Oil, Natural Gas and the Political Economy of East Africa

Oil, Natural Gas and the Political Economy of East Africa

U.S. militarism is rooted in oil discoveries and resource control

By Abayomi Azikiwe Editor, Pan African News Wire

Transnational oil corporations and the Pentagon are very active throughout East Africa. Why are they there, oil and plenty of it is the answer. Several countries throughout the region are the focus of oil and natural gas exploration and exploitation projects that are valued at trillions of dollars. From Somalia and Uganda to Tanzania, Sudan, South Sudan and the Democratic Republic of Congo (DRC), known existing oil and gas resources and new discoveries have prompted both positive outlooks on the economic future of the region as well as heightening tensions over control of these riches.

The coast lines of East Africa have not produced oil as of yet but natural gas discoveries off the coasts of Mozambique and Tanzania has led to increased interest. The west coast of Africa has already proven to be a very lucrative market with Angolan offshore resources and Nigerian on shore leading the way. Oil offshore is also being developed further on the west coast of Africa and some speculators are anticipating they will find substantial reserves in the east as well. Tara O’Conner, Managing Director of Africa Risk Consulting, said that “Oil interest in East Africa is huge. That whole area is of enormous interest to junior and medium-ranked companies. In fact, it has been a long time since so many oil companies that size were so active exploring a region.” (The Observer, Kampala, July 5)

The United States Congress is moving to lift existing restrictions related to conducting business within the oil industry in Sudan. The Republic of South Sudan, which was granted independence from the Republic of Sudan last year, is eager to conduct business with western-based oil firms since the industry under the government in Khartoum has strong Chinese influence. Sudan, previously the largest nation-state in Africa, was partitioned last year in the aftermath of a vote that led to independence. The country borders several East African, Central African and North African states and developments in both South and North Sudan have regional implications.

The most recent discoveries in Kenya have created tensions with neighboring Somalia. Kenya has deployed thousands of its own troops in Somalia since October 2011 largely at the aegis of the U.S. The Kenyan Defense Forces (KDF) are in Somalia as part of the U.S.-backed attempt to prevent the Al-Shabaab Islamic resistance movement from taking power from the fragile Transitional Federal Government based in Mogadishu. Kenya’s intervention in Somalia has not gone well over the last several months. Consequently, the Kenyan forces have been integrated into the African Union Mission for Somalia (AMISOM) which already plans to reach a troop-level of 17,000 soldiers from Uganda, Burundi, Djibouti and Sierra Leone by the end of the year. On July 6 the TFG in Somalia accused Kenya of acting illegally by awarding offshore oil and gas exploration blocks to several transnational firms including Total of France and Eni of Italy. Somalia’s deputy energy minister, Abdullahi Dool, told Reuters press agency that the agreements made by Kenya were invalid and that if its neighbor did not cancel them the TFG government would take Nairobi to the United Nations, which rules on maritime border demarcation issues. Dool said of Somalia’s TFG that “We are concerned about the lease of blocks. I am sure we will lodge complaints.” (Reuters, July 6)

An official in Kenya, where oil was just discovered in March, has dismissed allegations of a dispute over ownership between the two countries. Petroleum commissioner Martin Heya stressed that “Saying these are not Kenyan blocks is like saying we don’t have a full-fledged government, like we are a banana republic.” The dispute between Kenya and Somalia’s western-backed TFG regime could have an impact on Nairobi’s role in the imperialist-engineered war inside the country. Although Kenya says that it is acting in its own interests in Somalia in order to prevent kidnappings and bombings within its borders, documents released several months ago indicate that the intervention into southern Somalia, dubbed “Operation Linda Nchi,” was planned in conjunction with Washington for two years. Sudan, South Sudan Crisis The discovery of new oil and natural gas deposits in East Africa sheds light on the current unresolved issues related to the partition of the Republics of Sudan and South Sudan. Fighting between the two countries flared up earlier this year when Juba halted the flow of oil through the northern pipelines over a supposed payment dispute. Later the Sudan People’s Liberation Army (SPLA) moved in to seize the Heglig oil fields disrupting production even further.

The Sudan People’s Liberation Movement (SPLM) government under President Silva Kiir was condemned for the military aggression at Heglig and eventually withdrew its forces from the area. These problems coupled with ongoing disagreements over border demarcations and the legal status of Abyei, has heightened tensions between the now two separate states. The oil industry in South Sudan is largely paralyzed has a result of the failure of the two governments to resolve their differences. In the Republic of Sudan capital of Khartoum, austerity has been imposed due to the precipitous drop in foreign exchange earning previously gained through the export of oil. It has been estimated that over 70 percent of the oil resources in the two Sudans are located in the South. This drastic drop in oil revenues in the Republic of Sudan has sparked protests against the elimination of fuel subsidies and the rising prices of other consumer goods in the country. Several opposition parties who have joined in the demonstrations are calling for the resignation of the National Congress Party (NCP) government under President Omar Hassan al-Bashir. The People’s Republic of China has attempted to maintain relations with both the Republic of Sudan and the Republic of South Sudan in working out a resolution to the conflict which has damaged all three countries’ interests in the region.

President Kiir traveled to Beijing in an effort to seek Chinese support for the building of an alternative pipeline which would channel the South’s oil resources through Kenya and not the North. Chinese leaders refused to provide assistance in building a new pipeline but said that PRC would loan the Republic of South Sudan $8 billion. China has enhanced its economic relations with the African continent but is cognizant of the geo-political dynamics within the region. The U.S. was a strong proponent of separation by the Republic of South Sudan.

With legislation being formulated in Congress to eliminate sanctions that could hamper American-based oil firms from doing business in the Republic of South Sudan, coupled with the rise in threats of renewed military confrontations, the Pentagon is moving to strengthen Washington’s presence in East Africa. Oil discoveries in Uganda on the border with the Democratic Republic of Congo may impact U.S. involvement with the oil industry there since legislative restrictions related to resource mining in the eastern DRC could also hamper participation. The role of China in all of these developments will be of primary concern of Washington and Wall Street. Strategic Outlooks for U.S. and World Imperialism With China increasing its economic partnerships with various African states, the U.S. is building up its military engagements in East and Central Africa, but also this involvement by the Pentagon, the State Department and the Central Intelligence Agency (CIA) is designed to benefit the profit-making drive of Wall Street.

All of these states throughout East Africa, the DRC and the Sudans, will need massive financial investments to build the type of infrastructure that will allow for the extraction of oil, natural gas and other resources. Uganda, whose oil reserves are estimated to be two billion barrels at present, will require massive infusions of capital. According to business consultant Kenneth Kitariko, the African Alliance Uganda’s CEO, “Investment is expected to pick up in the years ahead, with the country needing $10 billion—more than half the current value of the nation’s nominal GDP—over the next few years to build the infrastructure to produce, transport, refine and export oil..” (New Vision, Kampala, July 5) Some of the key players in the oil industry in the region include ERHC Energy Inc., a publically traded U.S. firm with oil and natural gas investments in Africa, which announced on July 9 that it had signed a production sharing contract with the Kenyan government.

The block being developed by ERHC is located on the border with the South Sudan to the north and Uganda to the west. (GlobeNewswire, July 9) ERHC has other interests in the Gulf of Guinea off the coast of West Africa with the nations of Nigeria as well as Sao Tome and Principe. In Chad, ERHC’s involvement is onshore. Statoil, a Norwegian oil company, credited with the finding of large deposits of natural gas off the coast of Tanzania in February, has naval patrols guarding its operations in the Indian Ocean. The head of exploration, Tim Dodson, said of its investment off the Tanzanian coast that it was “our biggest ever discovery as operators outside Norway.” (Financial Times, March 12) The Financial Times reported in March that “Statoil, Shell, Petrobras, and ExxonMobil are in Tanzania, while Eni is established in Mozambique. In reference to East Africa, Simon Ashby-Rudd, an oil investment banker who works for Standard Bank, said that “With gas exploration you have to find an elephant field to make it worthwhile. They didn’t just find one elephant—they found a herd.” (Financial Times, March 12) As the major transnational oil and natural gas firms buy out smaller companies and take over the exploration and exploitation, the actual pace of the drilling will accelerate. According to the Financial Times, “Morgan Stanley expects 23 wells to be drilled off Kenya, Tanzania and Mozambique this year, almost double the number in 2011.” (March 12) Imperialism and Militarism Provides No Solutions to Development Challenges Consequently, with this rush in investment activity in the East and Central Africa region, it is not surprising that the United States Africa Command (AFRICOM) is increasing its presence exponentially.

The Pentagon is training and financing military operations in Somalia, Djibouti, Ethiopia, Kenya, South Sudan, the DRC and the Central African Republic. However, if any indication can be drawn from the political history of Africa in relationship to profits accrued from the exploitation of oil and natural gas, in many cases the distribution of earnings from these projects do not benefit the masses of workers and farmers whose land and labor are utilized by the corporations to sell these resources abroad. Of course the corporations will make huge profits and the banks will provide the needed capital for infrastructural development and trade, but if the people are not organized and their governments are more concerned about pleasing the barons of Wall Street and Washington, then unrest will surely follow. In addition, the transnational firms may be able to pit these various states against each other in competition for capital investment and loans. With new findings in Kenya, some speculate that this may draw resources away from oil fields in Puntland (Somalia) and Uganda. What is needed is the unification of these African states allowing them to negotiate regional agreements with the oil and natural gas firms. The states would benefit their people more by taking hold and controlling the majority stakes within these investments. The distribution of profits would produce more social capital for the population through massive spending on public service programs such as agricultural developments, environmental preservation, health care, education and scientific research.

Can these programs be fully implemented under the neo-colonial and capitalist system of economic organization? These are questions that must be asked and answered by the people of East Africa in their struggle for control, development and distribution of resources.

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