|Chinese evacuees in Malta. Dmitry Solovyov / NBC News|
In recent days, the unrest in Libya and attacks on the many Chinese projects there, have raised questions about the impact this will have on China's quest for natural resources in unstable states. I think this focus is surprisingly off-track. What should we be learning about Chinese strategy from the Libyan engagement?
(1) China joins in United Nations sanctions
. First, there has been relatively little comment about a rather extraordinary step: on February 26, the Chinese joined with other Security Council members at the UN in approving Security Council Resolution 1970
which imposed immediate sanctions on the government of Muammer Gaddafi. This move put into place an international arms embargo and targeted "smart sanctions" on key individuals, and refers the matter to the International Criminal Court for possible prosecution. Given Chinese reluctance to support intervention into "internal affairs" of other states, this move marks yet another step toward China's coming of age as a global power. It's something we can applaud.
(2) China's investment in Libyan oil is actually quite modest, while Western companies are major players.
As William J. Hudson, acting deputy assistant secretary in the Bureau for Near Eastern Affairs, told Congress in 2009: "I'm happy to report that US oil
companies are the most active there, and Libyans are eager to use their technology. The Chinese
are participating, but our countries [sic] are taking the lead" (Snow 2009).
ENI (Italy), Occidental (USA), and Petro-Canada and BP, Hess, Marathon, Conoco-Phillips, ChevronTexaco
, and others have been key players in Libya. Italy, Germany, Spain, and France have been Libya's major markets for its oil. Although the US imposed sanctions on Libya after the Lockerbie airline bombing tragedy, not all European countries followed suit; US sanctions ended in 2004. Check out the Wikileaks
website for the Libya cables and extensive discussion of all of this. (A good place to start is here
China's efforts to invest further in Libyan oil and gas were rebuffed in September 2009 when Libya vetoed CNPC's $US462 million
bid for Verenex Energy, whose assets were Libya-dominated. Chinese oil and gas operations employed only around 400 Chinese nationals, another sign of their small size.
(3) For China, the problems posed by the popular uprising in Libya are far more about Chinese construction projects and their use of Chinese labor, than Chinese companies' oil investments.
Over the past four years, China State Construction Engineering Corporation (CSCEC) has itself signed at least $2.67 billion of construction contracts
in Libya. In 2008 alone, Chinese companies signed US$10.05 billion in contracts for 180 construction, engineering and labor service projects in Libya (they also reported turnover of US$750 million, which suggests most of these projects started fairly recently). This was far larger than any other location in Africa.
Construction firms doing projects in telecoms, railways, and other infrastructure, seem to have employed some 36,000 Chinese workers. This was bound to raise resentment from Libya's unemployed youth. Despite high levels of unemployment, wages are also high in Libya, and few local workers speak foreign languages. Comments on a Tripoli Post story on this issue
suggest that use of foreign workers is a widespread response by foreign companies in Libya. Despite this, many Libyans do find employment in this sector. The Economist Intelligence Unit
's 2008 report on Libya cited the Monitor Group, a US consulting firm, which estimated in 2005 that some 600,000 to 800,000 people were employed in Libya's construction industry. It is likely that the vast majority of these people were Libyan. But the attacks on Chinese work camps in Libya bring home the risks of a business plan that relies on imported labor in repressive states with high unemployment.
Nick Snow, "Local approaches may help US in oil-rich areas overseas," Oil & Gas Journal, July 27, 2009.