September 4, 2008

Russia’s Africa Deals Raise Alarm in Europe

By Tom Pfeiffer

Russia is reviving an interest in Africa that collapsed along with the Cold War, and its growing appetite for deals in oil and natural gas is an added cause of unease in an energy-hungry Western Europe.

Companies from Russia say their goal is to diversify energy interests and secure raw materials for a fast-growing economy, but the businesses are also seen as tools of an increasingly assertive Kremlin foreign policy.

The fact that Russian companies have yet to make major progress in Africa has not assuaged Western concerns, particularly because the Russian intervention in Georgia raised new questions about the reliability of energy supplies from the east.

Northern Africa is already an especially important alternative source for European countries that fear over-reliance on Russian energy.

"Quietly, but with rising amounts of panic, we're hearing officials from major European governments complain about what the Russians are doing," said Jon Marks, editorial director of the industry newsletter Africa Energy.

Russia's push goes beyond traditional allies that it supplied with weapons and money during the Cold War.

One of its biggest trading partners in Africa is Morocco, a staunch U.S. ally that supplies Russia with mineral phosphates consumed in large quantities for fertilizer.

But Russia also has shown that it wants to keep strong ties with Algeria, a former ally and a neighbor and rival to Morocco. The Kremlin agreed in 2006 to write off $4.7 billion of Cold War-era debt in exchange for a deal to sell Algeria combat jets, submarines, warships and missiles.

Russian companies, like counterparts from China and other Asian countries, are spending billions of dollars for better access to the mineral wealth of countries across the continent. Such interest is particularly welcome to those African governments that balk at conditions on democracy, human rights and openness that can be attached to dealings with Americans or Europeans.

The big concern in Western Europe is that Russia's tentative deals with African members of the Organization of Petroleum Exporting Countries are an attempt to get a stranglehold on Europe's natural gas supplies. The Russian company Gazprom, which already provides a quarter of Europe's gas, agreed with the Algerian oil company Sonatrach to seek out and commercialize natural gas together after Vladimir Putin visited Algiers last year as Russia's president, before he became prime minister.

Sonatrach is the European Union's third-biggest supplier of gas, after Russia and Norway.

This week, Gazprom signed an oil and gas exploration agreement with Nigeria, although details are yet to be determined, Nigerian National Petroleum announced Wednesday.

Gazprom said in April that it was in talks to take part in a multibillion-dollar project to pipe Nigerian gas to Europe across the Sahara.

In July, Gazprom said it could build a pipeline to pump Libyan natural gas to Europe. Libya has also agreed to sell some of its oil and gas to Russia.

"There is a distinct strategy here," said Marks, the Africa Energy editorial director. "Gazprom doesn't necessarily get a controlling stake, but the Russians are getting a place at the table."

He said a deal Italy signed last weekend to compensate Libya for misdeeds during its colonial rule was partly intended to maintain Italy's critical energy relationship with Libya.

Elsewhere in Africa, Lukoil, Russia's largest oil company, plans to explore for hydrocarbons in Ghana and Ivory Coast, and Sintezneftegaz has acquired oil exploration rights off Namibia.

Originally published by Reuters.

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