative, said Phil Flynn, vice president and energy analyst with Alaron Trading Corp.

Wen's trip is certainly about improving relations with an eye on oil, though his aspirations for Africa go beyond energy, Flynn told United Press International.

"This is not a surprise that he [Wen] would try to improve relations ... and the best way to improve relation is to secure more oil," he said.

Bolstered by its record-breaking growth over the past few years, China's coffers are brimming with extra revenue it can spend on new oil partners and exploration, both of which would force U.S. companies and Washington to rethink their own position on oil partnerships, Flynn noted.

At the same time China is spending billions in African oil, it could also make new partners in the arms trade, supplying the likes of Sudan and others with the weapons they need to fight protracted wars.

"Good trade partners can lead to other issue, like military support," Flynn said, noting how the United States during World War II promised to protect Saudi Arabia in exchange for oil rights.

It's a possibility that U.S. leaders and businessmen are going to have to consider if they hope to stay ahead of China as the oil race heats up in years to come.

"We're [the United States] not the only game in town anymore" Flynn said.
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