Is Russia’s Renewed Interest In Africa’s Energy Sector For Real?

This article was first published on March 9, 2015

Away from the scenes of a crisis-torn Russian economy, biting sanctions and a currency crisis, Moscow is busy firming its grip on Africa’s lucrative energy sector.

In just six months, Russia has bagged three mega energy deals across Africa – fueling talk of a potential counter to the dominance by the West and other emerging economies such as India and China.

“While much attention has been given to resurgent China and India and their relationship with the African continent, Moscow has finally woken up to the race for Africa’s resources by other emerging powers and the Kremlin is keen to reestablishing Russia’s influence on the continent,” Fantu Cheru, Research Director at the Nordic Africa Institute (NAI) said in a recent review of the resurgent Russia-Africa ties.

On February 18, a consortium led by Russia’s RT Global Resources won a deal to construct and operate a $2.5billion regional oil refinery in Uganda in which Kenya and Rwanda have agreed to buy stakes in.

The Russia-government owned Rostec holds a 100 per cent stake in RT Global Resources which was created to carry out projects involving raw materials and infrastructure development in Russia and abroad.

Members of this consortium include Telconet Capital Ltd Partnership, VTB Capital PLC, Tatneft JSC and GS Engineering & Construction Corporation.

“The process of selecting a lead investor in Uganda’s refinery project has been highly competitive. We are pleased that the two bidders responded to the Request for Final Offers, from which RT Global Resources emerged as the Selected Preferred Bidder. We have confidence that we will execute project agreements and go ahead to develop Uganda’s refinery project” Uganda’s Energy and Mineral Development Minister Irene Muloni said when she announced deal.

The refinery facility, to be developed in phases, is expected to have final output capacity of 60,000 barrels per day, but will start with 30,000 barrels per day capacity.

Britain’s Tullow Oil, French oil major Total and China National Offshore Oil Corporation (CNOOC) are developing Uganda’s fields. The first phase of the refinery is expected to be in place by 2018.

Egypt

Barely a week before bagging the Uganda refinery contract, Russia signed another energy deal with Egypt.

Egyptian President Abdel Fatah al Sisi on February 10, 2015 announced that Cairo would cooperate with Moscow to see the construction of the first nuclear power plant in Egypt, on the second day of President Vladimir Putin’s official visit to the Arab country.

Egypt and Russia signed a memorandum of understanding to build the first nuclear plant in the northern city of El-Dabaa, on the Mediterranean coast west of the port city of Alexandria, where a research reactor has stood for years.

“If final decisions are made, it will mean not just building a nuclear power plant, it means the creation of the entire new atomic industry in Egypt,” Putin told a news conference.

Cranking up electricity generation has been a priority for Egypt, long hit by power shortages resulting in frequent blackouts in major cities across the country especially in the summer when hydro dam levels recede substantially.

Sergei Kiriyenko, the head of Russia’s Rosatom state-controlled nuclear corporation, revealed that a power plant with four reactors would be built, producing 1,200 megawatts (Mw) each.

Apart from the nuclear plant pact, Egypt and Russia also penned agreements to improve investment and the natural gas business, as well as create a Russian industrial zone along the Suez Canal.

South Africa

In September last year, Russia signed a $10billion nuclear power cooperation deal with South Africa, paving the way for the building of up to 9.6 Giga watts of nuclear power based on Russian technology by 2030.

“This agreement opens up the door for South Africa to access Russian technologies, funding, infrastructure, and provides proper and solid platform for future extensive collaboration,” South African energy minister Tina Joemat-Pettersson said on the sidelines of a International Atomic Energy conference in Vienna.

Kirienko of Rosatom revealed deal would involve the construction of up to 8 nuclear power units.

China’s Guangdong Nuclear Power Holding Corp, Toshiba Corp and Korea Electric Power Corp were among companies that were widely reported as showing interest in securing the nuclear deal.

Russia has also had deep forays with oil producing Africa nations such as Algeria, Libya and Nigeria triggering a debate of its resurgence in Africa after an overall decline post the Soviet Union era.

Russia’s Rosatom in 2011 signed a draft agreement with Nigeria to develop a nuclear power plant. Kremlin penned a similar inter-governmental agreement with Algeria in 2014 to establish a nuclear power plant.

“In recent times we are seeing a renewed fervor in Russo-African relations, perhaps buoyed by the temperament and adventurism of the current President Putin. What is clear is that Africa has been put back in focus of Russian foreign and economic policy,” Tunde Oyateru, a political communication consultant in Nairobi told AFKInsider.

BRICS

Some analysts however said sub-Sahara is witnessing an overall scramble for its energy resources, especially by emerging global economies, the BRICS (Brazil, Russian Federation, India, China and South Africa) attracted by the numerous new discoveries y of oil and gas reserves mainly in east and West Africa.

“Whilst companies from the global north have traditionally been strong players in the Sub-Saharan energy sector, new ones from emerging economies– not only from China’s state-owned enterprises but also Brazilian and South African giants amongst others – are now also taking part in the scramble for the region’s energy resources”  Sören Scholvin says in the forward of a new book published by researchers at the South African Institute of International Affairs(SAIIF) and titled: A New Scramble for Africa? The Rush for Energy Resources in Sub-Saharan Africa.

Some critics however warned that Russia’s renewed dalliance with Africa may go beyond the historical Cold-War games and have mixed implications.

“While the web of strategic access and other ties that Russia has been reconstituting and expanding in Africa does not necessarily presage a return to a zero-sum Cold War competition across the continent, the long-term implications of these engagements should nonetheless be of concern to Africans and non-Africans alike,” the US-based Foundation for Defence of Democracies however warns in a commentary on March 5, 2015.