Chinese Investment in Sudan and South Sudan

=History=

Chinese investment in the Sudanese oil sector began in 1997 although their relationship dates as far back as the 1970s, as China provided a total of $89.3 million in aid and loans to the Sudan in the 1970s and 1980s

During development of the Sudanese oil sector in the 1990s/2000s, Sudan's relative economic isolation meant China enjoyed a particularly favourable entry into a largely untapped oil market, according to a report produced by the International Crisis Group. According to the Washington Post,China and Sudan are in a lucrative partnership that, from the Chinese side, delivers billions of dollars in investment and weapons, as well as diplomatic protection, in return for oil exports.

=Arms industry=

Sudan’s military expenditures rose dramatically since 1997, the year of its first oil exports, and according to human rights groups, much of the money for this came from profits made from oil exports to China, with much of the money returning directly back to China, for purchases of small arms and other military equipment by Sudan.

From 2003 to 2006, the period covering the worst abuses by Sudanese government forces in Darfur, China sold over $55 million worth of small arms to Khartoum. Media reports have covered evidence of this seen, for example, from TV video footage of a military parade during the 52nd anniversary of Sudanese independence last year shows that the country already had new-generation Chinese T96 and upgraded T59D main battle tanks and T92 wheeled infantry fighting vehicles fitted with Russian 2A72 30-mm cannon guns, as well as the Sudan military parade in 2007 which, according to UPI, had a strong Chinese colour as most of the armoured weapons were from China

=Investment in the oil sector=

China National Petroleum Corp. owns 40%, which is the largest single share, of the Greater Nile Petroleum Operating Company (GNPC), a consortium that dominates Sudan's oil fields in partnership with the Sudanese national energy company Sudapet and firms from Malaysia and India.

As of 2011, Sudan exports more than half of its daily oil output to China and, and Sudan was China's sixth largest source of overseas oil, accounting for more than 5% of China's crude imports in 2010.

Quoted in Al Jazeera, President Bashir said in June 2011, "When the American companies refused to work in the oil field and when restrictions were imposed on the Western companies operating in Sudan, we found in China the real partner,"

According to UNCTAD/UNDP, Asian Foreign Direct Investment in Africa, as of 2007, Chinese investment in Sudan was in excess of $6 billion, predominantly in the oil industry. China has obstructed efforts by the USA and Europe to impose UN economic sanctions and an arms embargo on Sudan because of the crimes against humanity that are committed in Darfur.

=Chinese perspective=

According to a report released by the Chinese National Petroleum Company (CNPC) in 2009, Together with its partners, CNPC has participated in and witnessed the entire process of constructing a modern, integrated oil industry in Sudan. Based on sincere mutual cooperation and utilization of complementary strengths, Sino-Sudanese petroleum cooperation has resulted in outstanding achievements, and has been acclaimed as “A Model of Sino-Sudanese Cooperation” by the leaders of the two countries.

The report also details CNPC's involvement in exploration and development projects in Sudan, including in Blocks 1/2/4, Block 3/7, Block 15 and Block 13, as well as in refining, chemical and trading projects including the Khartoum Refinery, the Khartoum Petrochemical Plant and the Petrochemical Trading Company. In addition, CNPC has also undertaken several major petroleum engineering construction and oilfield service projects.

=Post-Secession=

Since the birth of South Sudan, China has been trying to establish diplomatic ties with the new nation. However, Al Jazeera points to problems that have arisen from this, as while China talks of friendship with Juba, it continues to supply Khartoum with arms, and money. In early 2012, South Sudan expelled the head of Petrodar which is a Chinese and Malaysian company.

While Juba dismisses talk of a rift, analysis from Al Jazeera concludes that China has shown no interest in becoming a diplomatic mediator between the two nations, and finds itself now in a difficult position because of its reluctance to turn its back on old ties with Khartoum.

According to a report produced in April 2012 by the International Crisis Group, China has been "drawn into a high-stakes oil crisis" between South Sudan and Sudan, caused by balancing new alliances in Juba with old relationships from Khartoum. This report concludes that Juba has made it clear that, despite China's relationship with Khartoum, if the Chinese are the first to come and partner in developing the new nation, they will be welcomed with open arms.

= References =