Dangerous Business

This morning, at least 74 employees of China Petroleum and Chemical Corporation were killed by a rebel group. Before today, I did not know much about the Chinese investment in African oil.
China has spent billions of dollars up front to get preferential, long-term oil contracts with African countries. These deals typically ensure exploration and development rights as well as oil supply. They are made government to government, or national oil company to national oil company.
At the beginning of this month, African finance ministers met in Addis Ababa, the capital of Ethiopia, to assess the African economic situation. Africa's growth performance in 2006, as in previous years, was underpinned by improvement in macroeconomic management in many countries, and strong global demand for key African export commodities, especially crude oil.
In last week's blog, I noted that trade between Africa and China has grown 40% over the last year--and is still growing. The United States has also taken note.
In January of 2006, in his State of the Union address, President Bush said he wanted to reduce America's dependence on Middle East crude by 75 percent by 2025. Oil-rich areas in Africa would seem like a logical investment. In February, the US announced its intention of establishing more of a central command in Africa, called AFRICOM, to begin fully in October 2008. Troops already deployed in North Africa were involved in anti-terrorism efforts following September 11, 2001. Forbes reported, via the Associated Press, that "Officials also have said that Africa is strategically more important because of its oil production and increased efforts by China to gain influence on the continent." Hyperdynamics Corporation and Shell oil are two examples of American companies in Africa. In 1996, ExxonMobil discovered between 800 million and 1 billion barrels of oil in the Doba basin of southern Chad. The expansion highlighted the one of the major issues with Western development--while 98% of Chadians had no access to electricity, the twenty-five-mile-wide ExxonMobil facility lit up the night sky for miles around.

Armed militants in Nigeria kidnapped nine Chinese oil workers in January, and two more in March. Also in March in Nigeria, five Chinese telecommunications workers were abducted.
This morning in Ethiopia, the oil workers were attacked by members of the separatist group, the Ogaden National Liberation Front, or ONLF, reportedly because they felt that the company was exploiting the region's natural resources. In 1977, Somalia lost that particular region to Ethiopia. Thirty years later, the ONLF continues to wage a low-level war of independence on behalf of that region
Africa needs development. China and the US need resources. Now how do the superpowers help to empower these incredibly unstable parts of the continent without turning it into a cluster of indebted, and even more violent, countries?

Sources: BBC, Forbes, Business Week, InTheseTimes, Reuters, The Globe and Mail, The International Herald Tribune