China’s inroads into North Africa: An assessment of Sino-Algerian relations

The geopolitics of African countries such as Algeria, a country in North Africa that has traditionally enjoyed strong relations with the People's Republic of China (PRC) and whose strategic importance and regional profile have increased markedly of late, is key to grasping the dynamics that shape contemporary Sino-Algerian ties and China’s Africa strategy overall. A glimpse into Sino-Algerian relations at this time is appropriate considering Chinese Foreign Minister Yang Jiechi’s state visit to Algeria in January (Xinhua News Agency, December 31, 2009). Sino-Algerian relations made headlines in the summer of 2009 when al-Qaeda threatened China in response to the unrest between Beijing and ethnic Uighur Muslims in July; Al-Qaeda’s Algerian-based North African affiliate al-Qaeda in the Islamic Maghreb (AQIM) threatened to target the estimated 50,000 Chinese working and living in Algeria and Chinese interests in the country (China Brief, August 5, 2009). In August, a fistfight between a Chinese migrant worker and an Algerian merchant sparked a local crisis that reverberated to the highest levels of power in Beijing and Algiers, raising questions about the role of Chinese migrants in Algeria and xenophobia among Algerians (AFRIK.com [Paris], August 5, 2009). Understanding the dynamics of Sino-Algerian relations, however, requires reading beyond the headlines. This article will examine various aspects of the relationship between China and Algeria as they relate to natural resources, economics and politics. As will be made evident throughout this article, the circumstances underlying Beijing’s relationship with Algiers differ significantly from China’s bilateral ties with most African countries [1].

NATURAL RESOURCES

Considering China’s status as the world’s fastest growing oil consumer and third-largest net importer of oil and Algeria’s position as Africa’s fourth largest producer of crude oil in 2008 (and the world’s 18th largest producer of crude oil), the logic underpinning the PRC’s interests in Algeria seems clear (U.S. Energy Information Administration [EIA], May 13, 2009). China’s relentless pursuit of oil to fuel its growing economy is a key factor driving its Africa strategy. Yet well over 90 percent of Algeria’s high-quality, low sulfur sweet crude oil exports goes to Western Europe (Algeria is the European Union’s second-largest source of natural gas), not China. China’s imports of Algerian oil remain marginal compared to its oil imports from other parts of Africa. At this stage, China’s stake in Algeria’s oil industry revolves around exploration and future development projects. At the same time, China’s role in exploration and future development in Algeria is—like its overall role in Algeria’s hydrocarbon sector—small, especially compared to the role of international blue chip energy giants such as Statoil, Shell, British Petroleum, or Total SA in Algeria’s oil industry. In an era of tightening energy markets, even a small presence in Algeria’s hydrocarbon sector makes sense for China. Algeria is keen on expanding its oil production and export capacity as well as increasing its proven reserves, and it appears that China is positioning itself to reap some benefits when it does.

China’s minor role in the Algerian oil industry has steadily increased since Algeria has made it easier for foreign companies to enter the Algerian market. In October 2002, China’s Sinopec teamed with Algeria’s state-owned Sonatrach—the largest company in Africa and the world’s twelfth largest oil and gas conglomerate—in China’s first oil development venture in Algeria to jointly develop the Zarzaitine oil field in southeastern Algeria at a cost of $525 million; Sinopec assumed 75 percent of the overall investment (ArabianOilandGas.com [Dubai], August 20, 2009; Alexander’s Gas and Oil Connections [Netherlands], October 22, 2002). In July 2003, the China National Oil & Gas Exploration & Development Corporation (CNODC), a section of the China National Petroleum Company (CNPC), built a $350 million refinery in Adrar, in southwestern Algeria (APS Review Downstream Trends, February 5, 2007). A visit by Chinese President Hu Jintao to Algiers in 2004 ushered in a new round of Sino-Algerian cooperation in the energy sector, leading to agreements between CNPC and Sinopec and Sonatrach for oil exploration rights and related projects (APS Review Downstream Trends, February 5, 2007). Algeria’s Energy Ministry recently awarded the China National Offshore Oil Corporation (CNOCC) an exploration license for Hassi Bir Rekaiz (Reuters, December 20, 2009). In October 2009, Sonatrach announced that Sinopec was among a group of four international companies on a shortlist for consideration to design and engineer a new oil refinery in Tairet, in western Algeria, a project estimated to cost $6 billion. Sinopec is also represented along with other companies bidding for engineering, procurement, and construction (EPC) of the Algiers refinery, a project estimated to cost $300 million (ArabianOilandGas.com, October 21, 2009; Zawya.com [Dubai], October 22, 2009).

In spite of its substantial oil resources and membership in the Organization of Petroleum Exporting Countries (OPEC), it is Algeria’s status as a major producer of natural gas and Liquid Natural Gas (LNG) that have solidified its position as an energy powerhouse. Algeria, which became home to the world’s first commercial LNG facility in 1964, is the world’s sixth largest producer of natural gas, 70 percent of which is exported to markets in Europe, the United States, and elsewhere. Algeria is also the world’s fourth-largest exporter of LNG (EIA, May 2009). Algeria’s combined revenues from hydrocarbons account for well over 90 percent of its export earnings. While the United States represents the fifth largest importer of Algerian LNG, China’s imports of Algerian LNG are negligible (EIA, May 2009; New York Times, October 19, 2009). Instead, China relies on domestic natural gas sources and LNG shipments from the Middle East and Asia. Beijing is also awaiting the completion of pipelines that will transport natural gas to China from Central Asia. At the same time, China is committed to further developing its natural gas networks to meet growing demand, to include expanding its LNG terminal network, which may entail a greater role for Algerian LNG in China (EIA, July 2009; People’s Daily, June 22, 2006). Chinese firms have partnered with Sonatrach to explore for gas in Algeria, however, the Chinese footprint in gas exploration operations in Algeria is minimal.

ECONOMICS

As Africa’s third largest economy and with a population of about 34 million, China sees a great deal of potential in Algeria as a market for Chinese goods and technical expertise. Likewise, Algeria also counts China as a key trading partner. Algeria’s economic strength is crucial to understanding the dynamics underlying Sino-Algerian relations, particularly Algeria’s leverage in its dealings with China. Unlike much of Africa, Algeria does not seek Chinese loan and aid packages in exchange for granting access to its strategic industries and markets to Chinese firms. In fact, Algerian banks regularly finance major projects undertaken by Chinese companies in Algeria (Magharebia.com, April 19, 2006). This bilateral dynamic is unique in Sino-African relations. China’s economic and trade dealings with much of Africa are often characterized by transfers of Chinese largesse into the treasuries of African countries eager to attract Chinese investment. Beijing’s higher appetite for investment risk makes it an ideal partner for African countries with a legacy of social, political and economic instability. In addition to securing lucrative contracts in strategic industries such as hydrocarbons and minerals across Africa, China’s entry into the economic and business sectors in Africa affords it with political influence in the countries where Chinese money flows. In contrast, Algeria’s economic power allows it to negotiate from a position of relative strength and to be more judicious in its business dealings with China [2].

Overall, Sino-Algerian bilateral trade relations are strong. The volume of trade between China and Algeria has increased significantly in recent years. From a figure of $272 million in 2001, bilateral trade between China and Algeria topped $4 billion in 2008, and the current trends project a further expansion of trade (China Daily, December 19, 2008). After France and Italy, China has emerged as Algeria’s third largest import source (El-Khabar [Algiers], March 30, 2009). China’s economic footprint is most apparent in Algeria’s infrastructure sector, a sector where Algeria lacks the technical expertise and the capacity to undertake major projects on its own. Algeria has emerged as one of China’s largest overseas markets for infrastructure development. In May 2006, Algeria tapped the China International Trust and Investment Company (CICTC) and the China Railway Construction Company (CRCC) to undertake a mammoth effort to help construct the 1216 km road link dubbed the East-West Highway, which is designed to link eastern and western Algeria, and Algeria to Morocco and Tunisia (Reuters, August 4, 2009). At a cost of approximately 12 billion, the East-West Highway is currently the largest construction project in the world. Algiers also awarded three contracts worth $2.1 billion to the China Civil Engineering and Construction Corporation (CCECC) to construct railway networks in western Algeria (Agence France-Presse, July 20, 2009). Algeria also tapped China to help alleviate its housing shortages—a major domestic political issue that has sparked tensions in recent years—in urban centers such as Algiers. Algerian President Abdelaziz Bouteflika is counting on Chinese firms to fulfill his promise of creating an additional 1 million affordable housing units over the next three years (Reuters, October 20, 2009; Xinhua News Agency, February 26, 2008).

In a trend typical of China’s ventures in Africa and the developing world, Chinese firms awarded contracts by Algeria largely use Chinese laborers—both skilled and unskilled workers—to see their projects to fruition. While Chinese firms do employ Algerians, their overall numbers and the wages they tend to earn remain low. Moreover, skilled and unskilled Chinese laborers are often able to undercut the salary demands of their Algerian counterparts (Financial Times [London], June 2, 2008). These circumstances are largely tolerated by Algiers, as the state is primarily concerned with achieving quick completion of its projects. Yet the prominent Chinese presence in the Algerian labor force has also bred resentment in a country where strong overall economic indicators have yet to dent high unemployment rates, especially among youth; with a median age of 26, seven out of 10 Algerians under the age of 30 are unemployed (Christian Science Monitor, April 9, 2009; China Daily, August 5, 2009). In spite of feelings of resentment, relations between Algerians and Chinese on the personal level in Algeria are characterized as very good (Agence France-Presse, November 6, 2009). In addition to working as laborers in the construction sector, Chinese merchants also operate shops throughout the country. Estimates of the number of Chinese living and working in Algeria run as high as 50,000, making them one of the largest communities of overseas Chinese in Africa. Questions surrounding the Chinese presence in Algeria topped regional and international headlines when a fistfight erupted over a dispute between an Algerian shopkeeper and a Chinese migrant worker in Bab Ezzouar, a suburb of Algiers, and spiraled into clashes between groups of Algerians and Chinese. Bab Ezzouar has been dubbed “Chinatown” by the local proprietors and customers who shop at the many Chinese-owned businesses there (El Watan [Algiers], August 4, 2009). After scores were injured and thousands of dollars in property damage, Sino-Algerian diplomacy stepped in to downplay international media reports claiming that the incident signaled a rift in Sino-Algerian relations. In spite of the media hype, there is little indication that the flare up in violence in August represented something more than an isolated incident.

POLITICS

China and Algeria share a strong tradition of political ties rooted in their respective roles as leaders of the Non-Aligned Movement (NAM) and their staunch support for anti-colonial and national liberation movements across the globe. As an Arab, Berber and Muslim country, Algeria has always been a staunch advocate of popular causes such as Palestinian nationalism and resistance against Israeli military occupation. During a July 2009 visit to Algeria by Wu Sike, China's Special Envoy to the Middle East, Algerian officials thanked China for its vocal support for Palestinian self-determination (Chinese Foreign Ministry Website, July 28, 2009). Public diplomacy in Sino-Algerian relations is also imbued with references to the “brotherly” ties both countries profess to share based on equality and mutual respect and their efforts to further South-South cooperation (Xinhua News Agency, August 31, 2008). China’s approach to relations with Algeria are well-received; owing to its particularly harsh experience under French colonialism, Algeria often pursues a fervently independent foreign policy and is sensitive to outside interference in its domestic affairs. President Bouteflika once described Sino-Algerian relations as the model for further Sino-African cooperation (Xinhua News Agency, November 7, 2006).

As the first non-Arab country to recognize Algerian independence in 1962, China occupies a special place in Algerian diplomacy. Prior to Algeria achieving formal independence from France, China was among a handful of countries to have recognized the Gouvernement Provisoire de la République Algérienne (Provisional Government of the Algerian Republic, known by its French acronym GRPA) in 1958, the political wing of the Front de Liberation Nationale (National Liberation Front, known by its French acronym FLN), an armed resistance movement fighting French colonialism. Significantly, Beijing and Algiers mark the establishment of bilateral relations from the day China established ties with the GRPA on December 20, 1958 [3], four years before Algeria won its independence (People’s Daily, December 31, 2008; China View, March 21, 2008). Chinese diplomacy often contains references to the political, economic, and military support Beijing provided to the FLN during the Algerian independence struggle. China also expresses its gratitude to Algeria for its unequivocal support of the “One-China” principle that defines Taiwan as part of the PRC and its support for the restoration of China’s seat at the UN in 1971 (PLA Daily, September 16, 2009) [4]. Sino-Algeria relations also contain a strong cultural component marked by regular exchanges of artists, students, scientists and educators. When Algeria was struck with a devastating earthquake in 2003, China dispatched a rescue team to assist relief and aid workers in Algeria. The decision to dispatch rescue workers to Algeria marked the first time China sent rescue workers abroad. China also played a major role in developing Algeria’s health care sector following Algeria’s independence. Not coincidentally, the team of doctors dispatched by Beijing in 1963 to Algeria marked the first time China sent doctors overseas (Xinhua News Agency, March 21, 2008).

The tradition of strong Sino-Algerian relations also extends to the security realm. Algerian military officers have trained in China over the years. In fact, high-level exchanges between Chinese and Algerian military officials occur regularly; Algeria has maintained a defense attaché in Beijing since 1971 (Xinhua News Agency, August 15, 2006; China Brief, May 30, 2007). China has also played a key role in Algeria’s nuclear program. At one point, Sino-Algerian cooperation in the nuclear arena raised concerns in U.S. intelligence circles about Algeria’s possible intentions to develop nuclear weapons [5]. While Russia remains Algeria’s largest source of arms, especially advanced weapons platforms, China is determined to expand its arms exports to Algeria. Algeria was the first country in Africa to import China’s C-85 (Project 802) missile boats fitted with C-802 ship-to-ship missiles and a 5,550 ton training ship (UPI, December 31, 2008; UPI, November 5, 2007). Algeria has also purchased Chinese artillery, namely 155mm howitzers (UPI, January 30, 2009).

CONCLUSION

Sino-Algerian relations will remain strong and are poised to develop further in the future. Given Algeria’s relative economic strength, growing strategic significance, and overall leverage, however, the trajectory of Sino-Algerian relations will likely continue to follow a path distinct from China’s relations with other countries in Africa. Yet China is not alone in its efforts to expand ties with the Maghreb’s preeminent power; long regarded as a country within France’s sphere of influence, the United States, NATO, and Russia are also aggressively courting Algeria [6]. How China maneuvers these dynamics will say a lot for the extent of its influence and interests in Algeria and beyond.

* Chris Zambelis is an Associate with Helios Global, Inc., a risk analysis firm based in the Washington, DC area. This article first appeared in China Brief Volume: 10 Issue: 1 on 7 January 2010.
* Please send comments to [email protected] or comment online at Pambazuka News.

NOTES

[1] Many of the author’s insights into Sino-Algerian relations were shaped by a September 2009 trip to Algeria.
[2] While a decline in global oil and gas prices will contribute to a decrease in its GDP in 2009, Algeria’s economic indicators remain strong, even amid the global financial downturn. A November 2009 assessment of the Algerian economy conducted by the International Monetary Fund (IMF) concluded that Algeria is one of the countries least affected by the global economic crisis. The windfall in hydrocarbon revenues in recent years has enabled Algeria to maintain a strong trade surplus and to pay down the majority of its external debt to the Paris Club and other global multilateral financial institutions and to accumulate foreign exchange reserves of about 146 billion. For more details, see “Statement of the IMF Mission on the 2009 Article IV Consultation Discussion with Algeria,” Press Release No. 9/388, November 4, 2009, www.imf.org/external/np/sec/pr/2009/pr09388.htm
[3] Prior to formally establishing ties with the GRPA, China acknowledged its legitimacy upon its founding in September 1958.
[4] Algeria was one of 23 countries to have put forth a motion at the 26th session of the UN General Assembly to restore the PRC at the UN.
[5] See William Burr, “The Algerian Nuclear Problem, 1991: Controversy over the Es Salaam Nuclear Reactor,” National Security Archive, Electronic Briefing Book No. 228, September 10, 2007, www.gwu.edu/~nsarchiv/nukevault/ebb228/index.htm
[6] For the United States, Algeria’s experience fighting radical Islamists on its soil facilitated unprecedented levels of intelligence cooperation between Washington and Algiers immediately following the September 11, 2001 attacks. Given its diplomatic influence in Africa coupled with its own particularly harsh experience under French colonialism, Washington is also sensitive to Algeria’s position as it defines the mission of the recently established Africa Command (AFRICOM). Algeria also participates in joint military training exercises with U.S. and NATO forces. A resurgent Russia is also courting Algeria as more than just a reliable customer when it comes to its defense exports. Russia, the world’s leading source of natural gas, and Algeria have floated the idea of establishing an OPEC-like cartel for natural gas powers.