China and India have often been portrayed as predators seeking natural resources all over the world, and their presence across the African continent is especially noticeable now. During the process of obtaining natural resources, China and India have been described as rivals. Under these circumstances, it is intriguing that China and India have chosen not to compete, but to cooperate, in the oil industry in Sudan since 2004. Against this backdrop, cooperation between China and India is explored in more detail in this article.

The article is divided into four sections. Firstly, general features of the cooperation are explored. Secondly, the Asian countries’ cooperation in Sudan is examined. Thirdly, each stakeholder’s motivations and, lastly, the prospect of successful cooperation, are discussed. Considering that the two Asian countries are unlikely to stop investing elsewhere in Africa, it is hoped that China, India, and various African countries will cooperate successfully in the future. Furthermore, other investors can learn some lessons from this case.

The features of Chinese and Indian cooperation

Both China and India have achieved incredible economic growth in recent decades. The consumption of large amounts of oil, gas and coal, among other resources, was the important driving force behind the growth. It is unlikely that there will be a change in this tendency, as consumption will have to keep up with increasing demand. According to 2010 crude oil consumption data from oil giant, BP, China, at 8.625 million barrels per day, is ranked as second after the United States, followed by India, which is the fourth largest consumer at 3.183 million barrels per day.⁽²⁾ Regarding other resources, the situation does not seem to be different, and both countries corner the market.⁽³⁾ Competition for resources seems to be inevitable, as energy security, in other words, maintaining a stable and secure energy supply, has become a top priority for further growth in both China and India.

Africa has a large quantity of natural resources and, for the above reasons, this has attracted the attention of both Asian countries. China especially has provided many African countries with political, economic, and military support and, in return, has been able to dominate in the exploitation of natural resources. In the case of Sudan, China was one of the few states in the international community that supported the country, specifically when Khartoum was faced with a series of sanctions and embargoes from the European Union (EU) and the United States (US) due to the conflict in Darfur. Since then, China has been Sudan’s main defender, is its largest foreign investor, and an important supplier of arms and equipment as well.⁽⁴⁾

When it comes to Sudan’s relations with India, the burgeoning relationship between the two countries reached a peak when Indian President APJ Abdul Kalam visited Sudan in 2003.⁽⁵⁾ Since then, trade between India and Sudan has increased nearly fourfold: exports of US$ 105 million in 2003 rose to US$ 485 million in 2010. India’s imports from Sudan have also increased from US$ 33 million in 2003 to US$ 194 million in 2010.⁽⁶⁾ This shows that Sudan has been emerging as India’s new large market. Furthermore, this relationship could have been the cornerstone of India winning a bid in the oil industry in Sudan.

From rivals to partners

When looking at the relations between China and India and Sudan, it is noteworthy that despite the traditional conflict derived from a border dispute in 1962 and the Pakistan issue⁽⁷⁾ among others, mutual economic interests in terms of energy supply have led the two countries to establish joint ventures to explore oil reserves in other countries. The cooperation has taken place not only in Sudan but also in Columbia, Iran, Syria, and Peru. Sudan is the first country on the African continent where major oil companies from India and China started joint ventures.⁽⁸⁾

Sudan’s oil exploration and development began in the late 1950s, when Italy’s Agip Oil Company was granted offshore concessions in the Red Sea area, located in the northeast of the country. In the middle of the 1970s, Chevron was granted an oil concession; later on, Shell seized a 25% interest in this project.⁽⁹⁾ Up until the 1990s, Western oil companies dominated, but the withdrawal of these companies following the conflict in Darfur provided opportunities for China and India to step in.⁽¹⁰⁾ Since the West left Sudan, China has played a dominant role in constructing an oil export sector.

In the case of India, the 2003 withdrawal of the Canadian oil company, Talisman, following pressure from human rights groups, provided India’s national oil company with the opportunity to take over. As such, Talisman sold its shares in the Greater Nile Oil Project of Sudan to ONGC Videsh. Since 2004, both China and India bought shares and became partners in the Greater Nile Oil Project.⁽¹¹⁾ Crude oil in South Sudan is currently pumped by the Chinese National Petroleum Corporation, India’s ONGC Videsh, and Malaysia’s Petroliam Nasional Berhad.

During this process, it was noticeable that China and India started to strengthen their relations at a senior diplomatic level in order to spur further oil exploration. In April 2005, when Chinese Premier Wen Jiabao visited India, the two Governments issued a joint declaration. This became a watershed event for accelerating the two countries’ cooperation in the energy sector. Specifically, Article 9 of the declaration describes collaboration to explore and exploit natural resources in other countries.⁽¹²⁾ Recently, Article 17 of the Joint Communiqué of India and China of 2010 confirmed that China and India would enhance their cooperation in multilateral issues, including the energy sector.⁽¹³⁾

Subsequently, Sudan experienced a significant transition; that is, South Sudan gained independence on 9 July 2011 as a result of the 2005 peace deal.⁽¹⁴⁾ China’s foreign minister paid a visit to South Sudan immediately.⁽¹⁵⁾ Considering that China had close relations with Khartoum, this gesture is assessed as quick thinking. India was also one of the first countries to recognise the new nation.⁽¹⁶⁾ Nearly 90% of the oil resources are located in South Sudan where China and India have major investments. By establishing “new” diplomatic relationships with South Sudan, China and India made sure that they would keep oil exploration rights.⁽¹⁷⁾

Driving forces for cooperation

To gain a clearer understanding of the cooperation, it is interesting to explore each country’s motivation. First of all, both China and India have been able to reduce the unnecessary use of diplomatic and economic resources.⁽¹⁸⁾ By cooperating, it has been possible for India to reduce the intense competition over resources. In fact, the material capacity of India is less influential than that of China. The cooperation helps to reduce the cost of oil and India can obtain it at affordable prices.⁽¹⁹⁾ China then also benefits from the reduced price.

In addition, by engaging with India, China was able to mitigate its negative image in the international community, namely that it supports the corrupt and abusive Sudan regime.⁽²⁰⁾ Moreover, some observers point out that China's growing interest in India might be related to the nuclear deal in which the US accorded nuclear-power status to India. Therefore, establishing a strategic partnership through strong cooperation with India can be important for China as well.⁽²¹⁾

The cooperation can also bring about positive outcomes for South Sudan. In addition to support from these Asian partners when it was isolated, South Sudan, after decades of conflict, needs more funds from investors for the reconstruction of the nation. Furthermore, this kind of multilateral cooperation will reduce the domination of China, enabling the new Government to be autonomous and independent and hold the balance of power.

The prospect of future relations

China and India both have scaled up trade and developmental cooperation. Some commentators expect positive outcomes from this cooperation, including bringing about international peace and stability. Also, the fact that multilateral cooperation has gone beyond the exploitation of natural resources to the realm of technology can be beneficial to all stakeholders.⁽²²⁾ However, since the partnership is based on their mutual interest in oil, it might collapse when there are no more benefits to be reaped from South Sudan. It is already said that oil production in the Great Nile Project has started decreasing.⁽²³⁾ Therefore, South Sudan needs to find a way to maximise cooperation. For example, there should be attempts to diversify its economy, ranging from agriculture to tourism. This can be realised through the massive amount of money derived from oil. By doing this, a resource-rich country like South Sudan can avoid falling into the historical trap of mismanaging oil.

Juba and Khartoum also need to reach an agreement on oil as soon as possible. At present, South Sudan has to rely on Sudan when it comes to oil transfer, since the port of Bashair on the Red Sea and most of the oil infrastructure is located in Sudan.⁽²⁴⁾ While China, India, and other energy importers such as Japan and South Korea have already created a cooperative framework for their interests, it is noticeable that African countries have not developed a framework for negotiation. Cooperation, rather than competition, is definitely preferable, but the benefit that results from cooperation should be distributed fairly, and this depends on South Sudan as well as on other resource-rich African countries.

NOTES:

(1) Contact Yejoo Kim through Consultancy Africa Intelligence’s Asia Dimension Unit (asia.dimension@consultancyafrica.com).
(2) ‘Statistical Review of World Energy June’, BP, 2010, http://www.bp.com.
(3) Singh, B., ‘Energy Security and India-China Cooperation’, International Association for Energy Economics, 2010, www.iaee.org.
(4) Feinstein, L., ‘China and Sudan’, Talking Points Memo, 2007, http://tpmcafe.talkingpointsmemo.com.
(5) Ray, N., 2007. Sudan Crisis: Exploring India's Role. Strategic Analysis, 31(1): pp. 93-109.
(6) ‘Export-Import Data Bank’, Government of India, 2010, http://commerce.nic.in.
(7) India and Pakistan have been long-standing rivals. China has provided Pakistan with political and military support as well as economic assistance so that Pakistan was able to confront India. The alignment between China and Pakistan has thus created a wedge between China and India.
(8) Malhotra, J., ‘India, China: Comrades in Oil’, Asia Times, 19 August 2005, http://www.atimes.com.
(9) ‘Sudan’ Oil Industry: Facts and Analysis’, Fatal Transactions and European Coalition on Oil in Sudan, 2008, http://www.ikvpaxchristi.nl.
(10) Kumaraswamy, P. R., 2007. India’s Energy Cooperation with China: The Slippery Side. China Report, 43(3): pp. 349-352.
(11) Kobrin, S., 2003. Oil and Politics: Talisman Energy and Sudan. International Law and Politics, 36: pp. 425-456.
(12) Jiali, M., ‘China, India Stoke Energy Bond’, China Daily, 2 February 2010, www.chinadaily.com.cn.
(13) ‘Joint Communiqué of the Republic of India and the People's Republic of China’, Government of India, 2010, www.mea.gov.in.
(14) ‘South Sudan Profile’, BBC News, 8 July 2011, www.bbc.co.uk.
(15) ‘China's Foreign Minister in First Visit to South Sudan’, BBC News, 9 August 2011, www.bbc.co.uk.
(16) ‘India Extends Diplomatic Recognition to South Sudan’, The Hindu, 10 July 2011, http://www.thehindu.com.
(17) Klomegah, K., ‘Sudan: Foreigners Eye Business Beyond Celebration’, Buziness Africa, 11 Jul 2011, http://buzinessafrica.com.
(18) Jiali, M., ‘China, India Stoke Energy Bond’, China Daily, 2 February 2010, www.chinadaily.com.cn.
(19) Kumaraswamy, P. R., 2007. India’s Energy Cooperation with China: The Slippery Side. China Report, 43(3): pp. 349-352.
(20) Ibid.
(21) Malhotra, J., ‘India, China: Comrades in Oil’, Asia Times, 19 August 2005, http://www.atimes.com.
(22) Lynn, G., 2006. China and India: Towards Greater Cooperation and Exchange. China: An International Journal, 4(2): pp. 263-284.
(23) Large, D and Patey L., ‘Caught in the Middle: China and India in Sudan’s Transition’, DIIS, 2010, www.diis.dk.
(24) Malhotra, J., ‘How Sudan Has Brought India, China Together’, Rediff, 8 Apr 2011, http://www.rediff.com.

Written by Yejoo Kim ⁽¹⁾