Foreign Policy In Focus
Resource-rich Angola was once known as the scene of
Africa's longest-running civil war. Today, life
expectancy hovers around 44 years not unlike that of
an average Briton living in the 1800s. Over 70% of
the population lives in poverty, and the country has one
of the highest child mortality rates in the world.
30 years, Jose Dos Santos, leader of the liberation-party-turned-
permanent-government, the MPLA, does not appear to have lost his
lust for the throne.
Under Dos Santos's watch, since 1993, Angola's oil reserves have flowed
into the coffers of the regime's corrupt wabenzi elites as well as
multinationals via opaquely structured oil-backed loans. The MPLA initially
justified these loans as a means of securing arms and revenue to fight
UNITA, an armed movement led by U.S.-backed warlord Jonas Savimbi, also
aligned with Portugal's secret police and apartheid South Africa. Today,
the corrupt ruling party is devouring the nation's resources and its
future.
Despite the civil war, during which the United States sought to politically
destabilize the government, the MPLA nevertheless provided the United
States with cheap oil via U.S. multinationals like Gulf, which supplied 65%
of Angola's export earnings during the Reagan years. The MPLA, meanwhile,
invested 60% of its oil revenues into arms and much of the remainder went
into private gain. Presently, oil revenues account for 80-90% of export
earnings, with oil chiefly exported to China and the United States. The oil
money that flows in and out of Angola remains shrouded in mystery.
Angola is no longer officially a killing field, but the economy remains
dependent on enclave industries, with oil and diamonds comprising 99% of
exports. Though the government has embarked on developing domestic
industries and sectors devastated by war, such as infrastructure and
agriculture, these policies appear to lack the necessary political will. As
such, the profits from exports don't reach the majority of the population.
Shadowy Transactions
Thanks to accounts located in secrecy jurisdictions, also known as tax
havens and offshore financial centers, Angola's oil transactions are
protected from external investigation — even from branches of the same
bank. Details of transactions are also ring-fenced by Angola's secretive
state-owned company Sonangol, conveniently bypassing relevant ministries,
the central treasury, and parliament. Since 2003, over $13.5 billion has
been sourced through pre-export financing — largely limited to cash for
future oil — from major banks including Standard Chartered, BNP Paribas,
Commerz Bank, Deutsche Bank, Fortis, West LB, and others.
In theory, the regulatory authorities of specific jurisdictions monitor
these institutions, and are themselves scrutinized by global bodies such as
the Financial Action Task Force (FATF). But the FATF is merely an advisory
body, located in a dusty corner of the Organization for Economic
Cooperation and Development (OECD), and it is controlled by major
high-income countries that depend on access to Angola's resource and its
capital.
Sonangol remains the chief recipient of oil revenues and tax concessions,
but it's also able to subtract bogus losses and expenditure rents remitted
to the state. According to IMF reports, the state shaved off over 20% of
GDP in recent years. Though Angola overtook Nigeria as Africa's primary oil
producer in 2008, Sonangol continues to conduct secretive audits,
punctuated by occasional transparency and no accountability. Meanwhile, the
state maintains the fiction of a firewall with Sonangol, which allows
commercial and state-owned investors to pretend that they are not dealing
with a human-rights-abusing government that exploits public resources on
the pretext of development. Sonangol remains under the radar by swiftly
repaying debts, even if via refinanced loans. The company traditionally
shied away from the IMF's interference and its requests for financial
transparency. It even paid back $2.3 billion in outstanding debt in 2006 to
avoid the prying eyes of outside creditors.
This policy has also worked out well for the multinationals involved.
Standard Chartered, for instance, has described Sonangol's performance as
"impeccable" and countries like war-torn Angola as ever-sexier "investment
environments."
Thirsty China
Through the Export-Import Bank, China has provided over $24 billion in
loans to Africa, chiefly through a barter arrangement that emphasizes
resource extraction. In return, China has exported skilled laborers and
materials and invested in infrastructure to facilitate the flow of resource
back home. In fact, over 50% of all China loans through its Import Export
Bank have been invested in Africa, spanning 36 countries. These projects
range from mega-dams to railways, ports, and mining facilities. They are
specifically designed to improve the first two links in the commodity chain
— extraction and transportation — with production and distribution
tactically shifted to Beijing, and consumption going to countries like the
United States.
China also claims to hold 60% of the world's rare-earth metals within its
borders. These strategic minerals — yttrium, holmium, lanthanum, thulium
are essential for an estimated $100 billion end-user market that
includes many green technologies. Beijing has called for outright bans on
the export of certain minerals and urged quotas on others. This enables
China to retain priority access and dominate markets. But its policy toward
Africa is exactly the opposite.
China's two footholds on the continent are Angola and Sudan. It has
extended over $5 billion in oil-backed loans and revolving credit lines to
Angola. In 2007, for instance, China offered a $1.4 billion operating loan
to Sonangol through the China Petroleum and Chemical Corporation. Since
2000, Chinese trade with Angola increased by 14-fold. China's policy of
political non-interference turning a blind eye to a country's human
rights situation, for example — sets just the tone for a regime like the
MPLA.
U.S. Role
Vying for the position of top dog in Africa is the United States. Through
its new Africa Command, the United States has declared plans to access
25-30% of its imports from Africa by 2015. With the Persian Gulf in the
middle of a politically turbulent region, Washington is eyeing the Gulf of
Guinea as the "new gulf." Already, Africa contributes almost 20% of the
America's crude oil imports, supplied by oil-producing giants such as
Nigeria and Angola, two primary beneficiaries of the African Growth and
Opportunity Act, along with Chad, yet another petro-state governed by
lifetime dictator Idriss Deby.
Military relations between the two countries have grown closer. Last year,
the U.S. Navy ship Elrod landed in the port of Lobito, Angola to further
the naval and military alliance between the two nations. One of the four
main U.S. military arteries in Africa, the International Military Education
Training program has received increased funding under the Obama
administration.
The United States is making other inroads in Angola in agriculture,
economic reform, and health care. One example includes Angola's partnership
with USAID, which uses aid to promote U.S. multinationals like Chevron and
technologies such as genetically modified organisms. Unlike the oil-rich
Niger Delta, Angola lacks the organized, collective resistance to threaten
the powerful combination of state and multinationals. In contrast to the
Delta, where the bulk of extracted oil is inland, Angola's tapped oil for
the most part is safely located offshore.
During the Cold War, Angola was the site of a proxy war waged by the United
States, Cuba, and the Soviet Union. Today, the superpowers are still
interested in the country, but they are fighting for control of Angola's
vast oil wealth in a different way. Whether Angola can play the calm
offensive of the United States and China off one another to its own
advantage — and whether the already largely mortgaged oil wealth will
ever benefit the Angolan population — remain key unanswered post-Cold War
questions.
Foreign Policy In Focus contributor Khadija Sharife is a journalist and
visiting scholar at the Center for Civil Society (CCS). She's based in
South Africa
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