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ModernDiplomacy.eu: The Russian Federation in Africa

Posted by: Berhane.Habtemariam59@web.de

Date: Tuesday, 05 June 2018

Giancarlo Elia Valori

By

In its relations with Africa, Russia – which operates on global markets especially in the field of oil and non-oil raw materials – does not use the same logic as the Western countries’. The latter have always looked only for materials to be processed and turned into finished products within their factories.

In fact – according to the most authoritative scholars and experts – in Africa, Russia seeks above all the human capital, i.e. the human capital to be developed, the ruling classes to be educated, as well as the masses to be trained and made productive, always in an integrated vision of development between the great continental Eurasia and Africa.

The Russian relations with Africa are only synergistic, as they are two large reserves of raw materials and this makes their geo-economic situation in this respect very similar. However, as often reiterated by Russian experts, these are always operations that take long time and have a strong geopolitical and strategic dimension.

Hence, again according to Russian analysts, the logic underlying the relations between Russia and Africa is the union of their best practices so as to create a synergy that, in the future, will have a global geopolitical and economic impact.

Westerners want to look for goods and resources which are essential for their technological and industrial survival, while Russia wants to support Africa to take it away from the US and EU influence and use it as the pivot of Russia’s future development as a global, economic and strategic power.

However, the economic and political relations following the USSR collapse were the first ones to be sacrificed on the altar of the very severe Russian economic crisis of the time.

The current Russian establishment interpreted that crisis as an ill-managed colonization of the great Russian reservoir of raw materials. Exactly the same paradigm that is currently applied to the wide African region.

Later we witnessed the complex turn – ordered by Vladimir Putin since his official rise to power on May 7, 2000 – from a Russian GDP of only 764 million US dollars in 2006 to 2,096.8 million US dollars in 2014 up to 1,248.55 US dollars in 2016.

Moreover, the International Monetary Fund foresees that the future increases of the Russian GDP will result almost exclusively from the expansion of the internal market.

This is the example given by the Sochi Olympic Winter Games and by Russia’s international initiatives.

Hence – as Keynes explained in his old, albeit always valid, General Theory -if economic growth and the capitalistic or non-capitalistic industrialization depend on the secondary processing of raw materials and on the market-driven innovation, generated by the market and its demand, obviously the West must expand itself – in a new way – where these raw materials are found, namely Africa, Asia and Latin America – and obviously the new geopolitics will repeat the one analysed by Georg Wilhelm Pahl in the 1930s: the war for primary raw materials.

Unlike technologies, said raw materials are not reproducible.

Hence, in terms of basic productive structure, the Russian Federation is homogeneous and similar to many of the countries rich in raw materials which, like Russia, make up the so-called BRICS group.

In fact, if we read the Russian Federation’s “Concept of Foreign Policy” adopted by President Medvedev in July 2008, we can see that the issue of collaboration between Russia and the African countries- as well as an enhanced  dialogue with the G-20 and the G-8 -are some of the fundamental issues of the Russian power projection throughout the world.

Moreover, in the 2017 “Concept”, it is made clear that “Russia intends to strengthen its position in global economic relations and prevent any discrimination against Russian assets, services and investments”.

It is worth keeping in mind that, altogether, Africa and the Russian Federation hold 60% of the world’s natural resources.

Hence the fundamental problem for Russia is to be so strong at international, legal and financial levels to avoid the fast and ferocious exploitation of its own natural resources – as well as of its friendly African countries – at low prices and without any political and military compensation in return.

Although many people think the opposite, imagining an impossible “tertiary society” -of “services” or, even more humorously, of “knowledge” -the “resource factor” is essential to analyse the current state of the world market.

Between 1960 and 2009 the world population grew from 2.5 to 6.6 billion people and currently, based on the 2017 data, we see the undoubtedly shocking forecasts of world population reaching as many as 7.6 billion people in 2018.

A 400% increase of the world’s population recorded  throughout the twentieth century. According to UN data, between 2018 and 2100 the world population will rise   approximately to 10 billion people.

Oil extraction – the axis of Russia’s current economy, which will also be diversified through these new relations between Russian and African raw materials-has risen  from 2.5 million barrels per day in 1960 to 4 million barrels in 2009 up to 6.9 million barrels per day this year, with a forecast of stable global growth in oil consumption of 1.2 million barrels per day.

Global natural gas production has risen from 190 million in 1960 to approximately 3,900 in 2018, with a consumption outlook predicting significant growth of global consumption, higher than the oil one.

The fact is that these growth trends in raw material consumption apply not only to energy products, but also to  all types of minerals and non-food raw materials.

Hence there is no monetary crisis – occurring by chance or  artfully created – which can manoeuvre this stable condition of the markets and the allocation of raw materials. Any manipulation with derivatives or other financial formulas will never be able of changing the material equilibria on the planet.

It is worth noting, however, that 16% of the world population lives in developed countries, even though  in these countries the social gap between rich and poor is increasingly widening.

The “Gini coefficient”, which is a commonly used measure of inequality of income or wealth, is currently optimal in the North European countries, while it is very low in Bolivia, Colombia and generally in  Latin America.

However, it is also very low in Gambia, Namibia and South Africa, ranging between 0.66 and 0.50, in a context in which the maximum income equality is 0.50, considering that 0 means complete income equality.

The United States, Russia and China range between 0.40 and 0.45, with China following closely.

Nevertheless 10% of the richest population owns 37% of wealth in Europe, 47% in North America, 46% in Russia and 41% in China, but with 55% of wealth in Brazil, sub-Saharan Africa, India and even 61% throughout the Middle East – obviously excluding Israel.

This make us predict a future scenario that reminds us of Mao Zedong’s “Three Worlds Theory”, which proposed three political-economic worlds: the First world consisting of superpowers, the Second World of developing powers and the Third World of exploited nations.

The First World was composed of the USA and the Soviet Union, which engaged in imperialism and social imperialism and featured a “capitalist” country and a “revisionist” country (i.e. the USSR which, at the time, was consumed in the madness of the Cold War and in the economic and military confrontation between East and West). Japan and Canada, Europe and the countries of the global North-South divide composed the Second World, while the countries of Africa, Latin America and Asia (except Japan) composed the Third World, which would be  unified and led by Red China.

Hence 16% of the population lives in the First World,  which organizes the production and consumption of raw materials, while as much as 53% of the world population lives in developing countries.

With their 16% of population, however, the developed countries consume 52% of all the raw materials extracted.

This is the profound meaning of the “war for Africa” that everyone is currently waging with both conventional means and indirect or influence strategies.

Africa is the primary area for the extraction of manganese, chromium, bauxite, gold, platinum, cobalt – 94% of which is currently extracted indirectly by Chinese companies operating in the Black Continent – vanadium, diamonds, phosphorite and fluorite.

Africa is also the second region of extraction for copper, asbestos, uranium, antimony, beryllium and graphite, as well as the third  region in the world for oil, natural gas, mercury and iron ore reserves.

Africa, however, also possesses significant deposits of titanium, nickel, bismuth, lithium, tantalum, niobium, aluminium salts, tungsten and precious stones.

In short, the Black Continent is strategic for all the raw materials characterizing the technologies of the future  scientific and industrial revolution, which is currently  typical of the First World’s economies.

Finally, another factor of geoeconomic similarity between Russia and Africa is that they are two great global regions in which the fast and often unreasonable exploitation of natural resources has not occurred yet. Political and military difficulties of ancient and now outdated colonial hegemonies.

As, indeed, it has already happened in Brazil and in some Asian areas.

The depletion of natural resources in Latin America is older and more profound than the one already underway in some regions of sub-Saharan Africa.

We must not forget, however, that in mid-21st century the demand for raw materials will grow by 50% or 60% while, again according to Russian statistics – mostly confirmed also by the United States – the oil demand is expected to grow by 113 million barrels per day until 2030.

Another important fact, however, is that every year the United States is increasing its imports from Africa – and this has been going on since 2005, with a yearly 10% increase of North American imports from Africa.

Over the same 2001-2015 period, the European Union has instead reduced its imports from Africa by 2.5%.

Nevertheless, over 70% of imports to the USA is only for oil products, while minerals and other African non-food raw materials only account for 14-15% of the US total imports.

Hence the African Growth and Opportunity Act (AGOA) – the Treaty that since 2000 has been regulating US and African trade -lays down that 6,400 products of 40 African countries will enter the USA duty free. This has indirectly created a million new jobs in Africa but, as always happens with mere free-trade treaties, they do not lead to investment, but only to the expansion of African imports which, although important, is not enough.

Currently, however, the US direct investment in Africa is on the wane: lately the US exports to sub-Saharan Africa have been worth 19 billion US dollars, while bilateral trade fell from 100 billion US dollars in 2008 to 39 billion US dollars in 2017 – a fall in North American imports mainly due to the increase in US energy independence and autonomy.

China has already funded 3,000 infrastructures in Africa in various ways and has granted 86 billion dollars of commercial credits to African governments. It has also invested 6 billion dollars a year throughout the Continent until 2025.

In 2015, during the Forum on China-Africa Cooperation Conference (FOCAC), President Xi Jinping granted a further multi-year commercial fund to the tune of 60 billion dollars, to which another 20 will be added at the end of the mandate in 2025.

Hence China is already Africa’s first creditor, with 14% of the entire sub-Saharan debt stock.

China’s Foreign Direct Investment in Africa, however, is still low, considering that it accounts for 5% of all the FDI in the Continent, while there are currently 10,000 China-owned companies – mainly private ones – operating in Africa.

Furthermore, in 2007 the EU launched the Africa-EU Strategic Partnership, operating between EU-27 and 54 African countries.

The fifth Partnership Summit held in Abidjan in 2017 reaffirmed the main assumption underlying the agreement, namely mutual trade, in a situation in which trade between Africa (i.e. the 54 countries adhering to the Africa-EU Strategic Partnership) and the European Union is worth approximately  300 billion euro a year, while the European Union has guaranteed additional 54 billion euro for “sustainable development” – whatever this may mean in Africa.

Following the non-brilliant concept of “equalitarian” trade  typical of the USA, the EU has established a series of Economic Partnership Agreements (EPAs) with 40 other sub-Saharan African countries of the Strategic Partnership, with bilateral treaties envisaging preferential access to European companies in those areas, while imports will be liberalized over a period of 20 years.

Too late, too little.

Nigeria is opposed to the EPA since it maintains it is an obstacle stopping its industrialization, while Brexit has greatly weakened the EU ability to penetrate the African markets and ruling classes.

Finally, the USA has recently invested 6.5 billion US dollars in 14 African countries through the Millennium Challenge Corporation alone – funds  aimed at fostering inter-African economic integration (a sort of future African EU) and to create the best conditions for standard private North American investment.

Moreover, in February 2018, the US government established the BUILD Act, i.e. the rules on Better Utilization of Investment Leading to Development, a new federal agency that will put together some functions of the Overseas Private Investment Corporation and of  USAID, which will mainly deal with equity investment in Sub-Saharan countries.

However, let us revert to the Russian Federation.

Building on a strong bilateral relationship with Abdel Fattah al-Sisi’s Egypt, Russia currently plans to develop a series of relations – always and especially at bilateral level –  with many African countries, particularly those having a more difficult relationship with the EU and the USA.

At the inauguration of Vladimir Putin’s current Presidency there were people of great strategic importance for Africa: Cyril Ramaphosa, President of the South African Republic; obviously Abdel Fattah al-Sisi from Egypt; Emmerson Mnangawa from Zimbabwe; Joao Laurenco, President of Angola; Hage Geincob from Namibia and finally Omar al Bashir, military and political leader of South Sudan.

With regard to Egypt, Putin is working on a nuclear power plant and a special industrial zone, as well as on a package of aid and investment amounting to approximately 32 million US dollars.

An operation that is supposed to be completed in 2022.

For Zimbabwe – currently a political pariah for the whole West – the relationship with Russia and China is fundamental for the steady flow of economic aid from the two Asian countries. This aid will soon be turned into bilateral trade and into the creation of an autonomous Russian economic zone in the Southern part of the country, in addition to the modernization of agriculture and the creation of some industrial sectors mainly linked to agricultural by-products.

Russia, however, has also invested 3 billion US dollars in a large platinum mine.

Alrosa, Russia’s major State-owned company in the diamond sector, will operate in Angola where it will exploit one of the largest diamond deposits in the world, namely Luaxe. The Russian Federation is also planning to make additional infrastructure investment in South Sudan, very different from the investment planned by Europe and the United States there.

Russia, however, plans to develop – above all – the vast oil fields that Al Bashir’s regime of South Sudan has on the borders of the country. As to South Africa, we will see what results the South African Presidency of the BRICS groups on July 25-27, 2018 will achieve in terms of bilateral relations.

It is worth recalling that the BRICS countries account for 26% of the world surface and 42% of the world population.

In the Third World population is growing, while the population decline in Europe and North America makes us fear the worst for our rates of development and the unsustainable costs of welfare and pension systems while, for obvious reasons, the average factor productivity is decreasing throughout the West.

With a view to underlining again the importance of relations between the Russian Federation and the African countries, there is a clear link between Russia’s trading partners in Africa and the States participating in the bilateral joint manoeuvres put in place ever more often by Russia in Africa.

Moreover, the Russian peacekeepers in Africa often outnumber those coming from France, Great Britain and the United States. In Africa the Russian “green helmets” often outnumber those of the other Western powers altogether.

Furthermore – according to Standard & Poor’s, but also to data from other financial research companies-to some extents, sub-Saharan Africa is more attractive for business than other areas of the world, i.e. the Frontier Emerging Markets –  37 countries in total, including Slovakia, Slovenia, Kazakhstan, Cyprus, Estonia and the United Arab Emirates.

Considering these areas, the US military imports over 50% of the minerals needed for the construction of long-range bombers from sub-Saharan Africa only, while the US military imports of cobalt from the countries of that region account for 75%.

Furthermore, Africa will be a land of conquest for the  Russian Federation, together with the People’s Republic of China, inasmuch as the investment of major countries will be infrastructural, lasting and based on the training of the local ruling classes and, above all, of their local labour forces.

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