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China's Oil Imports from Sudan Draw Controversy - 2004-07-21


As China's economy continues its rapid growth, an increasing demand for energy is driving the country to look for oil in countries that are largely avoided by many in the international community - places like Sudan. Oil industry experts say they believe China is in a quandary about recent international criticism of Sudan over the crisis in Darfur, precisely because China's strong foothold there serves as a base for all of its oil activities on the African continent.

Ever since Sudan began exporting large quantities of oil five years ago, international development of its oil resources has been highly controversial. First, there was a civil war in the southern part of the country. This year, the focus is on the western region of Darfur, where clashes between rebel groups and government-backed militias, known as the Janjaweed, have already killed tens of thousand of civilians and displaced one million others.

International human rights groups have accused the Sudanese government of using oil revenues to finance wide-scale human rights abuses. Since 1997, U.S. economic sanctions against Sudan have kept many American companies out of the oil exploration and production business there. But, U.S. Senator Sam Brownback, who recently visited the region, said the Sudanese oil industry is getting ample help from China.

"They [the Chinese] continue to drill for and export the oil," said Senator Brownback. "That continues to take place, and they are funding the military build-up by the [Sudanese] government, because the helicopters and the gun ships, and it appears also, the arming of the Janjaweed. They're armed, the Janjaweed are. They're given satellite phones, which is a highly unusual and expensive thing, as well. Those monies only seem to be coming from the oil revenues."

More than 70 percent of Sudan's total export earnings come from oil sales abroad. China has a 40 percent stake in the Greater Nile Petroleum Operating Company, the main international consortium extracting oil from Sudan. Other large stakeholders include Malaysia's Petronas and India's national oil company, ONGC Videsh.

In Washington, Chinese embassy spokesman Sun Weide defended China's oil involvement in Sudan.

"I think the relationship between China and Sudan is a normal one. And oil, I think, cooperation, is only one area," said Sun Weide. "Nothing special about that."

Amy Jaffe, energy analyst at Rice University's Baker Institute for Public Policy, says it is not surprising that China would get the most criticism for its activities in Sudan.

"I think that the Chinese are definitely stuck between a rock and a hard place when it comes to this current humanitarian crisis, military crisis, however you want to describe it, in Sudan," said Ms. Jaffe. "Because, of course, they're going to be criticized as being one of the big revenue providers to the Sudanese government because that oil revenue is so important to the treasury in Sudan. And it's also a very important aspect to China's oil industry."

Ms. Jaffe compares the U.S. government's decision to impose sanctions on Libya in the 1980s to China's current dilemma over Sudan.

"When we [the U.S. government] told the [American] oil companies that they had to lose their fields in Libya for some period of time because of national security issues, those companies just lost the right to operate in Libya, and that was the end of it," she said. "But in China, the oil industry is run by the government. It's owned by the government."

The industry publication, Petroleum Intelligence Weekly, says China imported a total of 2.4 million barrels a day in April. Of that, though, only a small amount, or 71,000 barrels a day, came from Sudan.

Ms. Jaffe says Sudan is important to China, not for the amount of Sudanese oil that goes there, but because Sudan is the base for Chinese oil operations elsewhere in Africa.

"They have the most personnel there. They have the most money invested there. They have the highest production, ongoing production there," she said. "They also have what's called their service companies, which are companies that provide drilling support and surface facilities, pipeline construction and so forth. They're all operated out of these companies in Sudan."

China became an oil-importing country in 1993, and the country last year surpassed Japan as the second-largest oil consumer in the world, after the United States.

Fariborz Ghadar, director of Penn State University's Center for Global Business Studies, says China currently gets most of its oil imports from the Middle East. But, he adds, the Chinese government should look for oil closer to home.

"The logical source of oil for China, other than the enormous reserves in the Middle East, is really either Kazakh oil, coming from the eastern side of the Caspian Sea, into China through a pipeline, or access to Russian oil, as Russian oil production increases dramatically, into northern China," Mr. Ghadar said.

But Professor Ghadar adds that China is trying to diversify its oil sources.

"Nobody wants to be dependent on one source of oil, one source of crude, in one place. That's just too risky," he said.

That, he says, is one reason China may be looking to Africa. Professor Ghadar adds that as China's energy demands grow, he expects its dependency on African oil to increase as the continent's oil production continues to develop.

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