Will Oil-rich Sudan forego ‘development projects’ to get out of the Chinese Debt Trap?

Recent media reports indicate that Sudan, the strategically located oil rich African nation is facing one of its worst economic crises. The country is apparently under a debt burden worth about 20 Billion dollars to China. Though many economists differ on the exact figure and debt estimates, the Chinese direct and indirect investment in Sudan is alleged to be nothing less than 29 Billion dollars. As is known, China has provided numerous interest free loans and grants to the Sudanese government for diverse projects including construction of oil pipelines, bridges in Hantoop, Singa, on the Nile River along with building textile mills, railway lines and a free trade zone in the Red Sea state.

Like many other African nations, unaware of the systemic form of Chinese intrusion, Sudan too welcomed Chinese investments with open arms and allowed the Chinese state-owned China National Petroleum Corporation (CNPC) to make massive inroads in the much valued petroleum sector.  CNPC even obtained significant concessions through the Sudanese oil ministry to access and utilize untapped oil reserves with almost no competition. Taking a cue from CNPC, other Chinese companies too have heavily invested in the oil reserves of Sudan and are brazenly looting the country’s natural resources.

More specifically, the CNPC and a few more Chinese companies are currently working on projects such as the Greater Nile Oil Pipeline – Oil fields in Muglad Basin (Hegilig), South Sudan to Al Bashir Marine Export Terminal in Port Sudan, Melut Basin (Palogue) to Al Bashir Marine Export Terminal in Port Sudan, Fula Oil Pipeline, Bashir Marine Oil Terminal and Khartoum Oil Refinery, to name some prominent ones. These are major projects in the oil sector whose construction costs have been financed largely by Chinese banks/financial companies. No wonder, just in the oil industry alone, China’s investments in Sudan are valued at about 15 billion US dollars.

Singularly, Sudan’s debt to CNPC with regard to exploration of oil at Block No. 6 of Muglad Basin of West Kordofan state is itself over US$ 2.5 Billion. One can only speculate the extent of Sudan’s debts when all the Oil blocks are taken into account. In fact, so sordid are the state of affairs that CNPC, at present, holds 95% rights in basin exploration while Sudapet, a Sudanese commercial entity has a mere 5%. The rising costs and the consequent debts have serious implications on an already ailing Sudanese economy which despite having huge oil reserves is facing a severe shortage of fuel and petroleum products.

Not just in Oil, across multiple domains in over 200 projects in the field of agriculture, services and manufacturing including areas like farming, abattoirs, trade, mining, health, water supply etc more than 130 Chinese companies are directly involved in Sudan. Even construction and upgrading of numerous power projects is being done using Chinese money. Some of the important projects in the power sector include Merowe Multipurpose Hydro Dam Project (US$ 2.9 Billion), Garri Thermal Power Station (US$ 150M) near Khartoum through Central Bank of China, Power Transmission Line (USD 466M) via credit facility, W Kajbar Hydro Power Project (US$ 705M) through Chinese Hydro Power Company Sinohydro, upgrading of the Rossieres Hydro Power Plant (US$ 400M) and the Alfula Thermal Power Plant (US$ 298M) among many others.

In terms of infrastructure development, China has granted export credit facility for the Khartoum-Port Sudan Railway Link worth more than a billion dollars in addition to the various road projects valued at billions being undertaken by the Chinese firms. Interestingly, as in other coastal countries in the African continent, in Sudan too, China’s key emphasis has been on ports and the infrastructure connecting it to the hinterland to enable hassle free export of resources to China and benefit its economy.

Similar to oil rigs, with regard to exploration and mining of precious metals & stones as well, Chinese companies seem to have an upper hand in Sudan having obtained concessions from concerned ministries. In certain instances, Chinese firms have promised to transfer the technology to local units on completion of work but it remains to be seen if this is actually done. Meanwhile, China continues to blatantly explore and exploit Cobalt, Copper, Platinum, Gold and Black Sand in terms and conditions beneficial to the Chinese manufacturing units causing heavy losses to the local economy. Beyond known entities, the realm of mining in Africa has also provided a comfortable space for Chinese shell companies. Many projects in Sudan are being run by firms whose financial status and clauses of engagement are completely unknown. Geological research, agriculture and coal based power plants are some of the known domains where the Chinese are heavily engaged in money laundering.

As a country, Sudan has been entrenched in a past filled with terror related events. To this extent, the country was placed under severe sanctions by western countries and figured on the State Sponsors of Terrorism List (SSTL). However, in recent times, with an improvement in the living standards and efforts of the Sudanese authorities to steer the nation away from terrorism, USA and other developed countries have sought removal of Sudan’s name from this much abhorred list. Nevertheless, China has felt unease in doing so as that would increase the competition for resources amongst the great powers and challenge their unopposed hegemony in the region. Through concessional agreements with the Government of Sudan the Chinese are driven towards maintaining their special privilege status in the country and tweak the rules of engagement in their favour.

It is pertinent to mention here that since sanctions have been imposed on Sudan, most nations evaded doing any business or having any economic transactions with that country. However, China, in complete violation of the UN arms embargo (2005) imposed on Sudan for supplying arms during the Darfur conflict, succeeded in sustaining its military contracts and supplied 19% of all military exports to Sudan during the period 2007-2016. This arrangement strengthened further after 2018 when China became the lone arms supplier to Sudan, keeping all the world powers at bay.

The Chinese assistance to Sudan has ranged from intelligence training to its police and military personnel, defense procurement of aircraft, tanks, helicopters, missiles to engaging in space missions by launching satellites and rockets. Though this looks innocuous at first, collaboration in the realm of defence and space is heavily tilted towards the Chinese interests defined by its access to Sudan’s ports, military and all key state secrets. We have already seen the effect of Chinese infrastructure in the region with the security and privacy of the Africa Union headquarters in Ethiopia being compromised when China accessed the surveillance footage & CCTVs at the location remotely through Chinese hackers.

It is true that China has been consistent in the provision of loans and grants to African countries. However, these loans are driven by self interests to usurp the properties they generate rather than aiding the welfare of the African nations. This is also the reason why China provides loans through front companies and not through transparent mechanisms such as the G-20 Debt Service Suspension Initiative (DSSI) meant to grant waivers for repayment of interest-free loans to help ailing African economies. In recent times, with the international community recognizing and calling out Chinese tactics of dominance in Africa, China is reportedly increasingly investing through private players who impose prior stringent agreements with the debtor parties rather than engaging with government entities on vague terms.

In typical Chinese style of controlling the narrative, China has also been exercising its influence on the Sudanese media with Chinese Ambassadors regularly interacting with media houses and contributing numerous articles praising China’s role in ‘developing’ the country’s economy. This campaign is further accentuated by a regular feature of the Ambassador in the English newspaper ‘Sudan Voice’. It seems the Sudan News Agency (SNA) has an implicit understanding with the Chinese to spread the Chinese school of thought in Sudan. The SNA has also enhanced its exchange programmes with regular visits of Sudanese journalists to China.

Of late however, the tide has turned and many African nations including Sudan have begun to sense the exploitation being meted out to them by the Chinese. In Sudan, the country’s Prime Minister called out the dubious role of Chinese entities in the oil sector by seeking a review of all agreements signed with China in the past. Naturally, the Oil Ministry was tasked with carrying out the review. However, under Chinese influence the military component of the Country’s Sovereign Council is delaying the formation of any such review committee. It remains to be seen if such a committee will ever be formed and its report made public for the citizens to be aware of the level of Chinese intrusion in their lives and the amount of exploitation of the resources they have been blessed with. In another significant development, much to the chagrin of the Chinese, Sudan also chose the Astra Zeneca vaccine while neglecting the Chinese offer for vaccines to handle the Covid19 pandemic which is alleged to have emerged from the Chinese heartland.

Over the years, undoubtedly, China has gained a substantial foothold in Africa. By investing in varied sectors across different countries, China has tactfully increased its presence in the African continent benefiting immensely from the lack of transparency, established procedures and accountability mechanisms in these nations. The role of Chinese institutions including the embassies, personnel belonging to different companies, the Chinese Diaspora in acquiring commercial intelligence to fund operations using financial institutions such as the China Exim bank & their debt trap policies simply cannot be ignored. The profits accrued by the various Chinese entities directly contribute to the Chinese economy, aiding it in competing with the European and US markets while at the same time leaving the local African population poor and famished, deprived of the very resources that are capable of making them prosperous and self sufficient. May be Sudan has awakened to show the rest of Africa that there is light at the end of tunnel. Only time will tell.