Source: Foreign Policy in Focus
Resource-rich Angola was once known as the scene of Africa’s longest-running civil war. Today, life expectancy hovers around 44 years – not unlike that of an average Briton living in the 1800s. Over 70% of the population lives in poverty, and the country has one of the highest child mortality rates in the world. And the nation’s lifetime dictator of 30 years, Jose Dos Santos, leader of the liberation-party-turned-permanent-government, the MPLA, does not appear to have lost his lust for the throne.
Under Dos Santos’s watch, since 1993, Angola’s oil reserves have flowed into the coffers of the regime’s corrupt wabenzi elites as well as multinationals via opaquely structured oil-backed loans. The MPLA initially justified these loans as a means of securing arms and revenue to fight UNITA, an armed movement led by U.S.-backed warlord Jonas Savimbi, also aligned with Portugal’s secret police and apartheid South Africa. Today, the corrupt ruling party is devouring the nation’s resources and its future.
Despite the civil war, during which the United States sought to politically destabilize the government, the MPLA nevertheless provided the United States with cheap oil via U.S. multinationals like Gulf, which supplied 65% of Angola’s export earnings during the Reagan years. The MPLA, meanwhile, invested 60% of its oil revenues into arms and much of the remainder went into private gain. Presently, oil revenues account for 80-90% of export earnings, with oil chiefly exported to China and the United States. The oil money that flows in and out of Angola remains shrouded in mystery.
Angola is no longer officially a killing field, but the economy remains dependent on enclave industries, with oil and diamonds comprising 99% of exports. Though the government has embarked on developing domestic industries and sectors devastated by war, such as infrastructure and agriculture, these policies appear to lack the necessary political will. As such, the profits from exports don’t reach the majority of the population.
Thanks to accounts located in secrecy jurisdictions, also known as tax havens and offshore financial centers, Angola’s oil transactions are protected from external investigation – even from branches of the same bank. Details of transactions are also ring-fenced by Angola’s secretive state-owned company Sonangol, conveniently bypassing relevant ministries, the central treasury, and parliament. Since 2003, over $13.5 billion has been sourced through pre-export financing – largely limited to cash for future oil – from major banks including Standard Chartered, BNP Paribas, Commerz Bank, Deutsche Bank, Fortis, West LB, and others.
In theory, the regulatory authorities of specific jurisdictions monitor these institutions, and are themselves scrutinized by global bodies such as the Financial Action Task Force (FATF). But the FATF is merely an advisory body, located in a dusty corner of the Organization for Economic Cooperation and Development (OECD), and it is controlled by major high-income countries that depend on access to Angola’s resource and its capital.
Sonangol remains the chief recipient of oil revenues and tax concessions, but it’s also able to subtract bogus losses and expenditure rents remitted to the state. According to IMF reports, the state shaved off over 20% of GDP in recent years. Though Angola overtook Nigeria as Africa’s primary oil producer in 2008, Sonangol continues to conduct secretive audits, punctuated by occasional transparency and no accountability. Meanwhile, the state maintains the fiction of a firewall with Sonangol, which allows commercial and state-owned investors to pretend that they are not dealing with a human-rights-abusing government that exploits public resources on the pretext of development. Sonangol remains under the radar by swiftly repaying debts, even if via refinanced loans. The company traditionally shied away from the IMF’s interference and its requests for financial transparency. It even paid back $2.3 billion in outstanding debt in 2006 to avoid the prying eyes of outside creditors.
This policy has also worked out well for the multinationals involved. Standard Chartered, for instance, has described Sonangol’s performance as "impeccable" and countries like war-torn Angola as ever-sexier "investment environments."
Through the Export-Import Bank, China has provided over $24 billion in loans to Africa, chiefly through a barter arrangement that emphasizes resource extraction. In return, China has exported skilled laborers and materials and invested in infrastructure to facilitate the flow of resource back home. In fact, over 50% of all China loans through its Import Export Bank have been invested in Africa, spanning 36 countries. These projects range from mega-dams to railways, ports, and mining facilities. They are specifically designed to improve the first two links in the commodity chain – extraction and transportation – with production and distribution tactically shifted to Beijing, and consumption going to countries like the United States.
China also claims to hold 60% of the world’s rare-earth metals within its borders. These strategic minerals – yttrium, holmium, lanthanum, thulium – are essential for an estimated $100 billion end-user market that includes many green technologies. Beijing has called for outright bans on the export of certain minerals and urged quotas on others. This enables China to retain priority access and dominate markets. But its policy toward Africa is exactly the opposite.
China’s two footholds on the continent are Angola and Sudan. It has extended over $5 billion in oil-backed loans and revolving credit lines to Angola. In 2007, for instance, China offered a $1.4 billion operating loan to Sonangol through the China Petroleum and Chemical Corporation. Since 2000, Chinese trade with Angola increased by 14-fold. China’s policy of political non-interference – turning a blind eye to a country’s human rights situation, for example – sets just the tone for a regime like the MPLA.
Vying for the position of top dog in Africa is the United States. Through its new Africa Command, the United States has declared plans to access 25-30% of its imports from Africa by 2015. With the Persian Gulf in the middle of a politically turbulent region, Washington is eyeing the Gulf of Guinea as the "new gulf." Already, Africa contributes almost 20% of the America’s crude oil imports, supplied by oil-producing giants such as Nigeria and Angola, two primary beneficiaries of the African Growth and Opportunity Act, along with Chad, yet another petro-state governed by lifetime dictator Idriss Deby.
Military relations between the two countries have grown closer. Last year, the U.S. Navy ship Elrod landed in the port of Lobito, Angola to further the naval and military alliance between the two nations. One of the four main U.S. military arteries in Africa, the International Military Education Training program has received increased funding under the Obama administration.
The United States is making other inroads in Angola in agriculture, economic reform, and health care. One example includes Angola’s partnership with USAID, which uses aid to promote U.S. multinationals like Chevron and technologies such as genetically modified organisms. Unlike the oil-rich Niger Delta, Angola lacks the organized, collective resistance to threaten the powerful combination of state and multinationals. In contrast to the Delta, where the bulk of extracted oil is inland, Angola’s tapped oil for the most part is safely located offshore.
During the Cold War, Angola was the site of a proxy war waged by the United States, Cuba, and the Soviet Union. Today, the superpowers are still interested in the country, but they are fighting for control of Angola’s vast oil wealth in a different way. Whether Angola can play the calm offensive of the United States and China off one another to its own advantage – and whether the already largely mortgaged oil wealth will ever benefit the Angolan population – remain key unanswered post-Cold War questions.
Foreign Policy In Focus contributor Khadija Sharife is a journalist and visiting scholar at the Center for Civil Society (CCS). She’s based in South Africa.