China Invests Heavily In Sudan's Oil Industry
Beijing Supplies Arms Used on Villagers
By Peter S. Goodman
Washington Post Foreign Service
Thursday, December 23, 2004; Page A01
LEAL, Sudan -- On this parched and dusty African plain, China's
largest energy company is pumping crude oil, sending it 1,000 miles
upcountry through a Chinese-made pipeline to the Red Sea, where
tankers wait to ferry it to China's industrial cities. Chinese
laborers based in a camp of prefabricated sheds work the wells and
lay highways across the flats to make way for heavy machinery.
Only seven miles south, the rebel army that controls much of southern
Sudan marches troops through this sun-baked town of mud huts. For
years, the rebels have attacked oil installations, seeking to deprive
the Sudan government of the wherewithal to pursue a civil war that
has killed more than 2 million people and displaced 4 million from
their homes over the past two decades. But the Chinese laborers are
protected: They work under the vigilant gaze of Sudanese government
troops armed largely with Chinese-made weapons -- a partnership of
the world's fastest-growing oil consumer with a pariah state accused
of fostering genocide in its western Darfur region.
China's transformation from an insular, agrarian society into a key
force in the global economy has spawned a voracious appetite for raw
materials, sending its companies to distant points of the globe in
pursuit -- sometimes to lands shunned by the rest of the world as
rogue states. China's relationship with Sudan has become particularly
deep, demonstrating that China's commercial relations are
intensifying human rights concerns outside its borders while
beginning to clash with U.S. policies and interests.
Sudan is China's largest overseas oil project. China is Sudan's
largest supplier of arms, according to a former Sudan government
minister. Chinese-made tanks, fighter planes, bombers, helicopters,
machine guns and rocket-propelled grenades have intensified Sudan's
two-decade-old north-south civil war. A cease-fire is in effect and a
peace agreement is expected to be signed by year-end. But the
fighting in Sudan's Darfur region rages on, as government-backed Arab
militias push African tribes off their land.
China in October signed a $70 billion oil deal with Iran, and the
evolving ties between those two countries could complicate U.S.
efforts to isolate Iran diplomatically or pressure it to give up its
ambitions for nuclear weapons. China is also pursuing oil in Angola.
In the case of Sudan, Africa's largest country, China is in a
lucrative partnership that delivers billions of dollars in
investment, oil revenue and weapons -- as well as diplomatic
protection -- to a government accused by the United States of
genocide in Darfur and cited by human rights groups for
systematically massacring civilians and chasing them off ancestral
lands to clear oil-producing areas. The country once gave safe haven
to Osama bin Laden and is listed by Washington as a state supporter
of terrorism. U.S. companies are prohibited from investing there.
Part of a broader push by China to expand trade and influence across
the African continent, its relationship with Sudan also demonstrates
the intensity of China's quest for energy security and its
willingness to do business wherever it must to lock up oil.
From Kazakhstan to the Middle East, past pursuits have ended in
failure as Chinese firms have been aced out by the multinational
titans that dominate the energy business. Japan appears set to claim
Siberian stocks that China once thought were in hand. The U.S.-led
war in Iraq has thrown Chinese oil concessions in that country into
doubt.
The pressure to find new sources of oil has grown as China has
swelled into the world's second-largest consumer and as production at
the largest of its domestic fields is declining. According to
government statistics, China's imports have grown from about 6
percent of its oil needs a decade ago to roughly one-third today and
are forecast to rise to rise to 60 percent by 2020.
"China confronts foreign competition," said Chen Fengying, an expert
at the China Contemporary International Relations Institute, which is
based in Beijing and affiliated with the state security system.
"Chinese companies must go places for oil where American [and]
European companies are not present. Sudan represents this strategy
put into practice."
China National Petroleum Corp. owns 40 percent -- the largest single
share -- of the Greater Nile Petroleum Operating Co., a consortium
that dominates Sudan's oil fields in partnership with the national
energy company and firms from Malaysia and India.
From its seat on the United Nations Security Council, China has been
Sudan's chief diplomatic ally. In recent months, the council has
neared votes on a series of resolutions aimed at pressuring Sudan's
predominantly Arab government to protect the African tribes under
attack in Darfur and stop support for militias by threatening to
sanction its oil sales. China has threatened to veto such actions
while watering down the threat of oil sanctions.
"China has a long tradition of friendly relations with Sudan," Wang
Guangya, China's ambassador to the U.N., said in a recent interview
in New York. He confirmed China's veto threats, though he dismissed
as "categorically wrong" suggestions that oil interests were a
factor, asserting that the resolutions would have eliminated the
Sudan government's incentive to cooperate. China -- itself often
criticized on human rights issues -- has a philosophical
predisposition against outside pressure.
But Chinese diplomatic experts say oil interests clearly played a
role in Beijing's actions at the United Nations.
"Oil from Sudan makes up one-tenth of all of China's imported oil,"
said Zhu Weilie, director of Middle East and North African Studies at
Shanghai International Studies University, who has links with the
Foreign Affairs Ministry. "If we lose this source, how can we find
another market to replace it? China has to balance its interests."
Sudan is not a member of the Organization of Petroleum Exporting
Countries, but it was granted observer status in August 2001, a sign
it is being recognized as a significant oil producer. Its proven
reserves are currently 563 million barrels, double what they were
three years ago.
In an interview in Sudan's capital, Khartoum, Energy and Mining
Minister Awad Ahmed Jaz praised his Chinese partners for sticking to
trade issues.
"The Chinese are very nice," he said. "They don't have anything to do
with any politics or problems. Things move smoothly, successfully.
They are very hard workers looking for business, not politics."
Human rights advocates and opponents of the Sudanese government
portray China's role in different terms: Just as colonial powers once
supplied African chieftains the military means to maintain control as
they extracted natural resources, China is propping up a rogue regime
to get what it needs.
"The Chinese calculation is to consolidate and expand while Sudan is
still a pariah state," said John Ryle, chairman of the Rift Valley
Institute, a Nairobi-based research group that focuses on East Africa.
One of the poorest countries in the world, Sudan has long aimed to
extract oil riches but lacked the necessary capital. It needed the
help of deep-pocketed outsiders. In the 1960s and 1970s, Chevron
Corp. took the lead. But as the civil war flared in the south in the
1980s, Chevron abandoned its concessions. During the early 1990s, the
Canadian firm Arakis Energy Corp. took up the task, later selling out
to a larger Canadian company, Talisman Energy Inc.
China National Petroleum Corp., still owned by the Communist Party
government, bought into the Sudan consortium in 1996. It joined with
Sudan's Energy Ministry to build the country's largest refinery, then
last year invested in a $300 million expansion that nearly doubled
production, according to a report in the Shenzhen Business Post.
The consortium's Heglig and Unity oil fields now produce 350,000
barrels per day, according to the U.S. Energy Department. Separately,
CNPC owns most of a field in southern Darfur, which began trial
production this year, and 41 percent of a field in the Melut Basin,
which is expected to produce as much as 300,000 barrels per day by
the end of 2006. Another Chinese firm, Sinopec Corp., is erecting a
pipeline from that complex to Port Sudan on the Red Sea, where
China's Petroleum Engineering Construction Group is building a tanker
terminal.
Sudan's bloody north-south conflict began long before China arrived,
but oil has dramatically increased the stakes as well as the
government's ability to pursue the battle. The war is a struggle over
the resources of the south, pitting the mostly Muslim, Arab elite
that runs the government in Khartoum against the largely Christian
and animist African tribes who live in the lower half of the country.
For years, the government lacked the arms to vanquish the Sudan
People's Liberation Army, the rebel group that controls much of the
south. With the dawn of oil production in 1999, Sudan's government
began collecting $500 million a year in revenue. About 80 percent
went to buy weapons, said Lam Akol, who was Sudan's transportation
minister from 1998 to 2002 and is now a rebel commander. Over the
same period, Sudan's military budget has doubled, according to the
International Monetary Fund. A study by PFC Strategic Studies
concluded that the Sudan government could collect as much as $30
billion in total oil revenue by 2012, with the potential for much
more if exploration succeeds.
As the oil began to flow, Sudan relied on Chinese assistance to set
up three weapons factories near Khartoum, Ryle said. Human rights
groups say oil receipts have helped pay for a government-led
scorched-earth campaign to remove mostly ethnic Nuer and Dinka tribes
from around the oil installations. The goal is to deprive the rebels
of a base of support in their bid to attack the industry and
undermine the government's oil revenue.
A report by the U.S.-funded Civilian Protection Monitoring Team,
which investigates attacks in southern Sudan, asserted that
government troops have "sought to clear the way for oil exploration
and to create a cordon sanitaire around the oil fields."
"This government has always waged war against civilians," said Jemera
Rone, Sudan researcher for Human Rights Watch in Washington. Aided by
an influx of newly purchased helicopters, a government attack in
Ruweng county in October 2001 displaced 80,000 people, according to a
Human Rights Watch report. The next year, government troops again
used helicopters, killing 24 people during an attack on an emergency
food distribution center.
The Nuer people who now live in Leal were at the center of this
contested area. Their former town, Nhialdiu, was wiped off the map on
Feb. 26, 2002, in an attack confirmed by survivors and rebel
commanders.
Mortar shells landed at dawn. Then came helicopter gunships,
directing fire at the huts. Antonov airplanes dropped heavy bombs.
Roughly 7,000 government troops, mixed with pro-government militias,
then swept through with rifles and more than 20 tanks.
"Any human being who could not get away was killed, even children,"
said the chief of Leal, Tunguar Kuiyguong, who lost three of his 10
children that day. About 3,000 of the town's 10,000 inhabitants died,
he said, and every house was burned to the ground. The soldiers made
off with 10,000 head of cattle, which are the fundamental currency of
Nuer life -- the payment for brides and the source of meat, milk and
pride.
"The Chinese want to drill for oil, that is why we were pushed out,"
said Rusthal Yackok, who was blinded, his wife and six children
killed. "Now, I have no family, no cows," he said. "I have nothing.
My life is totally destroyed."
Even as people fled, walking more than seven miles to settle on a
treeless plain, the bombs continued to rain down and the helicopter
gunships buzzed in pursuit. "We would see the helicopters and try to
hide in the grasses," said David Majang. People stripped off their
colorful robes to try to blend in with the scrub.
Today, people in Leal try to coax crops from unproductive soil. They
line up at wells drilled by an aid organization and await the next
shipment of food aid. "Oil has brought devastation to our lives,"
said Stephen Mayang, a father of three whose legs were badly hurt
during the attack.
China National Petroleum Corp. refused repeated requests over the
past 10 months for an in-person interview to discuss its operations
in Sudan.
Last week, in a telephone call, a spokesman said the company bears no
responsibility for the war. "We do our own business," he said.
"Nothing else."
But field reports produced by human rights groups describe a
connection between the people extracting the oil and those waging the
war. Some of the helicopter gunships used in the attacks on civilians
are Chinese-made, according to Akol, the former Khartoum
transportation minister. The helicopters, he said, have frequently
been based at airstrips maintained by the oil companies -- a
statement consistent with the findings of Canada-based World Vision
when it interviewed survivors of attacks and defecting government
soldiers in 2001.
"The Chinese have every reason not to lose these oil fields, and that
is why they are committed to fighting the war by supplying the Sudan
government the wherewithal," Akol said.
A recent report in the state-controlled China Business News quotes a
Chinese foreign affairs official as saying that Beijing has asked
Khartoum to "send troops" to areas in which Chinese companies operate.
The exit of Canada's Talisman company from Sudan was largely a
reaction to public pressure. China National Petroleum has felt
similar pressures. In April 1999, the company announced plans to sell
shares on the New York Stock Exchange -- the first Chinese
state-owned firm to land on the Big Board. It was to be the largest
initial public offering in the exchange's history, valued at $10
billion. But human rights groups said the deal would be the effective
use of U.S. financing to aid the killing of innocents in Sudan.
Eventually, CNPC restructured the transaction. It sold $2.9 billion
in a newly created subsidiary, PetroChina, asserting that none of the
money would be used in Sudan.
Ultimately, it may be peace that presents the Chinese firm with its
greatest challenge. Under the terms of an agreement still being
negotiated, oil contracts are supposed to remain secure. But three
commanders of the southern Sudan rebel group said in interviews that
the SPLA will seek to punish China once the rebels gain a formal
decision-making role in the government.
The stakes could be considerable: Peace would allow the world's major
energy companies to enter Sudan's oil patch. Moreover, roughly
two-fifths of all known reserves -- oil worth more than $16 billion
-- are now in rebel-controlled territory, according to the study by
PFC, the strategic analysis group.
"The suffering of the people is on the hands of the Chinese," said
commander Deng Awou. "The agreements for the Chinese company may be
terminated."
Correspondents Emily Wax in Khartoum, Colum Lynch in New York and
special correspondent Jason Cai in Shanghai contributed to this
report.
© 2004 The Washington Post Company
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