US Warns Africa Over ‘Debt Trap’ Oil Funding

 In Investor News

African governments risk long-term debt dependency and threats to their sovereignty if they accept funding from “opaque forces” to develop their oil and gas resources, a senior US energy official has said.

Speaking at a major Africa energy conference in Cape Town, South Africa, the US Assistant Secretary of State for the Bureau of Energy Resources, Francis Fannon, said the US saw global energy development as a proxy for broader foreign policy issues, according to S&P Global Platts.

“All countries face a choice on their investment path. Transparency and best practices or do they fall under the spell of opaque forces that provide short-term money and long-term debt and eventually dependency,” Fannon told the Africa Oil Week event.

“Be careful, fast and loose money often comes with high interest rates, unclear terms and lack of respect for the domestic population and the environment. Today’s quick deal can, over time, turn into a debt trap that slowly erodes a proud nation’s sovereignty,” he said.

Fannon’s comments come just two weeks after Russia hosted its first-ever Russia-Africa summit, a move widely seen as a strategy by Moscow to expand its economic and security influence to the African continent.

His comments are also likely to irk China, which recently rejected the US claims that Beijing was engaging in “debt-trap diplomacy” with Africa by extending billions of dollars’ worth of new loans to the region. Chinese President Xi Jinping in September 2018 announced a $60Bn financing package in aid, investment and loans to Africa as the world’s biggest energy importer continues to expand its global influence.

Part of that pledge underpins efforts by China’s state oil giants to help develop the region’s sizable oil and gas resources. Last year, the US provided sub-Saharan Africa with $12Bn in foreign assistance and, since 2015, the cumulative total is $54Bn on the US-backed assistance programmes, he said.

“The question before us is: how do we ensure that the wealth under the ground transforms into prosperity for people above the ground?” Fannon said. He added, “When a country chooses to do business with a US company, they know that they are securing the best technology, the best health safety and environmental performance.”

Despite claims by the West that China and Russia are using state funds directly, or via their NOCs to gain an edge in building infrastructure and directing trade flows, some African countries have welcomed their growing financial support.

In a statement following the Russia-Africa summit last month, South African President Cyril Ramaphosa denied the forum was aimed at Russia expanding its “geopolitical influence” or that African governments were “being led into a debt trap.”

Speaking last October on returning from Beijing’s triennial African investment forum, Equatorial Guinea’s oil minister, Gabriel Lima, was upbeat over more Chinese investments in his country’s energy sector. “We are open to all offers but they [the Chinese oil majors] are offering the best prices, the most money. It’s that simple,” Obiang said.

 

https://punchng.com/us-warns-africa-over-debt-trap-oil-funding/

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