Nigerian and American National Security

by Paul I. Adujie

A major economic transaction occurred in the first ten days of August, 2005; $18 billion dollars worth! And it was between the Americans and the Chinese; it was botched by pressures emanating from the Americans against the Chinese. The Chinese company is CNOOC and the American company is Unocal Corporation.

Strong-arm tactics on the part of the Americans ended the several months long negotiations in connection with the gargantuan petroleum oil deal, which was really between a Chinese company and an American counterpart, until external forces seeped in.

The aforesaid transaction was transcontinental, it involved pure economics, gallons and barrels of petroleum oil, and it was supposed to be determined, ordinarily in the natural cause of events, by the tenets and ideals of the ubiquitous free market, of demand, supply and all. But those fine points of economic theories were summarily jettisoned.

Some American forces, outside of the demand and supply chain of economic command, arbitrarily interfered and truncated this purely economic transaction between an American company and a Chinese company. Simply put, the same Americans who are quick to lecture the rest of the world about opening up markets, free markets and fair trade, where demand and supply reign supreme, actually found themselves resorting to extra legal, extra economic, big stick jungle justice, whereby, the American political leadership, some business leaders with Congressional Action invoked national security argument as poor excuse why the sale of goods and services by an American company should not go to the highest bidder, just because it happens to be a Chinese!

The American action was reminiscent of similar American overreaction and panic about twenty-years ago, during a period in which Japan experienced major economic boom and as a result, Japanese individuals and their companies were splurging as they bought up many major landmarks real estate in American cities, especially New York City’s Rockefeller Plaza/Center skyscrapers. And suddenly! There was uproar! Oh, the Japanese are buying up America! Oh the Japanese now own everything sort of phobia.

When this summer, this oil deal negotiations between the Americans and the Chinese, was in progress, this old phobia was resuscitated and it finally truncated the sale. All Americans who were opposed to the sale to the Chinese company were quick to disregard every economic parameter and the usually talkative economists of Harvard Business School and elsewhere in the US, were all deathly silent!

Even the Nigerians who would want Nigeria to sell all of our national assets in the name of privatization, deregulation and removal of subsidies, were not commenting on this unusual usurpation of a purely economic transaction by politicians who were invited in, by private business concerns who were desperate in their efforts to circumvent economic forces of the free market place, where the American business had been outbid by a Chinese competitors.

So, as it happened, the month of July and the first ten days of August 2005 were spent by this writer observing the melodrama resorted to by the Americans who wanted to thwart the transaction. As the American and Chinese transactions unfolded, then botched and unraveled, due the underhand chicaneries of deals all aimed by the Americans at thwarting the deal to the disadvantage of the Chinese, who were eventually pushed to the proverbial wall. Of course the Chinese were compelled to withdraw and abandon their bid which was higher. It was all about comparative strategic advantage over petrol-politics and it would appear that the Chinese chose to run away, just so, they could fight more effectively another day, while also marking down for history books the precedent that the Americans have set with their admixture of economics with politics in this crude oil, crude politico-economic petrol-politics of a mega transaction.

While I followed this oil saga of a transaction between the Americans on the one hand and the Chinese on the other, another oil transaction was unfolding in Nigeria involving the Nigerian government agency which handles Nigeria’s oil and petroleum businesses. Part of this transaction involved oil prospecting in Sao Tome, and there was competition between foreign oil companies and the growing consortium of indigenous oil prospecting companies in Nigeria.

And so it was that I received an email from a Nigerian in Nigeria, Mr. Jude Iyamabo, who wrote the following…QUOTE: I will appreciate it if you can comment on the attached document. I am trying to relate it to a recent Washington post editorial which alleged that President Obasanjo’s is been held hostage by Nigerian businessmen. Reason: many indigenous Nigerian oil companies for the first time in Nigeria’s history won lucrative oil blocks in Joint Development Zone (JDZ) of the Gulf of Guinea against the practice in the past where only multinational oil companies walk in and won the entire oil block on concessions.

While the Americans/Europeans claimed that the bidding process was not transparent, the Sao Tome and Principe’s government says that they considered more than the financial bids, technical competence and signature bonuses. One of the factors the Joint Development Zone Authorities (the agency which handled the bid) put into consideration was Nigerian/Sao Tome and Principe’s governments’ policy to get more indigenous players involved in their oil and gas industry. This policy is in continuation of both governments’ desire to open up the oil and Gas sector to more players and has been responsible for the recent entrance of the Brazilians, Chinese, Indians, Malaysians and South Africans into the Nigerian oil industry. I will like to believe the Nigerian government. UNQUOTE.

This revelation and eye-opener, is shocking! It is as if the Americans and Europeans are perpetually telling us what to do, and usually something they would never ever do themselves! It is analogous of do what I say and not what I do? It is clear that the Americans frustrated the Chinese out of a legitimate oil business deal, where the Chinese, for all legitimate business purposes, were the highest bidder, and the Chinese conducted themselves fairly and properly in consonance with all the rules and precepts of free market, free economy and all the nary details of demand and supply, but, political intervention from high places, including by members of the US Congress, who argued that the simple oil business transaction portended some elephant size implications for US national security!

With that fiat or national security fatwa, and political press

ures from the top, the fair deal, that had appeared a done-deal for the Chinese, was aborted summarily! All this despite the Chinese bidders, Unocal Corporation having been the highest bidder in the transaction under review. Then, as the deal was aborted and botched by the Americans,, Chevron the American giant oil company and conglomerate got the sweet deal, despite its partnership with China in other oil deals, and this, regardless of the fact that Chevron offered a lower bid for the purchase! Chevron’s offer that was then accepted was billions lower than the $18billion that the Chinese had offered!

Why are all this important at all to us? Nigeria and other developing countries are engaged in privatization and deregulation, including the removal of subsidies, and frequently, the purchasers of these national assets that are being sold off, in Nigeria and in other developing countries, are snapped-up, in rock-bottom bargain prices, by multinational companies that are not of Nigeria or of any of these developing countries that are selling off national assets without deliberative contemplations of national security implications.

And what is worse? These multinational companies are now the same ones whose home governments are quick to announce and pronounce political and economic fatwa of national security proportions and arbitrarily deny the Chinese of legitimate business transactions. It should now be clear, that those who are happy to buy or acquire our national assets at cheap prices and ridiculous bargains are unwilling to sell their assets, even to the highest bidder, if the bidder is not politically suitable geographically!

We see in this brazen hypocrisy and double standards, selective application of free market concepts, of demand and supply rules, fair trade or noninterference in business transactions by political leaders. It gets egregiously worse when the comments ascribed to Washington Post is added to all these. The Washington Post is said to have commented that President Obasanjo of Nigeria is being held hostage by local businesspeople, who as Nigerian citizens, want a chance to participate in Nigeria’s booming oil business, which, if truth be told, is currently being dominated and controlled by foreign oil companies. Foreign oil companies have operated for decades without plans for backward integration; there is no local input, in terms of local personnel and materials. Granted that oil prospecting, exploration and exploitation are capital intensive, requiring foreign partnering, even so, Nigerian engineers, geologist and seismologists ought to form the bulk and backbone of this crucial sector of Nigeria’s economy.

Instead, foreign oil companies have for the most part, operated as if they are mercenaries who are splendidly uninterested in the health and wealth of the locales, locales that are polluted, degraded and ruined with endless oil spillages, gas flaring, while these companies add no value to the lives of the people.

These foreign companies do not even pretend to be responsible or good corporate citizens of Nigeria! These companies are not contributing to public infrastructures, as they rather would engage in improperly influencing the authorities or sometimes resort to hiring thugs for protection, when their mercenary-type shortsighted policies return to bite them.

It is time to wrest the Nigerian oil sector from foreign domination as such control by foreign concerns have seen no long term benefits by way of technology transfer to Nigerians or enhancements of industrial processes as a byproduct of the oil sector in Nigeria.

The Americans have showed Nigerians and the rest of the world in their dealings with a Chinese oil company, that American oil companies represent American national interests and we, as Nigerians, must be awake to our national security interests as well!

Nigerians must then learn to disregard the antics of commentaries such as the one that emanated from the Washington post regarding President Obasanjo’s efforts in the oil sector. Clearly, the Americans seem to choose when demand and supply or the so-called rules of free market are relevant or when they selectively deem such concepts irrelevant, regarding American agricultural products which America heavily subsidizes, as they do steel, aircrafts and many other American products, which also now include oil prospecting.

Considering all the above, it is crucially important that Nigerians support the efforts by President Obasanjo to elevate participation by Nigerians and indigenous Nigerian companies in the downstream and upstream sectors of Nigeria’s oil prospecting, oil exploration and exploitation. This means Nigeria’s oil wealth circulate among more Nigerians.

It also means nurturing and protecting Nigeria’s national security interests imbued in our oil wealth and when it pleases Nigeria, Nigeria must also dispense with demand and supply theory or free market concepts when such concepts run counter to Nigeria’s national security interests!

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1 comment

Anonymous October 24, 2005 - 5:16 pm

True word…in fact refer to the article below where Daukoru replied to those nay sayers on the oil blocs- enough of this genuflection from our own government- with millions of barreles drilled in our country why should thousands of our engineers be unemployed..why



Nigeria has given two Asian companies preferential rights over five oil exploration zones due to be offered in a licensing round on Friday ruffling the feathers of U.S. rivals Nigeria's top oil official told Reuters on Thursday.

Nigerian Minister of State for Petroleum Edmund Daukoru said that his government had agreed the deals with Korea National Petroleum Corp. (KNPC) and Taiwan's Chinese Petroleum Corp. (CPC) in return for huge investments in Nigeria's neglected industrial infrastructure.

Fending off U.S. criticism that he was pandering to Asian interests Daukoru said the last-minute deals were in Nigeria's strategic national interest. They represented a hope of development that Nigeria's Western investors have singularly failed to offer despite decades of involvement in Africa's top oil producer he said.

"It is a conscious national policy that major strategic projects — gas pipelines power stations refineries shipyards and railways — projects of this scope deserve to be treated as a package" Daukoru told Reuters in an interview on the eve of the bidding conference.

Western oil giants are set to face off with emerging Asian tigers in Nigeria's first ever licensing round on Friday when 75 exploration blocks will go under the hammer including 15 prized deep water areas in the Gulf of Guinea.

The United States hopes to source 25 percent of its oil from the Gulf of Guinea in 10 years from 14 percent now but fast-growing Asian economies also have their eyes on the relatively unexplored region where billion barrel finds are still possible.

The Asian deals agreed a week before the licensing mean that any other bidder for two deep water blocks previously offered to all comers known as 321 and 323 will now have to be a minority partner with KNPC.


Nigeria has given the right of first refusal for a 65 percent interest in blocks 321 and 323 to KNPC. KNPC must match the best bid for these blocks to take up the offer and the best bidder will take 25 percent with the remaining 10 percent reserved for a local partner. It also has preferential rights to 100 percent of onshore block 280 Daukoru said.

In return Korea has agreed to build a 1200 km gas pipeline from the southern delta region to the capital Abuja and 2250 megawatts of power generation Daukoru said.

Korean giant Daewoo has also agreed to build a shipyard to serve the oil industry in the Gulf of Guinea build a railway line across Nigeria and partner Nigeria in an oil tanker venture to export Nigerian crude.

"If those downstream obligations are not met we reserve the right to withdraw the blocks so we are fully protected" Daukoru told Reuters.

Nigeria has given the right of first refusal to CPC for 100 percent in two onshore blocks known as 274 and 275 in return for its promise to bid for 51 percent of Nigeria's Port Harcourt refinery in an upcoming privatisation. These blocks have recently been reclaimed by the government from Western companies because they had failed to invest in them.

A third strategic investor China National Petroleum Corp. (CNPC) has now withdrawn from Friday's bidding because Nigeria has agreed to find them new exploration acreage in return for its promise to operate the Kaduna oil refinery and build 10000 megawatts of electricity in Nigeria's northeast Daukoru said.

A Nigerian official said that some U.S. oil companies which had intended to bid for the KNPC blocks had threatened to pull out of the licensing because of the deals.

All of Nigeria's current output of 2.5 million barrels per day is produced by Nigerian National Petroleum Corp in five joint ventures operated by Royal Dutch Shell ExxonMobil Total Chevron and ENI .

Responding to criticism that the preferential treatment might put off the best bidders for these blocks Daukoru said:

"The best bidders have not helped with our national aspirations. No operator has talked railway to me no operator has talked shipyard no operator has talked about generating so much. Nobody has shared our aspirations with us."

"We are in a hurry to develop. The oil industry has been an enclave industry. We want to break out of the enclave and merge with the greater economy of the country and we are not getting the response we expect and deserve."

Because of the last minute changes to the offering three additional deep water blocks were added to the bidding conference just one week ago.


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