China’s Race for Raw Materials

WASIT PROVINCE, Iraq — When China’s biggest oil company signed the first post-invasion oil field development contract in Iraq last year, the deal was seen as a test of Iraq’s willingness to open an industry that had previously prohibited foreign investment.

via www.nytimes.com

Today’s article in the New York Times about the new role China is playing in Iraqi oil politics is very similar to the challenge Beijing is facing in other parts of the developing world where it is scraping up as many raw materials as possible. Nowhere is this more evident than across Africa where China’s oil and mineral interests are now becoming vital to its overall foreign policy.  Just as in Iraq, though, China is struggling to come to grips with how to engage the local political class and interact with civilians.

Unlike Western Europeans and Americans, China is not burden with a colonial past that continues to be an important factor in African/Middle Eastern and Latin American international relations.  Indeed, the Chinese are playing by a whole new set of rules.  In Cameroon, for example, a close contact of mine recounted an interaction between a trans-national Chinese mining company and the local government regarding the purchase of a huge iron-ore mine in that country.  After the transaction was complete and the mine had been transferred to Chinese ownership, the local labor unions approached the Chinese mining management to negotiate a deal for contract workers.  Typically, if the purchasing company was European or American, the local Cameroonian labor leaders would likely have been very effective at playing off its colonial past to leverage a better deal with their new employers.  The Chinese, on the other hand, simply brushed these labor leaders aside, “we will not be requiring your labor, thank you for inquiring.”  Completely confused, the labor officials mistakingly thought the Chinese were simply negotiating for a better deal.  Two days later, though, they discovered the Chinese mining company was not joking, they would not in fact need any local labor.  At the capital airport in Yaounde, two Boeing 747 jets landed with 700 imported Chinese laborers sent to Cameroon to work in the mine.  For the Chinese, it would be far easier and, possibly, not that much more expensive to import labor teams from China than it would be to use local hires.  Today’s New York Times article (link above) reflects a similar strategy where the CNPC feels more comfortable relying on its own teams than working with locals.

Yet another example of China’s strategy for raw material extraction from the developing world can be seen in the Democratic Republic of the Congo.  There, the Chinese are learning from previous colonials who came to this broken country for the same mineral ambitions.  Unlike the Belgians or the British who were brutal in the colonialism, the Chinese are applying their own tribal traditions to negotiating with the Congolese.  Whereas Europeans simply built their colonial infrastructure to extract as much raw material wealth as possible, Beijing is actually investing in the local society by building roads, hospitals and other much needed infrastructure projects.  In all, China is investing 4 billion dollars in the DRC, and not just building roads to the mines and ports!  While this is no doubt building some good will, the four billion dollar investment should be placed in the larger context where Beijing is engineering deals to extract 60 billion dollars in minerals, oil and other natural resources from the Congo.

The BBC produced a fantastic 20 minute program on China’s role in both the Congo and in nearby Zambia that are a must see for anyone interested in learning more about Beijing’s new foreign policy in the developing world.

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