China is a very aggressive and pernicious economic competitor with no morals and is not in Africa for altruistic reasons. It is in Africa for China primarily.
This was said three years ago by United States Assistant Secretary for African Affairs Johnnie Carson in Nigeria where he had gone to meet members of the International Oil Community.
Carson said the United States did not consider China a military, security or intelligence threat.
The other reason why China was in Africa, he said, was to secure votes in the United Nations from African countries.
A third reason was to prove that Taiwan was not an issue.
“There are trip wires for the United States when it comes to China. Is China developing a blue water navy? Have they signed military base agreements? Are they training armies? Have they developed intelligence operations? Once these areas start developing then the United States will start worrying,” he said.
Full cable:
Viewing cable 10LAGOS71, ASSISTANT SECRETARY CARSON MEETS OIL COMPANIES IN LAGOS
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Reference ID |
Created |
Classification |
Origin |
VZCZCXRO9718
OO RUEHPA
DE RUEHOS #0071/01 0531405
ZNY CCCCC ZZH
O R 221405Z FEB 10
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0034
INFO ECOWAS COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHMFISS/HQ USAFRICOM STUTTGART GE
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEHGV/USMISSION GENEVA
RUEHTC/AMEMBASSY THE HAGUE 0003
RUEHUJA/AMEMBASSY ABUJA
C O N F I D E N T I A L SECTION 01 OF 05 LAGOS 000071
SIPDIS
DEPARTMENT FOR AF/FO, AF/W, AF/RSA, AND INR/AA
AMEMBASSY YAOUNDE PASS TO AMEMBASSY MALABO
E.O. 12958: DECL: 2020/02/22
SUBJECT: ASSISTANT SECRETARY CARSON MEETS OIL COMPANIES IN LAGOS
CLASSIFIED BY: Blair, Donna M., CG, State, Lagos; REASON: 1.4(B), (D)
——-
SUMMARY
——-
¶1. (C) Assistant Secretary (A/S) Carson met with members of the
International Oil Companies (IOCs) on February 7. The A/S stressed
the fact that Nigeria is the most important country in Africa for
the United States. The IOC members noted that the A/S spoke mainly
of issues in Northern Nigeria and did not dwell on Southern issues.
The Petroleum Industry Bill is discouraging future investment
mostly in deep-water fields where most of the remaining oil in
Nigeria lies. If Nigeria raised the price of gas to two-thirds of
the world price, the IOC’s would be at each others throats trying
to cut the price by a penny or two. Nigeria has the possibility of
becoming the next Pakistan within 25 years. A/S allayed the IOCs
concerns of the United States’ relationship with China. END
SUMMARY.
¶2. (C) Assistant Secretary (A/S) Carson met with members of the
international oil community in Lagos on February 7. In attendance
were the following: Shell Senior Vice President’s Ann Pickard and
Ian Craig; Shell Vice President Peter Robinson; Chevron Managing
Director Andrew Fawthrop; Chevron Public Affairs Manager Femi
Odumabo; Exxon Mobil Managing Director Mark Ward; Hercules Manager
Coleman McDonough; Schlumberger Manager Supply Chain Service Demi
Adenusi; American Business Council (ABC) President Dick Kramer;
Special Assistant to the Assistant Secretary; Economic Officer;
Maritime Affairs Officer; Marine AttachC) and, Consul General Lagos.
—————————————–
NIGERIA: MOST IMPORTANT COUNTRY IN AFRICA
—————————————–
¶3. (C) Fawthrop asked the A/S whether he was in Nigeria to deliver
a message or was it more of a fact-finding trip? A/S stated that
he was in Nigeria for both reasons in that he wanted to listen and
engage with Nigeria. Nigeria is the most important country in
Africa for the United States due to: the size of its population;
presence of hydro-carbons; peace keeping role in ECOWAS, especially
in Sierra Leon and Liberia; its seat on the United Nations Security
Council; along with the strength and size of its financial markets
the A/S continued. Nigeria has enormous potential and is the
seventh largest Muslim country in the world with an Islamic
population that will eclipse Egypt by 2015 according to Carson.
Having no United States presence in Northern Nigeria is akin to
having no presence in Egypt and is why the United States is
considering opening a Consulate in Kano.
¶4. (C) The United States is concerned about the power vacuum in
Nigeria and the state of health of President Yar A’dua, per Carson.
The president is “very, very, very, very ill” and Nigerians are
under illusions regarding the state of their president. “Nigeria
cannot afford to implode or run aground.” 30 years of military
government was not good. The United States expects a stable,
legal, democratic, constitutionally-based government with no
“military involvement, full stop,” Carson stated. It is important
for the GON to do a better job this time around in regards to
elections. Only ten percent of Nigerians saw a ballot ticket in
the 2007 elections. If Nigeria brings credibility to its
democratic processes, its economic processes will improve.
LAGOS 00000071 002 OF 005
——————————————— ————-
UNITED STATES PRESENCE IN SOUTHERN NIGERIA NEEDS ATTENTION
——————————————— ————-
¶5. (C) Some places are more important than others within the
Federal system of Nigeria and Lagos is one of the more important
places, according to Carson. Consulate General Lagos is bigger and
more important than Embassies Benin and Togo together. Lagos is
significantly more important than Cape Town even though the latter
is 100 times better in terms of livability. The United States must
be in Lagos in a significant way, Carson declared.
¶6. (C) The statements of the A/S sounded wonderful from a Hausa
viewpoint, but nothing was mentioned about Southern and Eastern
Nigeria, Fawthrop pointed out. The A/S agreed that Fawthrop was
correct. The United States is underrepresented diplomatically,
economically, commercially, militarily and from a security
standpoint. When the A/S served in Nigerian from 1969-1971, the
United States had the Embassy in Lagos with Consulates in Ibadan,
Kaduna, and briefly in Port Harcourt, before the Civil war, and
also a USIS post in Kano. With the Nigerian population at 50
million the United States was better and more broadly represented
in a Nigeria that produced almost no oil. With an Embassy in Abuja
and a Consulate in Lagos, the United States has experienced a “huge
loss” in Nigeria today, per Carson. The United States must get
back into Enugu and Port Harcourt. “No presence means no access,
which leads to no influence. Without influence you have nothing.”
¶7. (C) Akwa Ibom governor Godswill Akpabio was singled out as an
impressive governor by Mark Ward. Akpabio has built up
infrastructure and industrial development. He is “one to watch”
per Ward. Other Southern governors that were highlighted included
were Rivers State governor Chibulke Amaechi and Edo State governor
Oshiomhole. Fawthrop suggested that USAID has a lot to offer in
the South in that if USAID makes a mistake it is OK. If a private
company engages in a similar project and makes a mistake you have a
FCPA investigation. The Consul General (CG) added that it might be
possible to team up with security assets of the IOCs to arrange
diplomatic trips to the Niger Delta. This arrangement would not
happen “100 percent of the time,” but more often than not, per the
CG.
————————————-
STATUS OF THE PETROLEUM INDUSTRY BILL
————————————-
¶8. (C) The PIB is more about taking control and not a real
solution, per Mark Ward. Oil Minister Rilwan Lukman has no
intention of doing the right thing in regards to the PIB stated
Dick Kramer. There are currently three versions between the
Senate, House, and Interagency committee and it is unclear when and
what will materialize, according to Ward. Fawthrop added that the
PIB amounts to resource nationalization and stated that it costs
more than 40 percent to develop the oil as opposed to leaving it in
the ground. The current fiscals of the PIB estimate that is costs
25 percent to develop the oil, thereby creating a disincentive. If
the oil stays in the ground then billions of development money will
go away and the resulting slowdown will be a massive problem. The
IOCs received a lecture from a team made up of various GON agencies
(the interagency team) in Abuja In a recent meeting in an example
of the current level of communication per Fawthrop. The whole
group then went to the office of the Vice President where the
interagency team stated that there was very good communication
between them and the IOCs.
¶9. (C) The large fields, elephants, have all been developed in
Nigeria per Fawthrop. What remains are fields one-quarter to
LAGOS 00000071 003 OF 005
one-third the size. The same costs are involved in producing the
oil but the revenue will be less because there is less oil. The
IOCs need more incentive, not less, in order to develop these
fields profitably. What the PIB accomplishes is a disincentive.
The downstream sector is very simple in Nigeria in that the refined
gas is moved from one tanker to another, to a smaller tanker and
then sold. The refining sector, exploration and production sectors
are very complex. It is unrealistic for the PIB to try to change
all of these areas in one tome of legislation, asserted Fawthrop.
¶10. (C) The gas side of the PIB tries to legislate the
delivery of gas rather than incentivize it. “The donkey is tired
and beaten. It will not go no matter what you tell it” stated
Fawthrop. If the gas price went to two thirds of the world price
the IOCs would “cut each others throat” to cut the price by one or
two cents. The rest of the IOC members nodded in agreement to this
statement by Fawthrop. European gas competition has gas developed
on a cost plus basis adding about eight percent to the cost. The
model should be based on rate of return and not forced upon
operators by legislative decree.
¶11. (C) Whenever gas doubles the cost of electricity goes
up by one quarter. Stable electricity will allow industry to
flourish in Nigeria but this will not happen 15 months before the
elections. Amateur technocrats run the oil and gas sector
according to Shell’s Peter Robinson. They believe that they can
control the industry via spreadsheets and pushing through the PIB.
There are many emotional issues in the PIB with Nigerian
politicians believing that they make no money on deep-water
projects. Potential banker and businessmen partners do not
understand the industry. The GON has made USD 2.5 billion with no
investment in the past two years according to Robinson.
¶12. (C) A large problem will be the ten percent of equity
that is to go to the communities argued Fawthrop. Equity going
into the communities will make them explode. The recipients of the
monies will be highly disappointed when they see the amount they
will receive, a much larger sum will be expected. Kramer referred
to the community equity as the “lawyer relief act” and wondered how
one defines an actual community.
¶13. (C) Peter Robinson stated after the meeting that Pedro
Van Meurs, the oil consultant hired by the GON to help negotiate
with the IOCs, is considering leaving. Van Meurs has been trying
to show the GON officials that their fiscal math does not work with
the PIB. Van Meurs does not agree with the IOC position completely
but sees areas for improvement. One example given to Lagos Econoff
by Exxon Mobil Project Manager Anh Tran concerned the levels of
cost involved with deep-water projects. Exxon, and other IOCs,
maintain that their capital costs are at least 40 percent of
deep-water projects while the GON allows for 25 percent capital
costs under the PIB. Van Meurs agreed that 25 percent was not
adequate.
——————————–
WHERE DOES NIGERIA GO FROM HERE?
——————————–
¶14. (C) It is possible that Nigeria could be a future
Pakistan according to the A/S. In 25 years, there could be
impoverished masses, a wealthy elite and radicalism in the North.
The question is whether the oil wells will be dry as well and could
Nigeria be on “sustainable and irreversible glide path to a new
economic base” per the A/S. When you look at the 2020/20 plan by
the GON you see that Nigeria needs to grow by 14 percent a year to
be at the current level of Indonesia Fawthrop asserted. That is
LAGOS 00000071 004 OF 005
using today’s figures, which does not take into account Indonesia’s
growth Kramer added. Nigeria is growing at five percent now and
would need 20 percent growth per annum in energy and USD 22 billion
investment in power plants Fawthrop stated. What would happen if
Nigeria fell just short of their goals, would there be an
alternative plan in place Fawthrop wondered? He cited the example
of the 2009 6,000 Megawatt goal. It was apparent early on that the
goal was not feasible and an alternative plan could have been
devised. The GON insisted that they would reach their goal and did
not develop alternatives. The same would hold true for 2020/20
Fawthrop assumed.
¶15. (C) The A/S offered that a forum could be organized in
Nigeria with World Bank President Robert Zoellick speaking to a
wide audience. Under Secretary for Economic, Energy, and
Agricultural Affairs Bob Hormats would be invited as well to lend
his knowledge of Africa. The forum would be shaped with the
broader picture in mind, not just oil. This would not be sponsored
by the IOCs. Members of the business community and individuals
that were committed to making oil meaningful to Nigeria’s future
would be asked to participate. Talk would center on “over the
horizon” issues, where Nigeria has gone right and where it has gone
wrong. Two or three fora would be defined with key people to spark
debate. Religious tensions, North-South issues, the lack of
capacity in the GON, narco-trafficking, the growing irrelevance of
Nigeria, as Princeton Lyman has suggested, could be potential
subjects. Nigeria is at a critical financial and political
threshold and the entire nation could possibly tip backwards
permanently per the A/S.
—————————————
CHINESE – AMERICAN RELATIONS IN AFRICA
—————————————
¶16. (C) What is the status of America’s influence in
Africa and how does it compare to China, Fawthrop queried? The
influence of the United States has increased in Africa, the A/S
countered. The United States’ reputation is stable and its
popularity is the highest in Africa compared to anywhere else in
the world. Obama has helped to increase that influence. “We must
manage the expectations of the Obama administration” offered the
A/S. The United States does not consider China a military,
security or intelligence threat. China is a very aggressive and
pernicious economic competitor with no morals. China is not in
Africa for altruistic reasons. China is in Africa for China
primarily. A secondary reason for China’s presence is to secure
votes in the United Nations from African countries. A third reason
is to prove that Taiwan is not an issue. There are trip wires for
the United States when it comes to China. Is China developing a
blue water navy? Have they signed military base agreements? Are
they training armies? Have they developed intelligence operations?
Once these areas start developing then the United States will start
worrying. The United States will continue to push democracy and
capitalism while Chinese authoritarian capitalism is politically
challenging. The Chinese are dealing with the Mugabe’s and
Bashir’s of the world, which is a contrarian political model, the
A/S stated.
——-
COMMENT
——-
¶17. (C) The A/S effectively provided the IOCs with a
rationale for the United State’s interest in Nigeria and its
commitment to the country. This commitment seems more substantial
than the IOCs given the prospect of the PIB and the current state
of play in Nigeria. Providing the IOCs with statements of support
through continuing if not increasing the USG presence in Nigeria
will be important in determining the increasing, decreasing or
non-existent role of the IOCs in the future in Nigeria. As the A/S
stated, if we can have a substantial presence in Pakistan, why not
Nigeria? END COMMENT
LAGOS 00000071 005 OF 005
¶18. (U) This message has been cleared by the AF Front
Office.
BLAIR
(120 VIEWS)
