Indian Diplomacy

India In Africa: Learning From China’s Mistakes

Prime Minister Narendra Modi talks with the delegates of African countries before a dinner at the India-Africa Trade Ministers’ Meeting 2015 in New Delhi on Friday.  Credit: PTI

Prime Minister Narendra Modi talks with the delegates of African countries before a dinner at the India-Africa Trade Ministers’ Meeting 2015 in New Delhi on Friday. Credit: PTI

The India-Africa Summit (IAFS) held in Delhi recently saw more than 20 African heads of state and many more Foreign Ministers in attendance. While the basic idea behind such a gathering was to develop the dynamics between the continent and the sub-continent, an equally substantive reason was to up India’s quotient against the overpowering influence of China.

Clearly, the summit was a great success. It was opulent by Indian standards, necessary attention was provided to all visiting heads of state and government and Prime Minister Narendra Modi made some crucial announcements on economy, trade and so on. This included a $10 billion concessional credit line offer. Both India and the African states are looking for greater partnership, greater trade and greater economic gains.

During the summit, one specific topic was, seemingly by design, underplayed significantly. This issue was of natural resources, and specifically oil and natural gas. While renewables featured favorably, oil, gas and other mineable minerals where African states get much of their money from were largely absent in the discourse. Even though ONGC Videsh (OVL) has said that it wants to double investments in Africa to $16 billion over next three years, this information was also put out in the media without much fanfare. Currently India holds assets in Sudan, South Sudan, Mozambique and Libya. All these announcements come on the back of Nigeria replacing Saudi Arabia as India’s largest supplier of oil (albeit for a brief period) earlier in June.

India is not new in its interest in oil from Africa, and certainly the other fast growing Asian giant China is no spectator either. In fact, one of the main points of the very existence of IAFS is to counter China’s unprecedented juggernaut of money, influence and power in the continent. Beijing has used African countries such as Sudan, Angola, Nigeria and so on to fuel its own voracious appetite of natural resources. While India is late to the game, it is now trying to catch up in the limited comparative economic capacity that it can.

Investing in Sudan

Nonetheless, it does not mean that China’s ability to throw money and influence stops India from creating its own space. In fact, it was in the late 1990s that India had started thinking of investing in Sudan’s oil and gas sector along with China, a major decision at that time when this country’s economy was still in transition.

During Prime Minister Atal Bihari Vajpayee’s tenure, a bold idea – to invest in oil blocks in Sudan – was floated. Previous such attempts under IK Gujral and HD Deve Gowda had failed due to lack of political stability. The reasons for choosing Sudan had to do with a mix of geo-politics and geo-economics. Western commercial interests in the region at that time, or even today, are minimal which meant India could exercise far greater influence as per its diplomatic and economic capacity. Prior to this, India had for the first time invested in Russia’s Sakhalin-I field in 2001. Sakhalin became India’s first such investment in energy security abroad, a significant moment for an economy which in the years to come would require unprecedented and uninterrupted supply of oil as a net importer. India imports nearly 78% of its annual oil requirements.

Vajpayee had recognized the need for India to invest in such projects; however it was an entirely different ball game for propagators of this idea, such as OVL, to justify the cost and convince him and his cabinet of ministers and advisors. The then Prime Minister overruled all protesting parties and gave a historic unconditional nod to OVL for the deal.

The Sudan story has of course, not been easy. After Sudan was divided and the new state of South Sudan emerged in 2011, Indian oil investments found themselves in a challenging situation when Sudan threatened to cut transportation of oil from its new neighbor, which used pipelines to send the oil to ports on the Red Sea. Previously, a 16-month shutdown of crude flow over a disagreement relating to transit fees had ravaged both the economies and hurt companies such as OVL. During the crisis production went completely dry in most of the fields while the few fields that were operational had production as low as 5,000 barrels per day.

Now, with the situation more in control along with Indian companies and diplomacy having gained significant geo-economics experience in the continent over the past few years, the ONGC’s foreign investment arm has highlighted more African states where it is interested to explore opportunities. These includes Algeria, Equatorial Guinea and most interestingly Angola, which is seen as a flagship Chinese influence state in the continent. The price of oil today is too low to invest in high-risk, high cost environments. So ultimately it depends on what the deal entails, how many sops and benefits Angola will greet India with and also, considering Angola’s economic situation, how desperate it is. Secondly, if India sees the investment from the commercial and strategic standpoint, then New Delhi may take a risk and go ahead with small projects to begin with.

Competing with China

Journalist Michael Specter in his article titled ‘Extreme City: The severe inequality of the Angolan oil boom’ in The New Yorker magazine has painted a contrasting picture of how China manouvered its interests in place. While Western oil companies are also present in significant numbers, Specter says it is China that came up and offered Anglonan strongman Jose Eduardo dos Santos his country’s own Marshall Plan, funded by China in return for oil, crops and other such commodities.

China’s practices in Africa have often been criticized, with some even labeling its presence as a ‘neo-colonial’ power. Chinese companies fly in thousands of construction workers to countries like Angola to make social projects such as dams, roads, railways and so on. Such export of labor means locals often do not get opportunities to be part of this supposed boom. China has often been blamed for not developing long-term skill sets in the said countries, but instead using them as transit hubs for its interests.

Today, China’s supposed Marshall Plan in Angola seems to be in disarray. The boom that Luanda saw from its oil industry seems to be coming to an abrupt. Repercussions of this are going to be felt in Beijing as well, as The Wall Street Journal calls Beijing the Angolan “regime’s sponsor”.  Reports suggest Western oil companies are laying off thousands of workers and expatriates that used to spend top dollar to uplift Luanda’s fast growing middle class are leaving. For China, perhaps the disintegration of Angola may not drastically affect its own economy and it can move on after consolidating its interests. But for Angola, the outcome of this oil bust will be critically felt and threaten Santos’s 35-year-old regime.

Enter India

India’s policies in Africa have the ability to compete with China’s raw economic prowess. The fact that India’s Development Partnership Administration (DPA) working with the Exim Bank approaches with more of an inclusive partnership model coupled with India’s generally good image is a big plus point. This includes development of oil and gas in Africa.

India, as a net importer, is looking to secure its hydrocarbon interests all across the world. Even though it imports the majority of it from the Middle East, keeping political risks in mind, an evenly spread out portfolio on energy security is a wise direction to head towards. This includes South America, Latin America, South East Asia and of course, Africa.

What India has learnt from China is that Delhi wants to go through a partnership approach, and not just look to win contracts, fulfil them, collect whatever is needed and leave. This is also a reason why India’s foreign aid agency is called the Development Partnership Administration (DPA). The whole idea is to enter a country with the offer of being a partner in mutual development, and not make it into a one-sided affair by throwing around economic or political weight.

India does not want to make the same heavy handed mistakes as China and rush in to be seen as exploitative of resources. While India highlighted issues such as trade, economics, historical and people-to-people ties, natural resource development was the elephant in the room during the summit. Mentioned only in fleeting instances in the larger program, it is no secret that one of the fastest ways towards economic prosperity is tapping into a region’s natural wealth. Both Indian and African delegates in Delhi were well aware of this anomaly, and will undoubtedly take up this issue more seriously on bilateral levels in the near future.

Kabir Taneja is a journalist and researcher specialising in South Asian foreign affairs, energy security and defence.