Untapped: The Scramble for Africa's Oil
The high cost of oil
By Steven Martinovich
With continued instability in the Middle East and the political difficulty of drilling on its own soil, it's not surprising that the United States has been casting about lately for new sources of foreign oil. The problem, however, is that most of the places that it and the rest of the world are looking to meet their insatiable need for energy are no more stable than the Middle East.
As John Ghazvinian reports in Untapped: The Scramble for Africa's Oil, the newest hotspot for exploration dollars, yuan and rupees, is sub-Saharan Africa. Although we've known for decades that Africa is sitting on a treasure-trove of oil it is only recently that prices have been high enough to make it economically feasible to exploit. And when it comes to Africa, argues Ghazvinian, exploitation is a fact of life.
While oil – or at least the use of it – has made most of the Western world wealthy, it has had a far less benign effect on many of the sub-Saharan nations which are exporting it. All are wracked with corruption and mismanagement and many are seeing the breakdown of their societies. Far from being a ticket to a prosperous future, the discovery of oil has led to a number of dangerous economic illnesses, as Ghazvinian shows in a tour of twelve such African nations.
Many develop an economic condition known as "Dutch disease", a phenomenon whereby a constant inflow of foreign currency – oil is sold in dollars, euros or yuans – disappears after the oil is gone. With a depreciated local currency and traditional non-oil industries often left to languish during the boom days, a nation which was once an exporter is typically left relying on foreign aid merely to survive.
Others suffer from what is called the rentier state, one which sees a government deriving a majority of its revenue from oil production. Besotted with the easy money, these governments are no longer on internal tax revenue to fund their activities. The state, in other words, is no longer reliant on its people for support and often uses the oil profits to buy off potential political opposition.
But, as Ghazvinian notes, much of the problems that sub-Saharan African states are simply due to mismanagement and corruption. Rather than spend money on sensible infrastructure projects many leaders prefer to buy new weapons to keep their people in check. Untold millions are salted away in secret bank accounts or spent in wildly extravagant binges benefiting only the elite – typically a leader's family and friends.
Ghazvinian saves some of his fire for the oil companies as well. He accuses them of taking advantage of nations inexperienced in oil production by crafting deals which sees them shortchanged. They tacitly allow government repression, he argues, against those who would threaten physical assets and production.
Complicating the situation, he writes, are the rising powers of the east. China, and to a lesser extent India, aren't constrained by many of the same rules that western nations are ostensibly regulated by. Where a western oil firm may avoid a nation governed by a tyrannical leader, China's nationally owned oil company has no such compunctions. In fact, writes Ghazvinian, that is one of China's competitive advantages. They arrive with money, offer some infrastructure projects to sweeten the deal, and stay out of local politics.
It would be tempting to dismiss Ghazvinian as yet another westerner shouting about the latest colonialist plot to rob Africa of her wealth but the evidence for his case is plentiful. During his visit to Nigeria he meets with villagers who live not far from the oil production fields but who subsist in utter squalor. In Gabon, the nation became so rich, so quickly on oil, that it faces a horrible future as the resource runs out and Gabonese have literally forgotten how or refuse to run the agricultural industry that used to sustain their nation.
Or São Tomé, which used to be a little known vacation destination for Europeans, is quickly becoming a paranoid dictatorship with constant political plotting by those who want to capture power and the potential oil wealth. Over in Angola, the one hundred richest families enjoy a tide of oil money -- ten members of the presidential elite alone boast assets of over $100 million and the Angolan president is one of Brazil's richest men thanks to overseas assets -- while millions live far below the poverty line and the government uses its share to do battle with separatists who themselves cast a covetous eye on the oil they could be producing.
In nation after nation, Ghazvinian shows, oil has been a curse, not a blessing, for its people. And while African oil is relatively safer than that from the Middle East, it clearly carries any number of economic, political and ethical minefields for the west. Ghazvinian doesn't pretend that there any easy answers – particularly when no one involved seems interested in any answers at all – but Untapped should be required introductory reading for any policy maker concerned with future energy issues.
Steven Martinovich is a freelance writer in Sudbury, Ontario.
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