As energy companies seek out new oil and gas reserves around the world, Sudan, Nigeria and Angola have emerged as key players in what is shaping up to be an African energy boom. During today's OnPoint, Princeton Lyman, former U.S. ambassador to South Africa and Nigeria, and currently the Ralph Bunche senior fellow for Africa Policy Studies at the Council on Foreign Relations, talks about how African nations are handling the sudden rush of economic development. Lyman also explores the growing ties between China's state-owned oil companies and African resources, and why an uptick in Chinese weapons trading should get more attention from U.S. policymakers.
Brian Stempeck: Hello and welcome to OnPoint. I'm Brian Stempeck. My guest today is Princeton Lyman. He's the former U.S. ambassador to South Africa and Nigeria, now a senior fellow for African policy studies at the Council on Foreign Relations. Princeton thanks a lot for being here today.
Princeton Lyman: Brian, my pleasure.
Brian Stempeck: Thanks. In the past few years we've seen oil production really explode in Africa. What's driving this change going on right now?
Princeton Lyman: Well there's several things. There is a big increase in demand in Asia, China's explosive growth, India coming right behind it, other countries in Asia seeking out more access to natural resources. Then you've got instability in a number of areas, not just the Middle East, but from an occasional instability in a producer like Nigeria or trouble in Venezuela. And that sends the price spiking upward.
Brian Stempeck: Now China's state-owned companies have been making a lot of deals in China. How do they structure these deals? I mean are these basically, is this foreign policy we're seeing in action? Or is this an oil company working?
Princeton Lyman: No, this is foreign policy. And the one thing the Chinese have that we don't quite do the same way is that their foreign policy and their companies and their aid programs all work together. And one of the major tenets of Chinese foreign policy right now is access to natural resources. Africa is part of that, but it's also Asia, the Middle East and Latin America.
Brian Stempeck: What are the key countries that we're looking at in Africa in terms of being oil exporters to China and to Asia?
Princeton Lyman: Well the biggest exporters are the Sudan, Angola, Nigeria and Congo Brazzaville. Those have been the ones that China has concentrated on in the past, but they're expanding out considerably. But they get about, about 14 percent of their oil comes from Africa.
Brian Stempeck: Are we seeing U.S. oil companies or other multinationals going to these countries? Or is it primarily just China going into Africa right now?
Princeton Lyman: Oh, no, no, no. The American oil companies are investing heavily on the west coast of Africa, in the tens of billions of dollars, because production is going to double in Angola and Nigeria over the next several years. And the other big investment is in liquefied natural gas. And several big plants are being built on the West Coast of Africa.
Brian Stempeck: Are private oil companies able to compete with what the Chinese have to offer in terms of building infrastructure and other parts of the deals like that?
Princeton Lyman: That's a very good point, because what the Chinese are now doing is combining their bids on oil exploration with promises to build, through their state-owned companies, pipelines, highways, etc. American oil companies don't do that. They don't work in those different sectors like that. So I think the competition is going to become keener. And we saw that, we saw that in Nigeria, we saw that in Angola.
Brian Stempeck: So what does that mean? Are we going to see a company like ExxonMobil start building hospitals, pipelines, more infrastructure for an African country?
Princeton Lyman: I think right now the American oil companies still feel they compete well on technology and overall capabilities. Much of the new production in Africa is coming offshore. But the Chinese and the Nigeria deal is very instructive in this regard, are now also moving into offshore technology. What I think American companies will look for is some way to bring other resources to bear, either through the Export/Import bank or others, so that they can see packaged arrangements with African countries.
Brian Stempeck: Poverty is obviously a major concern in some of these countries. What are the Chinese doing to try to alleviate some of the problems that they're having in Africa?
Princeton Lyman: Well, the infrastructure that they're willing to build is important for African development and it's an area that we have gone out of in 30 years. We don't build roads and factories anymore in our aid program and they will. They're also into the health area. They're doing malaria work in East Africa. They're working on a vaccine. They are producing bed nets. They have a lot of doctors in Africa. And they're working in agriculture, so they're working in a number of areas that are important to poverty alleviation.
Brian Stempeck: On the flip side of course, there's kind of a growing weapons trade between China and Africa. I think the latest stat I saw was an estimate that China would be producing about 10 percent of the weapons that are being used in Africa. How problematic is that?
Princeton Lyman: Well I think this is a serious policy issue for us because China is willing to work with almost any regime with whom they can strike business deals. And that means that a regime like Sudan, which is carrying out what the U.S. has called genocidal attacks in western Sudan, in Darfur. And the Chinese are not only protecting them on the Security Council from the sanctions, but selling them arms. The same is true in Zimbabwe, which has been violating human rights in a major way. This, I think, is the most serious policy issue we have with the Chinese. That it's not that they don't have a right to compete for resources, but backing up cruel inhuman regimes, that's a serious problem.
Brian Stempeck: What do you think the role should be for the United States stepping in there? Should it be the United Nations or somebody from the State Department stepping in and saying we're not going to approve this kind of deal? I mean what power do we really have in that kind of situation?
Princeton Lyman: Well I think we have to put it on our agenda with overall Chinese relations. We've got a lot of issues with the Chinese, but we have to say this is part of our agenda. We are concerned, particularly in Darfur, Sudan if we see genocide taking place. We really can't see the Chinese blocking the U.N. from putting on sanctions and pressure. And that's beginning to have some effect on the Chinese. For the first time we've opened a dialogue on Africa with the Chinese through the State Department. This is the first time and I think it's an important step.
Brian Stempeck: Is it hypocritical at all though for the United States to be talking to China about these arms deals? I mean throughout the 80s we saw all sorts of deals between the United States and the Middle East. A lot of ties between trading weapons, selling fighter planes and of course, oil exports. So was it hypocritical to the United States to be stepping in on this?
Princeton Lyman: Well I think some people will say so. And the Chinese portray themselves as a member of the developing world and closer to the aspirations of developing countries. But you know our concern over democracy and human rights, which may be late in coming, is now a major feature of our foreign policy. And it's a major feature of a lot of the Africans. So this is an issue for Africa as well, to deal with this question and make sure that whatever benefits they get from China it doesn't divert them from their own emphasis on democracy and human rights.
Brian Stempeck: You of course worked in Nigeria and South Africa during your time with the State Department. What's kind of the reaction of African citizens, of African governments to this influx of demand in oil companies from China and around the world?
Princeton Lyman: Well I think they see it in one way as beneficial, because it's driven up prices they're earning a lot more. It's not just oil. It's copper. It's zinc. It's timber. It's all the resources in which Asia has been now in great demand. And they see the benefit in the infrastructure and they like the fact that the Chinese don't put on these political conditions. That makes it attractive. But they do see also that China brings in its own workers to do all these projects. They don't create jobs. There are 78,000 Chinese workers in Africa. And also a lot of Chinese goods are coming in and undercutting local African production. That's true in southern Africa. It's true in Nigeria. So there is some feeling that this is a mixed blessing to see China so active on the continent. And the Africans are debating this.
Brian Stempeck: A lot of times we hear about this so-called resource curse. You're talking about a developing nation that has a lot of oil or gold or another type of mineral, and it's exploited by an outside company that kind of leaves them out of the situation when it ends. How is that being alleviated in Africa at all? I mean I assume that's a major concern for policymakers there.
Princeton Lyman: It's a major concern for everyone, including the Africans, because it has been a curse. And a lot of the regimes have taken that money and used it for corruption or sent it to Switzerland or wherever. And in recent years there's been more of an emphasis now on what's called transparency. There's an international effort called the Extractive Industries Transparency Initiative, which brings countries, governments and companies together to try and move forward on transparency. It's very slow, very tough. We see some real progress being made in Nigeria. A little bit of progress was being made in Chad, now it's backsliding. Very little progress in Angola. And that's got to come, it's got to come from the Africans, it's got to come from Americans, it's got to come from the companies.
Brian Stempeck: I was going to ask about that. In Chad we recently saw the World Bank is withdrawing support for pipeline building there, because the government in Chad is basically changing the conditions of the pipeline deal and not giving as much money towards poverty. I mean you said that's the sign of a backslide.
Princeton Lyman: That's a backsliding, because that was a unique arrangement where the Chadians that agreed in return for World Bank support on the pipeline to set aside a certain portion of the money in escrow to be used on health, education, etc. Now they want to cut that back. And I think this is a major issue for us in terms of being able to push forward on these issues of transparency and making the proceeds really go to help the people. Chad, unfortunately, is a very unstable country and that makes it even more difficult.
Brian Stempeck: In past interviews I've seen that you've said that you feel like you didn't pay enough attention to this issue while you were ambassador in these countries. What advice would you have for the current ambassador to South Africa or to Nigeria or to Chad?
Princeton Lyman: Well I think in Nigeria I did not pay enough attention to the problems in the oil-producing area, the environmental damage taking place, the lack of development in those areas, even though that was producing most of Nigeria's wealth. Now we have a full-blown insurgency going on in that area. And it's unfortunately morphed into criminal and terrorist gangs, rather than really helping the people. We have a very good ambassador in Nigeria, but he's limited. He doesn't have the staff and he doesn't have all the resources. We don't even have a consulate in the oil area. So I think what we need to do now is make a major effort with the companies in that Gulf of Guinea area on security and on better transparency and better development. We're going to be contributing billions of dollars to those economies. We have to take some responsibility for how that money is going to be used.
Brian Stempeck: In the United States we see oil companies going to great lengths talking about how they can develop ANWR, develop offshore drilling in an environmentally sustainable way. Compare that to what's happening in Africa. I know there's been a lot of criticism saying that the oil companies aren't holding this to nearly the same standard that they would in North America.
Princeton Lyman: Well you have a history of, in the past, where they weren't holding to standards. Now the oil companies, partly because of public pressure and their own stockholders, are much, much more sensitive to these issues than they were before. There is a very good account in this book Collapse by Jared Diamond, of two different oil companies in Indonesia, one very sensitive to these issues and one not. And it's a very good example of a company saying 'This is important to us. It's good for our business to be sensitive.' In Nigeria, because the history is so long, the oil companies are struggling to know what to do because the insurgency has become so bad that they alone can't deal with this problem. So they're in a dilemma looking for help from the government of Nigeria, from abroad, etc., because it's gotten beyond the kind of things that they can do alone.
Brian Stempeck: OK. We're out of time. Princeton thanks so much for stopping by on the show today. We appreciate it.
Princeton Lyman: Well Brian, thank you.
Brian Stempeck: I'm Brian Stempeck. This is OnPoint. Thanks for watching.
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