Stephen Marks
19 June 2008
opinion
In Africa, the Russian state seems far more 'upfront' about pursuing its grand geopolitical projects than the more cautious and patient Chinese. Russia's private sector too is prepared on occasion to operate with an unashamed directness where others might be more diplomatic." While all eyes are on China's growing influence in Africa, Stephen Marks argues that Russia's bear is quitely intensifying its hug.
While all eyes have been focussed on China's rise in Africa, the other former Cold War Communist giant has also been making a comeback. And at first glance there are obvious parallels between the dragon and the bear, as each seeks to rebuild its African links on a commercial basis while building where it can on the friends and contacts made in an earlier, more ideological era.
Today the Aswan dam stands as a monument to Soviet aid in the Cold War era, as the Tazara railway does to China's role. And the thousands of Soviet graduates match the specialists trained in China.
But Russia's recent rise in African trade though steep, is far from matching China's. The fall from $2.7bn in 1994 to just over $900m in 1994 (only 1.5% of all Russia's non-CIS trade) has been followed by a climb back to over £3bn in 2006, with a reported further leap to $6bn in 2007. (See also http://www.users.globalnet.co.uk/~chegeo/)
But this is easily dwarfed by China's trade volume, already at $40m in the first nine months of 2007 alone, and projected to soar to $100m by 2010.
Nonetheless the trappings of Russia's African rise seem at first glance to mimic those of China, if on a smaller scale. In September 2006, just weeks before the FOCAC summit in Beijing, Russian President Vladimir Putin took 100 Russian businessmen - some of them top 'oligarchs' - on a five-day whirlwind trip to Morocco and South Africa, followed up in March 2007 by then-Prime Minister Mikhail Fradkov taking more business chiefs and officials to Angola, Namibia and South Africa.
As with Chinese President Hu Jintao's whirlwind African trips, there were reports of major deals, promising investments in mining, energy and even space exploration. And Russia has also stepped up to the mark with the right noises about development and debt relief.
This April, at the first joint meeting of the AU and the UN Economic Commission for Africa, Russia's ambassador to Ethiopia announced a $500m development assistance package and a $20m contribution to the World Bank's African anti-malaria programme.
And Russia has also written off $20bn of African debt, making its contribution to the Debt relief Initiative for HIPCs the biggest of all donors in share of GDP, and the third biggest in absolute value.
A more detailed look at the deals done by the business chiefs accompanying Russia's leaders on these jaunts shows some apparent similarities, but also significant underlying differences when compared to the pattern of China's intervention.
As with China, energy and raw materials deals are a prominent part of the Russian roadshow. As Newsweek reported at the end of last year 'Over the last three years, four top Russian metal companies have invested more than $5 billion in sub-Saharan Africa alone. Russian oil giants Lukoil, Rosneft and Stroytransgaz have signed exploration deals in Algeria, Nigeria, Angola and Egypt worth more than $3 billion'.
Earlier last year LUKoil, Russia's largest oil company, bought a 63% stake in a field off the Ivory Coast in a production-sharing agreement with its Nigerian owners, followed by taking a 56.66% stake in three prospecting projects in the Ivory Coast and Ghana from the U.S. company Vanco Energy.
Metals have also been an area of Russian interest as far back as 2004 when Norisk Nickels acquired a 20% stake in South African gold producer Gold Fields from Anglo American for $1.16bn in cash. Norilsk is the world's largest producer of nickel and palladium and a leading producer of platinum, copper and cobalt, as well as Russia's largest gold miner.
Russia's steelmaker Evraz has also completed a take over of South Africa's leading steelmaker Highveld Steel and Vanadium. And United Manganese of Kalahari, a company part-owned by billionaire 'oligarch' Viktor Vekselberg,, recently confirmed that it had won a mining license for its planned $200m manganese mine. Vekselberg's company Renova and its partners last year bought the Transalloys ferro-alloy plant in South Africa. Vekselberg has said Renova plans to invest around $1 billion in buying ore deposits and processing plants. Renova is also in a currently stormy partnership with BP in the Russian oil company TNK-BP.
Mr Vekselberg appears to be a key figure in Russian-South African trade relations. He was appointed by President Mbeki to his International Investment Council. He also heads the foreign relations committee of Russia's Union of Industrialists and Entrepreneurs, and is said to be known as 'Mr South Africa' in Russia and 'Mr Russia' in South Africa. As we shall see he has been in the news for other reasons too.
Putin's original 2006 visit took in only Morocco and South Africa, leading to the criticism that he was leaving out the expanse of black Africa in between. But since then the gap has been at least partly filled, not only by oil deals in West Africa, but also by Russia's financial sector. In Luanda Angola's first foreign-controlled bank has opened, owned 66% by Russia's foreign trade bank Vneshtorgbank.
Russia's Renaissance Capital group now owns 25% of Ecobank, the Nigerian bank which claims 450 branches in 22 countries. And the Renaissance group is also launching a $1bn African investment fund.
There has also been a Russian-South African tie-up between the world's two largest diamond producers De Beers and Alrosa, the largely state-owned Russian producer. The two signed a joint exploration agreement a joint exploration agreement to facilitate De Beers exploration in Russia which is said to have reserves potentially greater than Botswana's. This followed an EU anti-trust ruling barring De Beers from buying diamonds direct from Alrosa.
But diamonds apart, there is one significant difference between this Russian interest in energy and raw materials and its larger and more publicised Chinese comparator. While a major Chinese motive is the need for raw materials to fuel and feed China's soaring output, Russia is a major raw materials exporter. Indeed it is rising world raw material prices, partly fed by China's growing demand, which provides Russia with the cash resources to fund its purchases of African and global assets.
As Newsweek put it: 'Russia is the world's largest energy exporter, and has plenty of its own metals and minerals. But rich Russian companies want to extend their global reach while they have the money, and with oil approaching $100 a barrel in recent weeks [sic], the time is now. There's another motive, too, analysts say: moving empires beyond the reach of the Kremlin serves as insurance against future political changes in Russia'.
As a result, the detailed articulation of the relationship between the state and its geopolitical strategy, and the commercial interests of private capital are arguably different in the Russian and Chinese cases, though it may not be immediately clear how the difference should be characterised.
In energy for example, Russia's position as a net exporter enables the state to use its energy strategy as a geopolitical tool. While Russia is said to be running short of gas, this is partly due to the need to meet its considerable export commitments. Russia has been accused of attempting to use German and Ukrainian dependence on Russian gas as a means of political leverage. And at least one Russian analyst sees recent trends in Algerian policy as a reflection of Western fears of a Russian-Algerian energy tie-up being used in the same way.
Thus the Novosti News Agency reported in December 2007:
"Algeria has joined the global fight for diversification of energy supplies... According to Andrei Maslov, director of Rosafroexpertiza, a Russian expert group on Africa, his view stems from news on the expiry of a memorandum of understanding, which Algeria's Sonatrach state oil and gas corporation and Russia's gas monopoly Gazprom signed in August 2006.
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