By Akram Esanov, RWI Senior Economist
On June 26, 2009, Russian President Dmitry Medvedev ended his historic four-day visit to Africa. During his trip, Medvedev and a group of Russian businessmen visited Angola, Egypt, Nigeria, and Namibia. In 2006, Medvedev's predecessor Vladimir Putin visited South Africa and Morocco without generating any visible progress on economic ties between Russia and African countries. However, the situation has changed. In all four African countries he visited, Medvedev held high-level talks and signed numerous bilateral agreements aimed at boosting trade and economic ties between the countries. For example, Medvedev signed a strategic partnership agreement between Russia and Egypt and launched bilateral talks on the creation of a Russian free trade zone in Egypt.
Medvedev's agenda was focused on reestablishing Russian business interests in these resource-rich nations. During the Cold War era, Africa was a key battleground for the competing political ideologies of the Communist state and the West. Any economic assistance or military support from Russia was contingent on a declaration of loyalty to the country's Communist ideas. With the abrupt collapse of the USSR, Russia severed most economic and cultural ties with Africa. It took almost two decades for Russia to try to restore these relationships. As they are renewed, this time relations will be based on mutual economic benefit, rather than ideological ambition.
The highlight of Medvedev's visit to Nigeria was the forging of a joint venture agreement between Russian state-controlled gas giant Gazprom and the Nigerian National Petroleum Corporation (NNPC) to develop natural gas fields. Gazprom pledged to invest $2.5 billion in building refineries, pipelines and gas power stations in the West African nation, and possibly to take part in building the Trans-Saharan gas pipeline that will deliver natural gas from Nigeria to Eastern Europe. This pipeline was originally an EU effort to diversify the source of its natural gas imports and reduce its dependency on Russia. If Russia does become involved in the Trans-Saharan project, it will represent a significant blow to EU diversification efforts and will further embolden the Russian government to use energy as a strategic negotiation tool.
The visits to Namibia and Angola also resulted in trade agreements. In Namibia, Gazprom signed a one-billion dollar deal with energy company Namcor to construct a new power plant, and also expressed interest in uranium mining, energy production and oil exploration. In Angola, the last stop during Medvedev's trip, Russia and Angola signed six agreements in areas ranging from aviation to telecommunications. For the latter, two Russian state-controlled banks will provide a $300 million loan to Angola to develop its telecommunication sector. Russia is also trying to secure deals in the country's hydrocarbon sector.
With such productivity in securing agreements, Medvedev's visit to Africa can be considered a success, but Russia is not alone as a bidder for Africa's natural resources. Historically Africa's vast natural resources have been in high demand among industrialized countries, but over the past few years, competition among potential consumers of African resources has intensified. China and, to a smaller extent, India are among the emerging global economies eager for natural resources and in possession of sufficient financial resources to make mega-deals in Africa.
Despite the fact that Russia is a net exporter of oil, gas and a long list of minerals, it has begun once again to compete with other nations in Africa. This indicates that Russia seeks African resources to help build its strategic influence on the continent and increase its political weight around the world, and not simply to fuel its domestic industry.
If Russia is able to secure important extractive sector contracts in Africa, it will then have influence over where and how those resources are sold. Africa also offers lucrative extractive sector projects for Russian investors, as well as a potential market for industrial products. Conversely, Russia's interest is welcome by resource-rich African countries, since any competition for their resources can help secure better mining deals and provide another potential source of investment into largely untapped natural resources.
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