Nigeria River Delta Finds a New Investment Partner

Few people realize how many Chinese citizens are living and working in Africa. The details, indeed everything you ever wanted to know about Chinese involvement in Africa can be read in the excellent series by Richard Behar called China in Africa. On page two this tidbit jumps off the page.

There are already more Chinese living in Nigeria than there were Britons during the height of the empire. From state-owned and state-linked corporations to small entrepreneurs, the Chinese are cutting a swath across the continent. As many as 1 million Chinese citizens are circulating here. Each megaproject announced by China's government creates collateral economies and population monuments, like the ripples of a stone skimmed across a lake.

We were not surprised today when we read about China's latest megaproject, this time in an area very important to you and me, as it is the specific region in Nigeria that caused our gas prices to go up last week:

One of China's top engineering firms has signed a $1 billion deal to build a road around the volatile Nigerian city of Port Harcourt, the hub of Africa's biggest oil industry, the AFC development bank said on Sunday.

The deal makes Beijing a key development partner in the Niger Delta, home to Nigeria's 2.1 million barrels per day (bpd) oil industry, where poor infrastructure and a lack of investment have fuelled a campaign of violence by militant groups.

China Harbour Engineering Co. (CHEC) signed a memorandum of understanding with the African Finance Corporation (AFC) for the six-lane ring road during a visit to China by Nigerian local government and AFC officials last week.

On Friday the price of oil went almost to $150 because MEND announced it would be ending its cease fire. It will be interesting to see if China has success in this region. There are plenty of reasons to be optimistic for the short term, but if you read the entire Special Report by Richard Behar one can also come to the conclusion of long term consequences. Unlike the west who is concentrated mostly offshore, China's interest is on land, and they come with cash as the solution to all problems. From the second part of the seven part series, we find this nugget.

China's closed books make it impossible to see where the money actually goes, opening the door to all manner of inducements to local and national officials. These cash-heavy "no strings attached" offers make China's projects very hard to imitate for public companies from the West -- and all but irresistible to the cliques sitting atop most sub-Saharan countries.

For the outside world, Beijing markets its efforts with flowery rhetoric -- reminiscent of Mao Zedong's in Africa in the 1960s -- touting China as a "selfless friend" intent on fostering a "harmonious" relationship. But China doesn't hesitate to create more lasting symbols of its benevolence: parliament buildings in Uganda and Congo, a presidential palace in Sudan, the Supreme Court in Namibia, an entirely new administrative capitol rising in Equatorial Guinea -- and lavish soccer stadiums everywhere. These monuments not only distract restive local populations but are also, as one of the continent's best-known businessmen sees it, part of a subtler "psychological strategy: When the people are recreating, they will automatically revere the Chinese. And when the parliament is sitting, they will automatically revere the Chinese."

One wonders with a new billion dollar highway project how long we will see MEND, who will likely soon find themselves bribed with cash to leave the Chinese alone, sitting around the river road in reverence to the Chinese.

You may not agree with it, but China has a serious strategy in regards to Africa. What are we doing? We think the Navy is doing a decent job, indeed they have employed some clever ideas in how to engage Africa during peacetime. We keep thinking something more is required though, because we don't want to pay $4.50 or even $5.00 a gallon of gas, and had Bonga gone up in smoke a few weeks ago, that is exactly what we all would be doing today.

Here is something to think about. The price of oil hit a new record above $147 a barrel on Friday primarily for two problems, both of which are directly related to Maritime Security. The first problem is the return of tensions to Nigeria with the MEND cease fire ending, a cease fire which began right after the Bonga attack. The other factor is the Iran situation, with speculators concerned that a war with Iran will happen, and when it does Iran is going to shut down the Strait of Hormuz.

The United States Navy is the greatest Navy in the history of all mankind, and yet the perception that the US Navy is powerless to prevent disruption to the oil market by a band of river bandits in Nigeria or to a club of Iranian speed boat drivers wielding AK-47s is sending our economy into recession.

How can the most powerful naval force in the history of mankind not blunt the common perception of some of the most experienced money makers in the world, the speculators for oil? There are good reasons by the way. One wonders what speculators concerned about Nigeria think when naval forces in Europe do not respond to the Bonga attack, and return home instead. One wonders what speculators might think about the Iranian speedboat threat today had the US Navy blown the blue speedboats out of the water back in January.

What you don't like that comment? This whole post is discussing the price of peace, war isn't the only thing that has costs.