Wednesday, August 24, 2011

China, Russia may lose out in new Libya

China and Russia may lose out on oil contracts as a new Libya rises from the destruction of the Gaddafi regime. This week an official at Libyan oil company AGOCO, allied with the rebels, told news agencies they "may have some political issues" in future dealings with China and Russia as they prepare for a return to production.

The reasoning behind his statement was due to the fact both Russia and China had failed to support the rebellion and abstained in voting for Resolution 1973 which paved the way for NATO airstrikes and a no-fly zone.

Gaddafi's fall will reopen the doors to Africa's largest oil reserves and give new players such as Qatar's national oil company and trading house Vitol the chance to compete with established European and US oil majors. But if the rebels side with those that helped them overthrow Colonel Gaddafi several major players are likely to lose out in benefiting from Libya's rich resouces.

Russian commentator Alexander Nekrassov talking to Al-Jazeera conceded Russia and China was likely to lose out on new oil contracts. But he said he did not believe it was a mistake to abstain from giving support to the rebel cause. "You cannot humiliate small countries just because you feel like it," he said, and went on to say that anti-Western sentiment may grow because of Western interference around the world. He also criticised the hypocrisy of the US and West for ignoring other dictatorships such as Saudi Arabia.

Nekrassov pointed out that China and Russia were not the only nations to abstain from supporting the rebels. India, Brazil and Germany also opposed military action and had urged greater diplomacy, he said.

But these nations too may also fail in securing lucrative contracts. "We don't have a problem with Western countries like the Italians, French and UK companies. But we may have some political issues with Russia, China and Brazil," Abdeljalil Mayouf, information manager at Libyan rebel oil firm AGOCO, told Reuters on Monday.

Russia has rich oil and gas resources, but China and other countries rely heavily on imports of oil. Before the revolution Libya was China's 11th largest oil supplier, but there is more at stake. China, which has sponsored an increasing number of development loans and projects in Africa in exchange for access to natural resources, also risks losing out on major redevelopment contracts.

"China is now encountering the complications of its non-interference policy," says Patrick Chovanec, associate professor in Beijing's Tsinghua University's School of Economics and Management. "China has a presence in a lot of countries that are seen as potentially politically unstable and yet it has this policy of supporting that status quo…When things are uncertain, it puts China in a very uncomfortable position."

This week as it became clear Gaddafi's regime was finally crumbling China's Ministry of Foreign Affairs appeared to change its position. In a statement the Chinese Foreign Ministry spokesman Ma Zhaoxu said, "We have noticed recent changes in the Libyan situation and we respect the Libyan people's choice." A commerce ministry official meanwhile called for a return to stability. "We hope after a return to stability in Libya, Libya will continue to protect the interests and rights of Chinese investors and we hope to continue investment and economic cooperation with Libya in the future," a conciliatory Wen Zhongliang, deputy head of the commerce ministry's trade department, told a news conference.

Behind the scenes China may well be nervous. Before the uprising there were some 35,000 Chinese workers in the country. Now it seems unlikely they will return.

Until the Arab Spring, China massaged the shoulders of dictators everywhere, and took home boatloads of oil, metals and minerals. This may not be a dependable bet in the future. Libya may just be the beginning of a growing movement for democratisation of African and Middle East states. Successful opposition movements may not be favourable toward apolitical resource-buyers. A policy of non-interference and of ignoring issues of human rights abuses may severely affect China if it loses out to more of Africa's vast resources [Globe & Mail / Foreign Policy / Reuters / CNN].

Perhaps China and Russia should have read The Little Red Hen, an old folk tale, most likely of Russian origin. In the tale, The Little Red Hen finds a grain of wheat, and asks for help from the other farmyard animals to plant it. However, no animal will volunteer to help her. At each further stage (harvest, threshing, milling the wheat into flour, and baking the flour into bread), the hen again asks for help from the other animals, but again she gets no assistance.

Finally, the hen has completed her task, and asks who will help her eat the bread. This time, all the previous non-participants eagerly volunteer. However, she declines their help, stating that no one aided her in the preparation work, and eats it with her chicks, leaving none for anyone else. The moral of this story is that those who show no willingness to contribute to an end product do not deserve to enjoy the end product. By maintaining a hands off approach with regards Libya, China and Russia as well as several other countries may well be left out of any new deals. 

tvnewswatch, London, UK

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