[MUSIC] In the second case study, we'll look at Angola, which is really an independent, tough partner, largely because it's a neutral, it has neither close ties, necessarily close ties to the US strategically nor needs China because it's a piraya and under pressure from the US. Now, if we look at this map we can see where in fact, where Angola is. It is in the southern and western part of Africa near the Gulf Guinea which is actually one of the world's major centers for oil production. And you can see all of these little markings on there reflect oil wells or large oil fields. Now, China gave a lot of support to Angola's anticolonial struggle against the Portuguese, but unfortunately for China, it backed a losing side in the civil war that followed independence. When the people's movement for the liberation of Angola, in Portuguese the initials would stand for NPLA, when they won in 1975, China's refused to recognize Angola's independence and the MPLA government for another eight years. But by the 1990s Angola had actually become China's second largest trading partner in Africa, probably after Nigeria. And this was largely to the sale or at least due to defense cooperation. Now in October 1998, President dos Santos visited China for the first time, moves the relationship forward and cooperation between the two has involved regular bilateral visits by key officials. Now again continuing to look at this political and diplomatic relationship, in 2010, China and Angola established what the Chinese like to call a strategic partnership, which means a closer relationship on all fronts. And then, not too much later, Xi Jinping, whose now the president of China, then was the vice president of China, he visit Luanda the capital of Angola in March 2011, and he commented that the visit marked a new faze in relations. Three years later, Prime Minister Li Keqiang signed new agreements for construction and energy infrastructure, and in fact during his visit, he acknowledged that as many as 260,000 Chinese were working in Angola out of perhaps 1 million Chinese who have moved to Africa over the last 10 to 15 years. But some people even estimate there's as many as 400,000 Chinese working in Angola. So that says a very strong, or at least highly interactive relationship. And one of the things in terms of the politics of all this, I think that's very important for President dos Santos, for his family, and for some of the top officials, is that China really does not question and does not insist on transparency of the oil sales. Where the money is going despite the fact that we know, the billions of US dollars of our money has disappeared from Angola. And there are estimates that some of that is gone to Brazil, some of that is gone back to Portugal, but China on this issue does not, would claim that it does not interfere in internal affairs, even though it may suffer from this lack of transparency. In terms of financial and trade assistance, China was there when Angola needed it. In late 2003, when the Angolans decided that they really needed to overcome the end of the civil war, the country was still in a disastrous state and they needed money, they were going to try to get money from the IMF, from the International Monetary Fund. But in return for that the International Monetary Fund was going to demand high deal of transparency. But China instead signed a deal and in March 2004 the Export-Import Bank pledged $2 billion in what's called oil backed loans to fund this reconstruction and this infrastructure development, and it was payable over 12 years at very low loans. At this time, estimates are that China kickstarted over 100 projects in energy, water, health, education, telecommunications, fisheries and in public works. And more recently about 2014, the Export-Import Bank and the China Development Bank have loaned Angola close to 16 billion dollars. Let's take a look at this figure that I borrowed from an article by Alex Vines in the book that I've edited. Here you can see that the line here, the lines represent the destination of Angolan exports where the Angolan exports go. And here we can see that China's imports of Angolan oil have increased by about 10 million metric tons between 2007 and 2012. Ironically, in the same time, the United States imports of Angolan, oil while back of 2007 about the same as the Chinese imports, began to drop off dramatically. And this is largely due to the production of shale, gas and oil in the United States. And in fact, the truth is that they import now by about 2014, they import by about one half of what they were importing before. So this should give China a nice advantage relative to the United States in the Angolan oil economy. Now, it's important to understand, I had mentioned before, one of the unique things about the Chinese model was what's called the Angolan model. And what this involves is resources for infrastructure, and China's Export-Import Bank used this loan structure, the World Bank calls it the Angolan model, others call it the resources for infrastructure model. Where the repayment for roads or railways or harbors is made in terms of natural resources. And for China, it's broadly in terms of getting oil for these projects. And this approach began with Japan, Japan started to use it when it did business with China many years ago. And it's particularly useful for countries that don't have adequate financial guarantees, so the other states are hesitant to do the projects for them. But in this sense they can put together a nice package and use their resources to develop their infrastructure. According to the World Bank the average interest rate for these kinds of projects is about 3.6% and the grace period is for 4 years and often can take up to 12 years. The Chinese terms of the loan are what's called LIBOR, the London interest offered rate, which about a year ago, I looked on the list on the website and it was about 1% for a one year loan, so that plus a spread of about 1.5% with a grace period of up to three years. China, despite these favors that they did to Angola in coming up with these loans and making it so they didn't have to borrow from the IMF, they've had their problems with Angola and Angola is an excellent example of a resource rich state, that protects its sovereignty and it's independence. And as I said at the beginning, it can do this because it's really neutral in the, sort of, the structure between or the struggle between the U.S. and China. And despite getting key financial support from China in 2003, 2004, Angola does not favor China's national oil Companies. We know that twice, Sinopec, which is a major Chinese oil company, thought it had a deal, it had actually paid a signature bonus, thought it had a deal with Sonangol, which is the state the Angolan oil company, and the deals fell through. So, the Chinese felt burned by this. And if you look at some of the quotes, some of the articles where people have written about Angola, one woman, Lucy Corkin, she argues that, there is in fact little evidence to support continued preferential treatment at the bidding table for Chinese oil companies due to extensive Chinese loans. Political posturing indicates that both China and Angola see each other as necessary strategic allies for the foreseeable future, but this may mask an uneasy marriage of convenience, maybe a bit overstated. In any case, another scholar, Horta, said that given the important loans, one would expect that Angola would fall under greater Chinese control. While China has gained an impressive economic presence in Angola, its political and diplomatic influence is growing weaker by the day and its soft power is rather weak, and that was written in 2011. Recently, we've seen Angola, borrowing more money maybe another $6 billion from Chinese sources. The price of loan repayment unfortunately for Angola and for the 16 billion that they had borrowed before, has probably gone up because the drop in the price of oil so it's tougher for them to pay for those projects. Angola there as I showed you that US, the market in the US has dropped dramatically, in fact it's halved, so they need to be looking for other markets. I'm sure the country is suffering quite badly because of this. And China's share of oil exports has even dropped. So President Dos Santos went to China in February this year 2016 to renegotiate terms of a loan agreement in this new economic environment. So I think, overall, the relationship remains robust. China's Angolan model, from what we know, is now less popular in Angola, especially as the price of oil drops, which increases the cost of those loans. China has been very active in helping reconstruction, reconstruct Angola through this energy for infrastructure. And even though many people question this deep impact of Chinese investment because of the corruption and the limited spillover of oil profits into society, one would argue that at least China's footprint, at least when China takes the oil, it leaves something behind, roads, harbors and that's a benefit to the development of Angola. While China has limited leverage, Angola does need money, and China is still willing to loan it with very few questions about, where that money actually winds up. But still in that environment, Chinese oil companies have to fight really hard to succeed.
