Undoubtedly, a number of Russian companies have largely underperformed in Africa, which experts described as primarily due to multiple reasons. Most often, Russian investors strike important investment niches that still require long-term strategies and adequate country study. Grappling with reality, there are many investment challenges including official bureaucracy and technical hitches in Africa.
Lukoil, the largest Russia’s oil company, has had a long history, going forth and back with declaration of business intentions or mere interests in tapping into oil and gas resources in Africa. In the past, Lukoil have said in separate reports about its business deals in a number of African countries including Ghana, Cote d’Ivoire, Sierra Leone and Nigeria. These are coastal countries on the Gulf of Guinea (Atlantic Ocean) in West Africa.
Besides technical and geographical hitches, Lukoil noted explicitly in its official reports that “the African leadership and government policies always pose serious problems to operations in the region.” It said that the company has been ready to observe strictly all of its obligations as a foreign investor in Africa.
Lukoil has moved to Senegal. Predominantly rural and with limited natural resources, Senegal is classified as a heavily indebted poor country, with a relatively low Human Development Index. Most of the population is on the coast and works in agriculture or other food industries. Other major industries include mining, tourism and services.
Energy is produced by private operators and sold to the Senelec Energy Corporation. According to a 2020 report by the International Energy Agency, Senegal had nearly 70% of the country connected to the national grid. Current government strategies for electrification include investments in off-grid solar and connection to the grid. Senegal has a population of approximately 15.9 million.
In spite of that, business is business. Quite recently, Lukoil, one of the largest Russia’s oil companies, publicly declared that it finally concluded an agreement with Cairn Energy PLC to acquire a 40% interest in RSSD (Rufisque, Sangomar and Sangomar Deep) project in the Republic of Senegal for $300 million in cash.
The agreement provides for potential bonus payment to Cairn Energy PLC of up to $100 million after the commencement of production. The transaction is subject to customary conditions, including the approval by the Government of the Republic of Senegal.
The blocks of the project covering 2,212 sq. km are located on the deepwater shelf of the Republic of Senegal 80 km from the shore with the sea depth of 800-2,175 meters. The blocks include two discovered fields: Sangomar and FAN.
The Final Investment Decision (FID) on the Sangomar field was taken early 2020 and the field development has begun. According to the Company’s estimates, the recoverable hydrocarbon reserves of the Sangomar field total approximately 500 million. The field is planned to be launched in 2023, with designed production level of 5 million tons of crude oil per year.
The RSSD project is currently implemented under a production sharing agreement. Woodside is the project’s operator with 35% stake. Other participants are FAR (15%) and state-owned company Petrosen (10%).
“Entering the project with already explored reserves at early stage of their development is fully in line with our strategy and allows us reinforcing our presence in West Africa. Joining the project with qualified international partners will allow us to gain additional experience in development of offshore fields in the region,” said Vagit Alekperov, President of PJSC Lukoil.
Early this year, precisely on January 28, during his briefing with President Vladimir Putin on the 2019 performance and activities of the Lukoil holding, Vagit Alekperov noted the unique window of opportunity that opened up after the summit held with African countries late October 2019 in Sochi.
“In fact, we are beginning to work actively in West Africa: we have started working in three countries and another four have offered to launch joint work. This is unprecedented. This summit gave an impetus to Russian companies to work in one of the most promising markets: West Africa,” he told Putin in the Kremlin.
After Putin noted that it was surprising African colleagues had asked only for collaboration and nothing else, Alekperov reassured that “today, it is not just a declaration but these are real projects: in the Republic of the Congo, in Ghana, we are now looking at a number of other countries, and Cameroon.”
Its media release shows that Lukoil’s portfolio is quite extensive. It works in 32 countries worldwide, conduct geological exploration both in the West and in Africa. For now in Africa, it has one success story. For the past ten years, Lukoil company’s operations in the Republic of Ghana where it focuses on upstream exploration. The reserves evaluated on the blocks proves to be sufficient for their industrial development.
On the opposite side, Russian news agencies reported that Lukoil exited projects in Cote d’Ivoire, where it had led exploration in the deep offshore. The company confirmed the information about leaving the projects to TASS News Agency.
In August 2015, Lukoil also pulled out of the oil and gas exploration and drilling project that it began in Sierra Leone. According to Interfax, a local Russian News Agency, the company did not currently have any projects and has backed away due to poor exploration results in Sierra Leone.
It reported that drilling in West Africa, including Côte d’Ivoire and Sierra Leone, did not bring Lukoil the expected results, as preliminary technical results did not demonstrated commercial hydrocarbon reserves. According to official reports, Lukoil has been active in a number of countries with a high level of political and economic risks that could significantly complicate the work of the company in a particular region, and even lead to its termination.
Russia’s Lukoil is one of the world’s biggest vertically integrated companies for production of crude oil and gas, and their refining into petroleum products and petrochemicals. The company is a leader on Russian and international markets in its core business and its key mission is to harness natural energy resources for human benefit and supports long-term economic growth, social stability, prosperity and progress in the regions where it operates.
‘Full scale’ humanitarian crisis unfolding in Ethiopia’s Tigray
A “full-scale humanitarian crisis” is unfolding as thousands of refugees flee ongoing fighting in Ethiopia’s Tigray region each day to seek safety in eastern Sudan, the UN refugee agency (UNHCR) reported on Tuesday.
More than 27,000 have now crossed into Sudan through crossing points in Kassala and Gedaref states, as well as a new location further south at Aderafi, where Ethiopian refugees started crossing over the weekend, according to UNHCR.
The scale of the influx is the worst that part of the country has seen in over 20 years, according to the agency.
“Women, men and children have been crossing the border at the rate of 4,000 per day since 10 November, rapidly overwhelming the humanitarian response capacity on the ground,” said Babar Baloch, UNHCR spokesperson, briefing reporters in Geneva.
“Refugees fleeing the fighting continue to arrive exhausted from the long trek to safety, with few belongings”, he added.
According to news reports, Ethiopian Prime Minister Abiy Ahmed, has indicated the military operation that was launched in response to the reported occupation of a Government military base by Tigrayan forces nearly two weeks ago, would continue, although he said it was now in its “final phase”.
‘Needs continue to grow’
UN agencies, along with relief partners have ramped up assistance – delivering food rations, hot meals and clean water, as well as setting up latrines and temporary shelters. They are also supporting the Sudanese Government in its response. But the needs continue to grow.
The UN World Food Programme (WFP) is also supporting other humanitarian workers in its response, providing fuel for vehicles and generators in remote locations. The UN Humanitarian Air Service, managed by WFP, has also increased flights from three times per week to daily flights for aid workers.
Since Saturday, UNHCR has relocated 2,500 refugees from the border to Um Raquba settlement site, in eastern Sudan. There is however, a “critical need” to identify more sites so that refugees can be relocated away from the border and can access assistance and services, said Mr. Baloch.
‘On standby’ in Tigray
Meanwhile in the Tigray region of Ethiopia itself, lack of electricity, telecommunications, fuel and cash, continue to severely hamper any humanitarian response, the UNHCR spokesperson said.
“After nearly two weeks of conflict, reports of larger numbers of internally displaced grow daily, while the lack of access to those in need, coupled with the inability to move in goods to the region, remain major impediments to providing assistance,” he said.
UNHCR and partners are on standby to provide assistance to the displaced in Tigray, including basic items, when access and security allow.
The conflict is also a major ongoing concern for the Eritrean refugee population of nearly 100,000 in Tigray, who are reliant on assistance from UNHCR and partners.
“Potential for further displacement of refugees inside the country is increasingly a real possibility … The humanitarian situation as result of this crisis is growing rapidly” he warned, reiterating UNCHR’s call for peace and urge all parties to respect the safety and security for all civilians in Tigray.
Russia to Build Naval Facility in Sudan
Emerging from the first Russia-Africa Summit held in Sochi a year ago, Russia will make one huge stride by establishing a naval facility in Sudan. This marks its maritime security presence in the Mediterranean and the Red Sea region. Sharing a northern border with Egypt, Sudan is located on the same strategic coastline along the Red Sea.
According to the executive order, the published document says “the proposal from the government of the Russian Federation to sign an agreement between the Russian Federation and the Republic of Sudan on creating a facility of the Navy of the Russian Federation in the territory of the Republic of Sudan be adopted.”
It also authorizes “the Defense Ministry of Russia to sign the aforementioned agreement on behalf of the Russian Federation.” The document stipulates that a maximum of four warships may stay at the naval logistics base, including “naval ships with the nuclear propulsion system on condition of observing nuclear and environmental safety norms.”
Earlier, Prime Minister Mikhail Mishustin approved the draft agreement on establishing a naval logistics base in Sudan and gave instructions to submit the proposal to the president for signing. The draft agreement on the naval logistics facility was submitted by Russia’s Defense Ministry, approved by the Foreign Ministry, the Supreme Court, the Prosecutor General’s Office and the Investigative Committee of Russia and preliminary agreed with the Sudanese side.
As the draft agreement says, the Russian Navy’s logistics facility in Sudan “meets the goals of maintaining peace and stability in the region, is defensive and is not aimed against other countries.”
The signing of the document by the Russia president shows the positive results of negotiations, the possibility of constructing a naval base in the region, over the years with African countries along the Red Sea and in the Indian Ocean.
During a visit by then-President of Sudan Omar al-Bashir to Moscow in November 2017, agreements were reached on Russia’s assistance in modernizing the Sudanese armed forces. Khartoum also said at the time it was interested in discussing the issue of using Red Sea bases with Moscow.
On the Red Sea and the Gulf of Aden, Russia had a naval base in Somalia during the Soviet days. Currently, Djibouti hosts Chinese and American naval bases. China’s military base in Djibouti was set up to support five mission areas. India is another Asian nation that has increased its naval presence in Africa. In order to protect its commercial sea-lanes from piracy, it has established a network of military facilities across the Indian Ocean.
Will South Sudan follow its northern neighbour’s lead?
As the world watches to see whether President Trump accepts the US election results, few have noticed thatcivil war is looming in Ethiopia, after Prime Minister Abiy Ahmed announced that he was sending troops to the Tigray province. This imperils not only Africa’s second most populous state but its neighbours, Sudan and South Sudan, as well.
Sudan has had a good run recently and is in a better position to weather any regional conflict. In a surprise movelast month, President Trump announced Sudan’s removal from the US State Sponsors of Terrorism List (SST)in exchange for normalising relations with Israel. The US is understood to have sweetened the deal with a raft of economic and political incentives, including humanitarian assistance and high-level trade delegations. It would also support Sudan in its discussions with international finance institutions on economic and debt relief.
Since the toppling of President Bashir in 2019, the new transitional government, led by Prime Minister Hamdok, has focused on reviving Sudan’s economy and managing its $60bn debt burden. Hamdok faces a severe economic crisis, aggravated by the Covid-19 pandemic, high inflation and the worst flooding in decades, that has affected more than 800,000 people and destroyed homes and large tracts of farmland just before the harvest. Food, bread and medicine are in short supply.
Thesanctions removal means that Sudan can now expect substantial assistance from the International Monetary Fund and the World Bankand unlock investment into its fledgling economy.
This is good news for Sudan. But where does it leave its neighbour, South Sudan?
The international community had high hopes for South Sudan when it announced independence in 2011. But its optimism was misplaced. It never understood the Sudanese conflict that began with British colonialism and erupted after the British left in 1956. It wasn’t just a war between the Government of Sudan and the southern Sudanese rebels. Nor was it a fight between the Islamic North and the Christian South. It was a fight over resources and power.
South Sudan continues to fight. After its first post-independence civil war in 2013 and its endless cycle of violence and retribution, South Sudan is now as unstable as it was before it seceded from Sudan. To accommodate the different factions and keep old military men in power, the South Sudanese government and bureaucracy is peopled with those loyal to the former rebels.
Few have the skills needed to manage the country properly. They have squandered their oil opportunity, through mismanagement and corruption. With falling oil growth demand, oil is unlikely to remaina sustainable revenue source. This will challenge the South Sudanese economy which is 90% reliant on oil.
South Sudan is also facing multiple sanctions. In 2014, the international communityimposed travel bans and asset freezes, as well as an arms embargo. In 2018, the EU designated sanctions against individuals involved in serious human rights violations, alarmed by “the outbreak of a destructive conflict between the Government of South Sudan and opposition forces in December 2013.” Most recently, the US added First Vice President of South Sudan, Taban Deng Gai to its Global Magnitsky sanctions list for his involvement in the disappearance and deaths of human rights lawyer Samuel Dong Luak and SPLM-IO member Aggrey Idry.
If US foreign policy towards Sudan was driven by religious and ideological interests in the 1990s and 2000s, what we are now seeing is a shift to transactional diplomacy. There is no reason to think that President Biden would change course.
South Sudan is watching closely. It may be why it has instructed a US lobbying firm to allegedly lobby for their own sanctions removal. It is also why it welcomed a peace deal between Sudan and five rebel groups in September, paving the way for increased oil export cooperation with its neighbour.
But stability in the youngest African state is fragile. Even with a recently signed peace agreement between former foes, President Kiir and Vice-President Machar, violence is always lurking. South Sudan is plagued with the same environmental challenges of flooding and poor harvests. The fighting in Ethiopia will not help.
As South Sudan looks to the North, it will see a New Sudan, unshackled by the weight of its history and benefitting from international goodwill. Will this encourage South Sudan to look forward instead of back? Or will it unleash demons from the past?
Let’s hope that the international community pulls itself away from Trump’s horror show and starts paying attention to East Africa. It may be a long winter.
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