Home | News    Friday 22 October 2010

Chinese companies among bidders for Juba-Lamu oil pipeline: WSJ

October 21, 2010 (WASHINGTON) – Chinese companies are among those that are competing to win a contract for building a pipeline that would pump oil produced in South Sudan through a Kenyan port, according to a report on the Wall Street Journal (WSJ).

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FILE - Chinese President Hu Jintao (R) meets with South Sudan president Salva Kiir Mayardit at the Great Hall of the People in Beijing, capital of China, July 19, 2007 (Xinhua)

The controversial project would enable the landlocked South to avoid transporting its main export through the pipeline that runs through the North until it reaches Port Sudan.

"China is one of the parties that has been invited to participate," Alfred Mutua, a Kenyan government spokesman told WSJ.

Most analysts believe southerners will vote to secede from the north in an emotional referendum on independence due in less than three months, the culmination of a 2005 north-south peace deal ending Africa’s longest civil war.

But the North is wary of letting the oil-rich South go without arranging for a wealth sharing formula that would prevent an economic collapse in post-referendum Sudan. Currently the North and the South are splitting the proceeds of crude in accordance with the Comprehensive Peace Agreement (CPA) signed in 2005.

The Government of South Sudan (GoSS) has frequently accused the North of underpaying its share in oil revenue through concealment of true export figures.

About 75 per cent of Sudan’s proven reserves of 6.3bn barrels are in the south but the pipeline that carries the oil to export terminals and refineries runs through the north.

Sudan exports 60% of its oil to China. Sudanese production accounts for 7% of China’s annual consumption. Beijing therefore has a vested interest in ensuring that the South Sudan referendum goes smoothly so as not to threaten its multi-billion dollar investments in the East African country.

The Wall Street Journal said that China has recently dropped its opposition to South Sudan secession which was based on long-standing ideology which is against independence movements abroad, for fear that it embolden separatist sympathies at home.

Beijing has cracked down, often violently, on independence protests in Tibet and Xinjiang. Beijing also considers Taiwan a breakaway province and seeks reunification, by force if necessary.

"It is a delicate issue for China," said Dru Gladney, an expert on Chinese minorities at Pomona College in California. China has until now portrayed itself as a leader of developing countries, he said. But its own rapid development has changed that relationship. "Encouraging a so-called separatist movement is one that is going to complicate that [noninterventionist] position very much."

China has a pragmatic reason for tolerating a potentially independent south: It is home to 80% of Sudan’s oil reserves, including most of the China National Petroleum Corp.’s four oil concessions, granted to it by Khartoum. Beijing’s stake amounts to 40% of Sudan’s oil industry.

GoSS last week assured China that its investments would be protected should the South vote for separation from the North.

"The largest investment in southern Sudan today is Chinese. They have invested billions of dollars in the oil sector, and have a large number of Chinese workers in the oil fields," said Pagan Amum, secretary general of the south’s ruling Sudan People’s Liberation Movement (SPLM).

"We have given assurances to the Chinese leadership delegation to protect the Chinese investments in southern Sudan, and are desirous to see more investment in the future," he further said.

Anne Itto, south Sudan’s minister of agriculture, and SPLM deputy secretary general told reporters after her return from China last August that the Chinese government fears that its assets in Sudan’s oil would be “a waste” if the south opts for secession.
"A lot of wild rumors have been getting to them, that if the south separates, there will be insecurity, and if there is insecurity, their assets worth billions of dollars in the form of pipelines and so on will have been a waste," she said.

Itto added that she had told Chinese officials that "if they want to protect their assets, the only way is to develop a very strong relationship with the government of Southern Sudan, respect the outcome of the referendum, and then we will be doing business".

In 2008, China opened a consulate in Juba, the south’s capital, an unusual move for China in a place with separatist aspirations. Last week, a Chinese Communist Party delegation visited southern officials. Top officials from the south have also visited China, said Li Baodong, China’s U.N. ambassador, in an interview during a United Nations Security Council diplomatic mission to Sudan this month.

Mr. Li said the referendum is "their internal affair and we are not getting into it. We respect the sovereignty and territorial integrity of this country."

WSJ said that until early this year, Beijing staunchly opposed independence in Sudan’s south. But that stance has appeared to shift as the international community has pushed the vote.

"I don’t think anyone believes that the referendum process can be stopped," said Fabienne Hara, an Africa specialist in New York for the Brussels-based International Crisis Group. "It is pragmatism."

While it is caught between its stance on separatism and its economic-self interest, Mr. Gladney of Pomona said Beijing had reluctantly made its choice. "It’s whichever cat catches mice—and in this case, the cat that supports a separatist, Christian group will catch more mice for China," he said.

China has provided shield to the Sudanese government, dominated by the National Congress Party (NCP), from sanctions at the United Nations Security Council (UNSC) and remains Sudan’s major seller of weapons.