China is a pernicious economic competitor with no morals

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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FM AMCONSUL LAGOS

TO RUEHC/SECSTATE WASHDC IMMEDIATE 0034

INFO ECOWAS COLLECTIVE

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C O N F I D E N T I A L SECTION 01 OF 05 LAGOS 000071

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DEPARTMENT FOR AF/FO, AF/W, AF/RSA, AND INR/AA

AMEMBASSY YAOUNDE PASS TO AMEMBASSY MALABO

E.O. 12958: DECL: 2020/02/22

TAGS: EPET ECON PGOV PREL NI

SUBJECT: ASSISTANT SECRETARY CARSON MEETS OIL COMPANIES IN LAGOS

CLASSIFIED BY: Blair, Donna M., CG, State, Lagos; REASON: 1.4(B), (D)

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SUMMARY

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¶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)