What the China-Iran Megadeal Means for Africa’s Oil Exports

• Iran and China are reportedly reaching completion of a huge oil-for-infrastructure agreement that would pave way for billions of dollars of Chinese investment in Iran.
• This new deal is mostly going to cause a shift from African oil for China which gets more than 30 per cent of its oil from the region.
• This deal could also increase China’s reliance on the Persian Gulf for oil, seeing that the country’s Chinese oil imports from Saudi Arabia increased by 47 per cent last year

Iran and China are reportedly reaching completion of a huge oil-for-infrastructure agreement that would pave way for billions of dollars of Chinese investment in Iran’s coal, telecommunications, and financial services sectors in return for 25-year oil supplies.

Both sides have admitted that negotiations are continuing but neither has verified the details. When a China Radio International journalist asked Hua Chunyin, spokeswoman for a New York Times article on the agreement, Hua declined to comment.

However, there’s growing speculation that the deal is worth more than $400 billion and will provide Tehran with a vital lifeline, as the economy has struggled hard under the crushing weight of U.S. sanctions.

READ ALSO: Nigeria to Further Revise 2020 Budget Oil Benchmark to $20 Per Barrel

How the China-Iran Deal Relates to Africa

The Move from African Oil:

Last May, former U.S. Ambassador and prominent China-Africa scholar, David Shinn disclosed to the U.S.-China Economic and Security Review Commission that China extracted more than 30 per cent of its oil from Africa in 2008, but that number dropped to just 18 per cent ten years later. If it goes through, this agreement with Iran will drive the continuation of China’s diversification of its oil supplies away from African sources.

China’s Dependence on the Persian Gulf:

Last year, Chinese oil imports from Saudi Arabia increased by 47 per cent making Beijing the single largest customer in the Kingdom. Likewise, China also invests heavily in Iraq’s oil infrastructure with a view to expanding supply from there. So, the Iranian agreement will further deepen China’s dependency on the Gulf for a large portion of its oil supply, and possibly further reduce its reliance on once-preeminent Angolan and Sudanese suppliers.

Bottom line

In the last two decades, oil has been the main pillar of Chinese investment in Africa. Looking at the latest data from the Johns Hopkins University’s China Africa Research Initiative or the recent research from the Beijing-based Development Consultancy Reimagined, Angola is jumping off the page for its outsize role in China’s involvement on the continent.

In Africa, China has invested billions on the same kind of oil-for-infrastructure deal it is now seemingly proposing in Iran.

But now that it is facing tens of billions of dollars in debt rescheduling in Angola and elsewhere in Africa, Beijing is also possibly seeing the downside of these arrangements as well.

he crux of the matter is that the days of huge Chinese investment in the African oil market are most likely over now that they buy more from producers in Russia, the Persian Gulf and the Americas.