Clinton Seeks U.S. Africa Gains as China Expands Oil Purchases

By Janine Zacharia

Bloomberg -- Secretary of StateHillary Clinton shifts to economic statecraft this week on an African tour that stops in major oil and mineral exporters as she seeks advantages for U.S. investors in a market where China is making inroads.

After six months of dealing with North Korean provocations, Iran’s election unrest and a coup in Honduras, Clinton will turn to issues of trade and energy in sub-Saharan Africa. She will spend time in Nigeria and Angola, two of the biggest suppliers of crude oil to the U.S.

China has boosted investment commitments in Africa, especially in mining, and Chinese oil purchases are expanding from countries such as Sudan. In 2007, China was the largest individual exporter to the region with a market share of 9.8 percent, the U.S. Commerce Department reported in July. The U.S. market share in 2007 fell to 5.3 percent in exports.

“China’s influence is increasing at the moment and, to some extent, African policy makers are looking to see what the American response will be,” saidDerek Scissors, a research fellow at the Heritage Foundation in Washington who tracks Chinese investment on the continent.

Johnnie Carson, the assistant secretary of state for African affairs, said any suggestion that Clinton is making such an extensive trip to counter China’s rise in Africa “is a Cold War paradigm, not a reflection of where we are.”

Clinton is going to Nigeria and Angola “because we have serious political, economic and hydrocarbon interests in those countries,” Carson told reporters July 30 in Washington.

Trade Summit

Clinton’s seven-nation trip begins with an Aug. 5 free- trade summit in Kenya, followed by visits with peacekeepers in the Democratic Republic of Congo and talks with the new South African leadership. She also stops in Liberia and Cape Verde.

The Africa trip is an early example of Clinton’s stated intention to strengthen economic outreach as part of U.S. foreign policy, a goal she articulated to theCouncil on Foreign Relations last month.

The State Department’s attention to energy in Africa is reflected in its appointment of a coordinator on energy issues, David Goldwyn, who had been running a consulting firm focused on Africa.

Nigeria is the fifth-largest supplier of crude to the U.S. and Angola is the sixth, according to the U.S. Energy Department. Those countries combined supply about 12 percent of U.S. imports. In July, Angola pumped more oil than Nigeria, traditionally Africa’s biggest producer.

‘Enormous’ Potential

Angola “has enormous economic potential,” Carson said. San Ramon, California-based Chevron Corp. is leading the development of liquefied natural gas exports from the country.

Clinton, 61, will press Nigeria on corruption, which Carson blamed for stifling international investment. International observers concluded that Nigeria’s April 2007 presidential election of Umaru Yar’Adua was a sham. The country, ranked as one of the most corrupt by Berlin-based Transparency International, is weighing anti-graft measures.

Yar’Adua set up a panel in April to investigate the alleged bribery of state officials by foreign companies including former Halliburton Co. subsidiary KBR Inc.

KBR and Halliburton, both based in Houston, agreed to pay $579 million in February to resolve U.S. criminal and regulatory charges stemming from payments made to Nigerian officials between 1994 and 2004 in connection with a $6 billion construction contract. KBR pleaded guilty to conspiracy and violating the U.S. Foreign Corrupt Practices Act.

Violence in Delta

Of immediate concern for the energy industry is violence and abductions in the southern Niger Delta. The acts against oil installations have disrupted Nigerian production.

Irving, Texas-based Exxon Mobil Corp. and Chevron pump more than half of Nigeria’s oil and have been hit by some of the attacks. Yar’Adua may seek support through the U.S. military’s Africa Command to tackle the threat from armed groups to oil production in Nigeria.

Nigeria is also dealing with religious unrest. In northeastern Nigeria, at least 600 people have died since fighting erupted on July 26.

Such an expansive Africa tour is unusual for a U.S. secretary of state, especially so early in a new administration. The effort is “laudable” because “many people would have predicted that Africa was going to get a pretty short shrift given all the other pressing business,” said J. Stephen Morrison, senior director of Africa research at the Center for Strategic and International Studies in Washington.

Exports Measure

Clinton will explore ways of strengthening the U.S. African Growth and Opportunity Act at the Kenya forum. The 9-year-old measure is designed to encourage African exports by giving duty- free access to the U.S. market. Yet oil dominates the commerce: Petroleum products accounted for 92.3 percent of the $66.3 billion in U.S. imports under AGOA in 2008.

Supporters of the law lament that a lifting of quotas on apparel imports in 2005 shifted manufacturing to Asia just as Africa was starting to take advantage of the initiative.

“AGOA is a litmus test of are we serious about helping Africa, or are we not serious,” said Rosa Whitaker, formerly the first assistant U.S. trade representative for Africa and now a consultant.

Whitaker said she hopes President Barack Obama will make AGOA permanent and offer tax incentives to encourage U.S. investment.

Political Violence

In Kenya, Clinton will press for prosecution of the perpetrators of last year’s post-election violence. About 1,500 Kenyans were killed and another 300,000 displaced in two months of fighting triggered by accusations of vote-rigging in a December 2007 election.

Obama, whose father came from Kenya, expressed concern last month that political paralysis is preventing reconciliation.

While in Kenya, Clinton will also assess the staying power of the embattled transitional government in neighboring Somalia when she meets with its president, Sheikh Sharif Sheikh Ahmed, to discuss battles with militant Islamists in the Horn of Africa.

“The problems in southern Somalia have started to bleed regionally and internationally,” Carson said, pointing a finger at Eritrea for funneling weapons and funds to the militants. The U.S. has shipped 40 tons of arms and munitions to Somalia since fighting broke out May 7.

Kenya Ties

Clinton travels from Kenya to South Africa to repair a relationship that frayed under President George W. Bush, especially over former South African President Thabo Mbeki’s refusal to criticize Zimbabwean President Robert Mugabe.

She will visit Pretoria and Cape Town, which will host the 2010 World Cup soccer tournament. After South Africa, she heads to Angola and then to the Democratic Republic of Congo, a country rich in minerals like coltan which is critical for mobile phones and fuels violent conflict among militias in the eastern areas of the country that Clinton will visit.

Congo’s minerals have attracted companies including China’s state-owned Sinohydro Corp. and China Railway Engineering Corp., which seek to develop copper and cobalt deposits. London-based Rio Tinto Group, the world’s third-largest mining company, is exploring for diamonds and iron ore.

While in Congo, Clinton will make a push to strengthen the Congolese security forces and speak out about violence against women, Carson said.

Congo’s record on human rights has worsened. On July 23, Congolese authorities detained Golden Misabiko, a human rights leader partnered with the U.S.-funded National Endowment for Democracy, after he wrote a report critical of the government’s handling of mining concessions to foreign companies.

“Congo is such a chaotic behemoth, it’s a wrecked state, whose instability, when it’s not functioning, kind of radiates throughout the continent,” Morrison said.

To contact the reporter on this story: Janine Zacharia in Washington atjzacharia@bloomberg.net