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Event Report: Book Launch- ‘India and China in Africa: A Comparative Perspective of the Oil Industry’; By Raj Verma

, dated April 5, 2017

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C3S Report No: 005/2017

The following is an event report of a Book Launch held on March 02 2017.

The book ‘India and China in Africa: A Comparative Perspective of the Oil Industry’, traces the activities of Chinese and Indian oil companies in West Africa. The book is based on the author’s PhD thesis at the London School of Economics and Political Science (LSE) during 2011-2013. The book is a mixture of theoretical study and empirical evidence. The author has attempted to view the research topic through the lens of Neo-Classical Realism.

Cmde. R. S. Vasan IN (Retd.), Director, C3S, welcomed the gathering. Followed by an introduction to the book by the author – Dr Raj Verma, Assistant Professor, School of International and Public Affair, Jilin University.

The Introduction to the book is as follows:

With the instability in the Middle East, oil companies around the world have begun to shift focus towards Africa. In this book, the author brings out the various risks that are involved in investments made by Indian and Chinese oil companies in West Africa. According to the author, the investments made by Indian and Chinese oil companies in West Africa are influenced by the nature of support they receive from their respective governments. The Chinese oil companies are largely supported by the Government and are state-owned enterprises. The Indian oil companies, on the other hand, do not enjoy the same backing that their Chinese counterparts receive from their Government.

With the instability in the Middle East, oil companies around the world have begun to shift focus towards Africa. In this book, the author brings out the various risks that are involved in investments made by Indian and Chinese oil companies in West Africa. According to the author, the investments made by Indian and Chinese oil companies in West Africa are influenced by the nature of support they receive from their respective governments. The Chinese oil companies are largely supported by the Government and are state-owned enterprises. The Indian oil companies, on the other hand, do not enjoy the same backing that their Chinese counterparts receive from their Government.

The other factor that influences oil investments is the two countries’ relative economic power and diplomatic ties with West African nations. This, the author says is an area where China is way ahead of India. China has 11 diplomatic missions in West Africa compared to India’s 3. The Indian embassy in Ghana is the single diplomatic mission for four nations. Indian embassies in Africa are also severely understaffed. This, the author argues as a factor that weakens India’s bid to invest in African countries, especially in the oil sector.

The author mentions that Indian oil companies lack the resource and money needed for investments. While bidding, the Indian oil companies do not enjoy the same amount of capital that their Chinese counterparts have.  Moreover, the level of expertise in China is higher as China’s state-owned companies work closely. One can understand the prevalence of strong ties between China and African nations as China believes in the saying “hard cash beats all political ties”. As a result, African nations prefer Chinese companies over India’s oil companies. This is also because China is willing to brave domestic turbulences within some of the African countries, something India has not been willing to risk.

The highly regulated oil pricing in India makes Indian companies look for markets outside India which is a very competitive field. Whereas China is more liberal in the pricing of oil in the domestic market, which provides a ready market for China its oil companies.

Dr Raj Verma made some critical evaluations. Firstly, on investment where he says that the Chinese have realised that all its acquisitions will not have profitable returns. Only 10% of the acquisition has provided strategic returns. Irrespective of this fact, the Chinese oil companies will continue to use the strategy of investing in Africa. Secondly, there is no oil ministry in China. It is the three big companies (SINOPEC, CNPC, CNOOC) and their ties with the political high heads that formulate oil policy. These companies have “hijacked” China’s national petroleum policy. He quotes “Political economy of China triumph’s India’s political power”.

The book was reviewed by Mr K. Subramanian, Joint Secretary (retd.), Ministry of Finance, Government of India. Mr Subramanian provided a thorough critique of the book. He suggested that the approach of viewing the topic through the prism of Neo-Classical Realism had certain limitations. To support this he mentioned China’s foreign policy approach in the Sudans. China had to use its diplomatic relations to ensure that the domestic conflict does not affect investments made by China’s oil companies. The full review can be found here.

The talk was followed by an insightful interactive session.

(Compiled by Lakshya Anand, Intern, C3S)

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