Africa: Oil & Gas Opportunities Abound for Africa Amid Russia-Ukraine Crisis

Most African economies have been teetering on the edge of a precipice for the past two years.

First dealing with the unprecedented storm brewed by the Covid-19 pandemic that caused the worst recession in more than half a century. And just when recovery was finally ashore and an economic rebound was on the horizon, the Russia and Ukraine crisis hit disrupting global supply chains resulting in the worst inflation on record.

As the war rages on six months down the line, countries in the continent have remained resilient, still grappling to build back and better, their economies. Hitherto, Russia has unilaterally declared its annexation of four Ukrainian oblasts of Luhansk, Donetsk, Zaporizhzhia and Kherson. The four annexed regions make up about 15 percent of Ukraine’s territory. Prior to this, was the announcement by President Vladimir Putin ordering a partial military mobilization, and threatening nuclear strikes against Ukraine. There seems to be no end in sight for a ceasefire, President Putin holds steadfast his vision, of restoring Moscow’s Soviet era status as a super power.

Most African countries have hitherto, largely declined to condemn Russia’s invasion of Ukraine. The UN General Assembly voted on a resolution, declaring a firm stand against Russia’s invasion in Ukraine earlier in March. Among the 54 African member states, nine countries failed to vote, 26 chose to remain neutral, 16 chose to abstain and Eritrea voted against the resolution. Amid the crisis, the geopolitical contest for power and influence in Africa among global super powers, pertinently the US, China and Russia, has been rapidly evolving.

The U.S has been relentlessly rejuvenating its diplomatic ties in Africa to counter a Russian charm offensive. In light of this, the U.S Secretary of State Antony Blinken recently concluded his second African tour in August, where he traveled to South Africa, DRC and Rwanda. He made his first trip late last year and visited Kenya, Nigeria and Senegal. This second trip was preceded by a diplomatic visit to Egypt, DRC, Uganda and Ethiopia by Russian Foreign Minister Sergey Lavrov. Furthermore, the US ambassador to the UN, Linda Thomas-Greenfield, also visited Africa in yet another diplomatic tour, where she visited Ghana and Uganda. Similarly, the U.S aid chief, Samantha Power, recently completed a trip to Kenya and Somalia, where she noted the rise in malnutrition in the region was exacerbated by Russia’s invasion of Ukraine.

Into the bargain, the U.S has sought to counter the massive Chinese influence on the continent. This was highlighted during the G-7 Summit, where the U.S President Joe Biden launched his Build Back Better World or B3W plan, as an alternative to China’s Belt and Road Initiative (BRI).The B3W is part of a joint effort among the G-7 partners, to deliver high-quality and sustainable infrastructure. The goal of the initiative is to create ‘a values-driven, high standard and transparent infrastructure partnership,’ to help finance projects in developing countries. In response to the recent Western charm offensive, China has scrapped tariffs on 98 percent of goods imported from nine of Africa’s Least Developed Countries (LDCs), additionally making numerous trips to the continent to strengthen relations.

Concurrently, Moscow has been intent on strengthening ties with Africa, building its reputation as a ‘defender of Africa.’ According to Irina Filatova from the Higher School of Economics in Moscow, Russia aims to gain a foothold on the continent as a security broker, in order to “confront the collective West” and project the image of a “defender of Africa”; a shared objective with the West but the latter has failed to accomplish. Russia has been an ally to multiple African nations, which have especially been afflicted by insurgencies. Insecurity in most parts of the continent, pertinently ‘resource-rich’ countries such as DRC, Nigeria, Libya and Mozambique, has seen countries import weapons from Russia, to thwart the ever emerging insurgencies.

Moreover, in some countries Russia has sent its own forces to help quell rebel militia groups. In reiteration Niger, Mali, Burkina Faso, Chad and Mauritania, all sought for help from Moscow to aid in combating the al Qaeda. By the same token, Moscow has also been selling nuclear plants and other related technologies, to developing countries such as Ethiopia, Egypt, Zambia and Nigeria. According to the 2020 annual report by the Stockholm International Peace Research Institute (SIPRI); arms exports to Africa accounted for 18 percent of all Russian exports between 2016 and 2020.

Africa had strong historical relationship with the former Soviet Union, in the 1950s, which supported several liberation and independence movements, offering all-round support; financially, militarily, and diplomatically, against European colonial masters. African countries have the upper hand of benefiting from each of these powers, towards the realization of their respective national development goals.

Africa’s economic prospects from the Russia-Ukraine crisis

The Russian-Ukraine conflict presents a myriad economic prospect for Africa. Reminiscent of the colonial era, there seems to be a newly found rush in the demand for Africa’s oil and gas resources; pertinently by countries in the EU, seeking to wean themselves off Russian energy.

The EU has set out an ambitious path to cut energy dependence on Russia, in response to the energy disruption caused by the ongoing conflict. The ‘REPowerEU Plan’ is targeted at saving energy, producing clean energy and diversifying energy supplies. Africa’s oil and natural gas-producing countries such as Mozambique, Nigeria, Libya, Egypt, Cameroon, DRC, Angola, Namibia, Algeria, Ghana, Gabon, Mozambique, Equatorial Guinea among others; have an invaluable window of opportunity, to contribute largely to the global energy landscape.

In response to EU’s partial embargo of Russian oil, these countries need to create an enabling commercial environment, and capitalize on the opportunities presented by the bloc’s diversification of natural gas sources away from Russia, and make up for the shortfall. The crisis has given Africa a golden chance to tap into its assets amid its energy transition.

Can these countries rise up to the challenge of meeting their domestic needs and still export surplus gas products to Europe? Africa’s geographical proximity to Europe is an advantage that can aid in increasing exports to the latter. The recently signed MoU between Afreximbank and the African Petroleum Producers Organization (APPO) for the creation of an African Energy Transition Bank, to finance oil and gas projects on the continent, will support and increase financing and investment opportunities for Africa’s oil and gas industry.

The crisis has thrown the energy market into chaos, sending fossil fuel prices soaring. This has birthed the global demand for thermal coal, especially from the Asian and European markets; with most countries in both regions having been dependent of Russia, as the country is the world’s third largest supplier of thermal coal used chiefly for power generation. Coal plants that had been scheduled for closure in Europe have been reopened, to fill the deficit in mitigating fuel costs and generating electricity; as the alternative gas, is inarguably more expensive. With energy security under threat, climate policies and commitments have taken a back seat. The EU recently declared that natural gas now qualifies for green investments.

The African coal market is projected to enjoy double its revenue for the next one year. The prevailing energy gap has created a window of opportunity for African coal producing nations. According to a report by Reuters, South Africa’s coal exports rose by 11 folds in the months following the war. Botswana has also projected growth in its coal market. The massive demand far outstrips the available supply, resulting into prices of thermal coal leaping to record levels. African countries with coal resources, have doubled profit margins, with the surge in demand from European buyers. Italy, France, Portugal and Spain have been sourcing from Nigeria, whilst Germany has sought Senegal for gas supplies.

The revenues gained from increased energy exports to Europe and other markets could be reinvested to boost agricultural productivity in Africa to mitigate reliance on Russia and Ukrainian wheat products. In addition, the surplus could boost the continent’s manufacturing sector, pertinently fertilizers to promote agricultural productivity which fuels most economies in Africa.

The economic prospects to be reaped from all these global powers combined are unimaginable and could be the continent’s diving board to massive development. The broad spectrum of their respective aid to the continent from infrastructural development, technology, power generation, internet connectivity to agriculture and a plethora of other sectors. By example, from China’s BRI and the US B3W, Africa’s infrastructure could be massively transformed. In the same breath from Russia, Africa could benefit from nuclear technologies, weaponry and conflict management through sending troops on the ground to thwart rebel groups as seen in Bangui.

Africa should play her cards right in order to spur economic productivity, boost export earnings and support long-term socio-economic development.

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