Loan for oil deal signed with Niger junta

Chinese state-owned firm to advance US $400m ‘lifeline’ to military rulers

Niger’s military junta has signed a US$400 million deal with a Chinese state-owned oil giant as part of its plan to “diversify international partnerships” after cutting ties with France and the United States.

The deal signed last week by Prime Minister Ali Mahaman Lamine Zeine and China National Petroleum Corporation (CNPC) chief executive officer Zhou Zuokun will see the company advance the money to help Niger’s military rulers meet shortterm obligations as the economy struggles to recover from the impact of sanctions.

According to the Nigerien Press Agency, the Chinese firm will be repaid with crude oil shipments within 12 months at an interest rate of 7 per cent.

“There is no shadow over this as we have safeguarded the interests of our country,” Zeine said after signing the deal in the presence of Chinese ambassador Jiang Feng, who has been leading the negotiations with Niger.

“China is a great friend for Niger, we can never say it enough,” Zeine said. “It must be remembered since the beginning of this great oil adventure, China has always been at the side of our country and today it is proven that at such crucial moments, we could obviously manage to request an advance, these are Niger’s rights, and we will give ourselves all the means to repay them.”

“This signature demonstrates the friendship … and fruitful cooperation between the two states,” Jiang said.

Resource-backed deals of this type are extremely popular with Chinese lenders, but critics say they increase countries’ vulnerability to debt.

Africa Development Bank president Akinwumi Adesina has called for an end to loans given in exchange for oil or natural resources, describing them as “non-transparent, unfair and corruptible” adding that they “complicate debt resolution, and mortgage the future of countries”.

“Africa must end all natural resources-backed loans,” he said last year during the Summit for New Global Financing Pact held in France.

The finance model was pioneered in Angola, which received billions of dollars from China for its reconstruction at the end of the country’s 27-year civil war in 2000 and still uses oil shipments to repay Chinese loans.

Gyude Moore, a policy fellow at the Washington-based Centre for Global Development and a former minister in Liberia, said the oil deal “is not a departure from Chinese practice”.

“China is regime-agnostic so a junta in Niger was never going to be an impediment to Chinese engagement,” Moore said. He said “this deal is a lifeline for Niger”, which was still recovering from the West African sanctions and reduction in Western engagement.

David Shinn, a China-Africa specialist and professor at George Washington University’s Elliott School of International Affairs, said China was a long-term buyer of oil from Niger so the new deal was not surprising apart from the fact that it appeared based on the Angolan funding model.

“Most African states have been phasing out of this kind of financing arrangement with China,” Shinn said.

In November, PetroChina, a subsidiary of CNPC, finished building a 2,000km pipeline that will take oil from the landlocked country to Seme, an Atlantic port in neighbouring Benin.

The Chinese company has invested US$4.6 billion in Niger’s petroleum industry and PetroChina owns two-thirds of the country’s Agadem oilfield.

Niger has been producing 20,000 barrels a day from the Agadem Rift Basin, but until now that has primarily been used domestically because border restrictions and sanctions meant it could not export the oil.

However, those sanctions – imposed by the Economic Community of West African States in the wake of the coup that brought the junta to power – have now been lifted on humanitarian grounds, meaning it can start using the pipeline.

According to S&P Global Commodity Insights, Niger could begin shipping its first oil exports in May, starting with 90,000 barrels a day before ramping up to 110,000 barrels a day.

The oil deal came weeks after Niger severed military ties with the US and ordered 1,000 American troops out of the country. Niger’s relations with France, its former colonial ruler, also deteriorated after the coup, culminating in French troops being ordered to pack up and move out at the end of last year.

Niger has instead moved closer to China and Russia. Last week, Russian military equipment arrived in Niamey along with 100 Russian military instructors, state broadcaster RTN revealed.

Moore said the relationship with Russia indicated the junta had no good options when it came to fighting a long-running Islamist insurgency.