China’s risky bet in Somalia

China’s willingness to invest in Somalia – before the Transitional Federal Government (TFG) completes work on a national oil law and as the security situation in the East African country continues to deteriorate – shows that Beijing has not been deterred by the growing backlash across Africa at Chinese policies and remains willing to take on political risks that Western firms will not tolerate.
Chinese investments have come under attack in recent months, and a general wariness about closer ties with Beijing has become part of the political dialogue in most African countries where China does business. Days after the June meeting in Somalia, a Chinese mining executive was kidnapped in Niger. The incident followed the killing of nine Chinese workers in Ethiopia, near the border with Somalia, in April. Chinese workers have also come under attack in Nigeria in recent months.

Politically, Chinese investments have become a touchy subject. Michael Sata’s opposition campaign in Zambia received strong backing after he attacked Chinese investments and threatened to renew ties with Taiwan. He ultimately failed in his bid for the presidency, however, after China threatened retaliatory measures if he was elected. Similar complaints have been raised in Nigeria and South Africa.

China began this year to address the growing unease in Africa toward its investments. President Hu Jintao in February visited Zambia and South Africa, where he pledged further investments and a greater focus on community development plans. China has also publicly used its leverage in Sudan to press Khartoum to accept the terms of last year’s United Nations Security Council resolution on the Darfur crisis.

Nevertheless, China’s fundamental goals in Africa have not changed. China is looking to secure access to the natural resources it needs to keep its economic expansion humming, as well as support for its policies at the UN. The CNOOC deal in Somalia is evidence that China’s appetite for risk has not decreased as it pursues these goals in Africa.

[…] The fact that China would enter an agreement in such an uncertain legal and political environment, to say nothing of the security concerns, shows that it is still willing to take on risks that the Western oil majors cannot tolerate. This remains the

main competitive advantage for China in the race to secure natural resources around the world – while Chinese firms do not have the technology to drill in some of the conditions that Western firms can, they do not have the same political and financial constraints that prevent them from investing in regions considered off-limits to Western firms.

Asia Times