Chinese Energy Companies in Africa

Implications for the Foreign Policy of an Authoritarian State

T. Kasandra Behrndt-Eriksen

• Publisher: Routledge
• Year: 2020
• Print ISBN: 9781138390003
• eBook ISBN: 9780429752407
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Economic Policy
• Index: Politics & International Relations

Over the last decade, Chinese energy companies have engaged in the acquisition of oil and gas in Africa. This book investigates the activities of Chinese energy companies throughout a number of African countries, including Nigeria, Angola, Sudan and Tunisia.

Based on seven years of empirical research and hundreds of interviews with Chinese government and company representatives, Chinese Energy Companies in Africa breaks original ground in understanding the emergence of domestic interest groups in foreign policy. It examines the impact of non-state actors on Chinese foreign policy, and in particular the increasing role played by national oil companies (NOCs). Supported by extensive data, this is also the first publication of its kind to focus on the foreign policy behaviour of an authoritarian state and the role herein played by non-state actors. In addition to the main cases put forward, a chapter of comparative mini-cases is included.

This book creates important implications for both policymakers and scholars; it will serve as a valuable resource for those involved in the fields of foreign policy, international security and international relations.

1 Chinese energy companies’ acquisitions abroad

China’s overall power has grown rapidly over the last decade. In all areas of power, not least economically and militarily, the capabilities of the country have increased, both in absolute and relative terms. In the debate on the “rise” of China, it is argued that as China’s capabilities grow relative to other powers, China is rising. However, while there seems to be consensus on China rising, there are different perspectives on how this “rise” is to be understood. According to most realist theory, as the capabilities of a state grow relative to other states, the foreign policy of that state is expected to become more expansionist,¹ and according to some, it should grow similar to that of fascist Japan or Wilhelmine Germany.² According to other strains of realist theory, however, China’s foreign policy is expected to be peaceful regardless of its growing capabilities; that is, it will act as a status quo power.³ The view that China will behave differently is also reflected in Chinese official rhetoric. Here, the view is that China’s rise will be peaceful and that China’s foreign policy in the years to come, despite the state’s increasing capabilities, will seek to maintain the status quo.⁴

In contrast to many power transitions in the past, China’s current economic growth has occurred largely while accepting the norms of the international system. Still, the question of how China will make use of the military power that its increasing wealth is rendering possible remains unsettled. While these tensions are yet to be resolved, given the country’s economic growth, China will clearly come to require increasing imports of resources in the future.

China has displayed a need for increased energy supplies in recent years in order to maintain its economic growth. Its growing economy, which has boasted average annual growth rates of 10 percent since 1990, has been accompanied by an increasing need for resources domestically.⁵ At the same time, China’s economic growth has been accompanied by increasing domestic energy consumption. In 2010, China replaced the United States as the world’s largest national energy consumer. While the country was largely self-sufficient in natural resources when the People’s Republic of China (PRC) was established in 1949, demand has outgrown supply in recent years, and China went from being an oil exporter to an oil importer in 1993. The Chinese leadership expects Chinese energy imports to increase, coming to account for 60–80 percent of China’s oil consumption by 2020. China’s growing trade surplus and massive foreign currency reserves allow the country to finance the import of resources.

To ensure sufficient supplies of energy resources to fuel the growing economy, the Chinese government launched its “Going Out” policy (走出去/zouchuqu) in 2001. Consequently, over the last decade, Chinese energy companies have become engaged in regions as diverse as Africa, Latin America, and Central Asia. In 2009, Chinese companies spent $18.2 billion⁶ on merger and acquisition deals, which equates to 13 percent of the total global oil and gas acquisitions in this period (61 percent of all acquisitions by national oil companies). In 2010, Chinese companies spent $29.39 billion on merger and acquisition deals, and Chinese oil companies are now operating in 31 countries, with oil and gas production in 30 of them.⁷

As a number of studies note, the growing need for oil imports renders the role of national oil companies in securing sufficient energy increasingly important. In other words, with the growing need for imports, the role of the Chinese national oil companies (NOCs) in securing the resources necessary for the regime to survive has become more important.⁸

Following the increase in activities abroad, evidence has emerged in the last ten years that state-owned enterprises (SOEs) have become stronger and more profitable. Chinese SOEs have been listed on international stock exchanges and are among the world’s largest companies in terms of revenue. Moreover, a tendency has been observed according to which SOEs have acquired an increasing influence on economic decision-making in China. There have even been instances in which SOEs have had an impact on foreign policy.

Here, the proposition is that the empirical variation found in the relationship between the government policies and the activities of the NOCs, a subgroup of the SOEs, provides a window for understanding China’s energy policy in recent years. To illuminate the relationship between the NOCs and the Chinese government, this book thus explores the research question: to what extent do the activities of the Chinese energy companies in a number of countries and regions reflect state interests, economic interests, or a concern with domestic stability (weiwen)?

The claim here is that the rise of the SOEs has been accompanied by a key change among the actors in foreign policy and in the “Going Out”/走出去 policy launched by the Chinese government in 2001. The SOEs now have attained an increasing influence on foreign policy. However, while there would appear to be evidence indicating that the SOEs have become increasingly strong, this claim has not previously been tested.

This book offers such a test: it presents cases in which one would expect the SOEs to have an impact on foreign policy, such as that of Sudan. In the period up to the 2008 Olympic Games in Beijing, Chinese foreign policy vis-à-vis Sudan had been characterized by principles of non-interference and a respect for domestic politics. In this instance, however, faced with an international campaign to boycott the Beijing Olympics, the Chinese leadership placed pressure on Sudan’s President Omar Al Bashir to accept UN forces within Sudanese territory.⁹ The argument was that as Chinese companies were involved in Sudan, the Chinese leadership was responsible for the genocide in Sudan. But the evidence indicates that when the Chinese leadership intervened, Chinese companies operating in Sudan suffered financial losses. Pressure from the international community led Beijing to change its foreign policy stance vis-à-vis Sudan. In other words, this is an instance in which the activities and interests of Chinese companies had an impact on Chinese foreign policy. Moreover, it is argued here that the physical risks that Chinese oil workers have been subjected to in recent years as a result of their activities in countries such as Sudan speak to the intricate linkages between the activities of the companies abroad and the concern of the Chinese Communist Party (CCP) with ensuring domestic stability. The argument rests on the assumption that the ability to maintain domestic stability is, in turn, a prerequisite for the CCP to remain in power. The argument is that, faced with increasing domestic discontent arising from the deaths of Chinese workers abroad, particularly in Sudan in 2008, the Chinese leadership became involved in the issue, which led to a shift in foreign policy. This instance provides evidence of how the activities of Chinese SOEs abroad affect foreign policy. Whereas the driver was external in the case of the pressure placed on the Sudanese leader in the period up to 2008, the driving force in terms of the killed Chinese workers abroad is domestic: it is about securing domestic stability. These two instances also provide evidence of how the activities of Chinese SOEs have bearing on foreign policy. This book will thoroughly examine whether, and how, the SOE activities have an impact on foreign policy. As the SOEs can be seen as an interest group, by implication, this book presents a rigorous test of the importance of interest groups in foreign policy.

The rise of SOEs

The explanation here of China’s behavior is rooted in three theories that can explain the activities of the Chinese energy companies (as detailed in Chapter 2).

First, the activities of the Chinese NOCs can be seen as evidence of state interest. Here, the sheer dimension of the acquisitions of energy resources by the NOCs abroad in terms of size as well as the pattern of the acquisitions point to state interests. Moreover, the manner in which acquisitions are accompanied by loans, aid, and a long range of diplomatic visits from the Chinese government to the recipient countries, together with the building of transnational oil and gas pipelines, indicates that the acquisitions made by the NOCs are part of a highly coordinated Chinese government strategy.

Second, it has been suggested that the behavior of the companies on the ground in different countries and regions reflects the economic interests of the companies proper. In other words, according to this view, companies are led by profit motives, and their activities occasionally conflict with state interests. Building on liberalism, a hypothesis is presented here that can explain this. The idea is that one characteristic of the (Chinese) authoritarian state is that authority is fractured: the weaker the state capacity, the more likely that large economic interests, including non-state actors, will influence economic decision-making. In turn, this explains why and how these economic interests can capture decision-making and have an influence on foreign policy in the authoritarian state. It is worth noting that some of the large SOEs, including the NOCs, can be seen as non-state actors.

Third, it has been noted that the activities of the companies abroad reflect a domestic need for resources that are necessary in order to maintain domestic stability (维稳/weiwen) and, thus, to sustain CCP (not state) rule. The proposition is that the state and the CCP are intricately linked, as the stability of the CCP is seen as a prerequisite for the state to maintain stability.¹⁰ Thus, the activities of the companies abroad can be seen as a reflection of the CCP’s need to sustain regime stability, which again is a prerequisite for the state to sustain domestic stability.

These three literatures build a framework that will help us analyze the activities of the Chinese energy companies.

Foreign policy of the authoritarian state

The framework is presented in such a way as to illuminate the role of NOCs for Chinese foreign policy. Here, we present a theoretical framework capable of explaining the role played by NOCs in foreign policy, offering streams from three different literatures: the international relations literature, the literature on political economy, and the ...

Table of contents

• Cover
• Half Title
• Series
• Title
• Copyright
• Contents
• List of figures
• List of tables
• List of abbreviations
• Preface
• 1 Chinese energy companies’ acquisitions abroad
• 2 The foreign policy of an authoritarian state
• 3 The Chinese energy sector
• 4 Nigeria: from “Angola Model” to “Addax Model”
• 5 Angola: independent NOCs impacting foreign policy
• 6 Sudan: a change of foreign policy
• 7 Tunisia: Chinese companies involved for profit
• 8 Mini-cases
• 9 Conclusion
• Appendices
• Index