Oil & Gas Summiteer

November 2, 2019

Sochi Diplomatic outreach as oil cold war reverberates

OPEC, OIL, crude oil

By Sonny Atumah

Russia is back into the fray for a second scramble for Africa’s economic soul. The motive is to accelerate the gains of superpower status it inherited from the defunct Union of Soviet Socialist Republics, USSR that dismembered its alliance in 1991.

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It participated in the 1884/85 partition of Africa 134 years ago, but did not benefit because it barely had a colony. Russia is immensely endowed with natural resources; a country with the largest land mass in the world.

Last week, the Russians met with a congregation of 54-member African Union leaders including 43 heads of state, in the southern city of Sochi from 23 to 24 October, 2019. The Russia-Africa Economic Forum was co-hosted by Russian President Putin and Egyptian President Abdel Fattah el-Sisi. The Sochi Summit appears to be very purposeful for the African ‘beautiful brides’ as the Russian leaders showcased concrete guides and plans to find African solutions to various African problems; from armaments, infrastructure, nuclear energy, to oil and gas.

Sochi is fast becoming part of what analysts describe as Kremlin’s making-Russia-great-again choreography. Putin has made the Black Sea resort that is two hours flight from the capital, Moscow, an attractive city to receive important guests. The Africa summit was indeed, an intending frantic competition of Russia to regain influence by wooing African leaders to Sochi. The discourses emphasized partnerships rather that grants and aids and sovereignties over fealties.

Putin told the Russian News Agency, TASS that Russia was ready to provide help without political or other conditions. Russian diplomacy analysts believe is for a new world order with multiple power centres that would include Nigeria, Egypt and South Africa. Courting Nigeria becomes strategic because it appears to be the trigger of political and economic influence in Africa. And Putin has put in mechanism to assist in defence and security, mining, energy, Ajaokuta Iron and Steel development, transportation, communication, among others to jumpstart the Nigerian economy.

As oil and gas were strongly on the cards the two countries agreed to expand energy cooperation. The Nigerian National Petroleum Corporation, NNPC’s GMD, Mele Kyari and his Lukoil’s counterpart, Vagit Alekperov both signed the agreement which will see both companies working together in crude oil exploration, refining, and trading. Lukoil will collaborate with the NNPC to upgrade their commercial relationship to a government-to-government backed partnership in upstream operations and to rehabilitate Nigeria’s ailing refineries. A memorandum of understanding resolving past issues paved the way for the revival of the rested joint venture between the NNPC and Russia’s gas giants, Gazprom for the development of Nigeria’s enormous gas resources and its infrastructure.

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And what are Russia’s interests? A multi-polar world not dominated by the United States it appears. Is Vladimir Vladimirovich, as Putin is referred to by his patronymic, hosting of the first-ever Africa summit a ploy to profit from a distracted America? Russia is striving for superiority, influence and control in what has been dubbed the new cold war with America and oil is playing the big role. Russia supplies over 10 percent of global oil.

In 2014, Russia and Saudi Arabia were up in strategy of ruination of American shale. The bilateral deal that led to the OPEC+ was to reduce oil output to stabilize global prices which Russia’s Energy Minister Alexander Novak told reporters in Sochi last week that there is slowing activity in U.S. shale despite the fact that production continues to grow.

Venezuelan is struggling to repay its Russian loans of more than US$6 billion. Half is owed to the Russian state with the other half owed to Russia’s largest oil company, Rosneft by Venezuela national oil company, PDVSA.

As Venezuela fell behind on debt payments in 2017 Russia became Venezuela’s lender of last resort. With Citgo which appears to have been the collateral, if sold, could be worth between US$6 billion and US$9 billion. Russia may lay claim to almost half of a major U.S. oil giant, which has strategic and security implications.

The United States is considering imposing sanctions on Rosneft over its involvement in trading oil from Venezuela. Rosneft has been reselling oil to buyers in China and India, helping Venezuela to continue selling its oil despite stricter United States sanctions. Rosneft has completed planned switch away from the U.S. dollar to euros in its export contracts to minimize risks from potential new U.S. sanctions, says Rosneft’s chief executive Igor Sechi. The share of the U.S. dollar in the global oil and oil products trade is around 90 percent. Sechin believes that in ten years’ time, the Chinese currency, Yuan could raise its share from the current 2 to 5 percent.

African has seven members (Nigeria, Angola, Algeria, Libya, Equatorial Guinea, Congo and Gabon) in the 14-member Organization of the Petroleum Exporting Countries, OPEC. Putin recently travelled to Saudi Arabia to seal a number of agreements, signed by the Russian leader and the Saudi’s King Salman, including a charter on long-term cooperation between the OPEC and non OPEC producers. African leaders are used without finesse.

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From the United States to United Kingdom, China, India, Japan, and now Russia, the 54 heads of state and government from Africa have been lured or cajoled annually to these countries with various grants and aids promises. France may be the next destination in 2020. Is that what Africans want?