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China's Silent Army

Page 17

by Juan Pablo Cardenal,Heriberto Araujo


  In this way, countries such as Angola which urgently need to rebuild their basic infrastructure but do not have access to a qualified workforce, let alone the necessary funding, can obtain quick results and, in the case of working with China, highly favorable financing. This model also stops corrupt authorities from gobbling up the loan money, preventing millions of dollars destined for public projects ending up in bank accounts in Switzerland or the Cayman Islands. This is achieved by the fact that the government never actually receives the money, which is transferred directly from the bank to the service provider.44

  Despite the apparent benefits of this model, China’s arrival in Angola is the result of Beijing’s opportunism, as we have seen in the other cases described in this chapter. After the civil war, dos Santos’s administration (which came to power in 1979) needed financing in order to move forward with its government plan. However, the traditional lenders—the so-called Paris Club—and international institutions such as the International Monetary Fund required Luanda to carry out reforms to its financial, political and economic sectors. With the aim of enabling one of the world’s most corrupt countries to become economically solvent, these organizations also insisted that Angola should pay off some of its previous loans before they would provide it with debt relief for its accumulated unpaid debts.

  This tug of war continued until March 2004, when China arrived on the scene to wreck the plans of the wealthy countries. The Exim Bank simply lent Luanda a fresh $2 billion and the African country managed to escape its debts scot-free.45 China offered some fabulous lending conditions to a country that was trying unsuccessfully to restructure its debt at the time: an interest rate of the Libor bank lending rate plus an extra 1.5 percent and a repayment period of twelve years (with a four-year grace period).46 Using the full power of its check book, Beijing was making a move that would allow it to enter the heart of Africa’s oil resources; in July 2004, Sinopec defied all the odds by taking over Shell’s shares in the deep-water oil asset Angola Block 18, supposedly as a reward for the credit given by China.47 That was just the beginning of a relationship which has seen the Chinese state lend Angola over $14.5 billion via its state-owned banks in return for payments in oil and long-term permission for its companies to access Angola’s natural resources.48 Despite the sheer size of this investment, it still does not provide a full picture of China’s success in the country: on top of the loans offered by the state-owned Exim Bank, CDB and the Industrial and Commercial Bank of China (ICBC), Angola has also received contributions from China’s supposedly private sector.

  With its twenty-five floors and gold-tinted glass structure, one building in particular dominates Luanda’s architectural panorama. It is located next to the National Assembly, and when night falls over the dangerous Angolan capital the building is lit up by colored lights that can be seen all over the city. At the top of the skyscraper are the initials CIF, which stand for a legendary name in the history of China’s expansion across the planet: China International Fund. The inside of the building houses the well-guarded offices of one of the most opaque and mysterious Chinese companies that we have come across over the course of our journey through the Chinese world. It is also one of the most powerful in Angola thanks to its loans of between $2.9 and $9 billion to the Angolan government, as well as its contacts amongst the elite members of the state.49

  CIF is officially a private company that was created in Hong Kong in November 2003. It forms part of a labyrinthine network of Chinese companies (all of them based at the same Hong Kong address: 10/F Two Pacific Place, 88 Queensway) which has been set up to negotiate with Luanda’s government within four specific sectors: oil, diamonds, construction and financing.50 CIF represents the financial arm of the group, although it is also involved in the diamond industry through its involvement with the Angolan state-owned company Endiama. The other two most important companies in the conglomerate, China Sonangol International Holdings (CSIH) and Sonangol Sinopec International Ltd (SSI), represent the only two Sino-Angolan joint enterprises in Angola’s oil sector. These companies play a significant role in this area, although the American company ExxonMobil is still the biggest foreign player in the sector.51

  With such an impressive portfolio, anyone would expect CIF and the other companies in the group to be backed up by solid credentials and internationally recognized experience. Nothing could be further from the truth: the company has never worked in the construction industry before, despite the fact that it has won tenders to build Luanda’s new international airport and to repair the colonial-era Benguela railway. Its website contains various vague references to other projects carried out by the company, which also operates—strangely enough—in other countries that are characterized by a lack of transparency and abundant natural resources. As such, the conglomerate is present, either through CIF or CSIH, in places such as Guinea, Congo-Brazzaville, Zimbabwe, Madagascar and Nigeria.52

  It is not even as if the controllers of the company are well-known personalities within the industry: the people behind the business structure are a string of directors and presidents who have little or no savoir-faire when it comes to working in the crude oil or diamond sectors, with the exception of Manuel Vicente, president of the Angolan state-owned oil company Sonangol. Even more surprisingly, despite the concerns that CIF’s activities raise as a result of its million-dollar contracts, even the all-powerful Chinese state has either not been able or not wanted to throw light on the conglomerate’s origin. At least, that is what the Chinese ambassadors in Guinea, Nigeria and Angola have declared time and time again, along with representatives of China’s Ministry of Foreign Affairs.53

  Under these circumstances, we decided to try to find out more ourselves about the conglomerate. We opted for the most direct form of research possible: knocking on the company’s door. We went personally to CIF’s offices in Luanda, Hong Kong and Singapore, but the company refused to answer our questions or to grant us an interview. We wondered why this was. Was it because of the company’s lack of transparency, its habitual opaqueness, or its connections with figures such as Pierre Falcone?54 “The explanation is very simple; the deals through China [i.e. CIF] have become the easiest and most effective way of plundering the country.” The voice of Rafael Márquez de Morais, a journalist and activist against the excesses of the Angolan government, trembles with anger when we meet him at his home in Luanda.

  De Morais has followed China’s actions in Angola for many years and compares China’s role with that of the West, which also does not escape his criticism. “There is no difference between West and East in terms of obscure deals. Whether it is the US, China, Spain, Portugal … the purpose is the same: to really get access to the decision makers in the Angolan government and to get as much as they can in the easiest way possible.” The only difference, he clarifies, is a “difference in scale” when it comes to China, a country which he sees as carrying out a “new imperialism.” “CIF has established several major construction projects in Angola. None of them have been delivered. None. And that leads us to another question: do they really give loans? Does the money really come in and does it get stolen or what?” During our stay in the Angolan capital, we manage to get as far as the doorway to CIF’s star project in the African country. This is nothing less than the construction of an international airport which, at a cost of over $2 billion, was due to be ready by the end of 2010. However, there is no trace of what should be Africa’s biggest airport. Around 30 kilometers along the Viana–Catete motorway, the amount of activity around the airport’s grounds is small to say the least. Hardly any vehicles can be seen on the dirt track leading to the supposed jewel in CIF’s crown. Under a punishing sun, the armed soldiers from the Presidential Guard who are protecting the entrance look as if they are really quite bored. After twenty minutes of verbal jousting, we still haven’t managed to break the resolve of the “chief,” a stoutly built high-ranking military officer wearing a beret and a handgun at his belt. “This airport is a
maximum security zone and the Angolan army has been entrusted to guard it by direct orders from the president of the nation. It is forbidden to enter this area,” he concludes. Close to the site, a Chinese family who opened a Chinese restaurant two years ago in the hope of attracting workers from the project feel like they have shot themselves in the foot. They barely make enough to get by. “Business has been very slow since the very beginning. There are no customers,” they tell us.

  We later spoke to a Spanish construction worker living in Luanda who pointed out that if the two nearby concrete factories were not producing cement—which was the case—then that would confirm the lack of activity at the airport. “If those factories aren’t active then there is no work going on, because concrete is essential in every phase of constructing an airport. If there was an airport being built there, there would be a constant queue of lorries going in and out.” What we saw on the motorway between Luanda and Viana therefore powerfully reinforces the hypothesis put forward by Rafael Márquez de Morais. He maintains that the loans announced by the CIF either never arrive or only partially arrive in the country. The loans therefore serve as a pretext, justifying the “repayment” made by the Angolan government for services that are never fully carried out. In other words, they lay the groundwork needed to allow government officials to rob the country’s natural resources on a massive scale. It is an enormous case of looting, pure and simple.

  “They say: ‘OK, here’s a loan for the airport.’ Five or six years later, there is no new airport and there is no money to account for. So a new loan is issued for the same airport. And that money disappears too. So, what happens is the state gets indebted, which justifies 200,000 barrels being sent per day to China, for instance,” de Morais argues. He says that this structure allows the state to plunder the country without causing any irregularities in the accounts. “In what other way could you steal, for instance, 200,000 barrels of oil a day? It is not very feasible for a government official to say ‘take this oil for me,’ because of the international scrutiny and because you can check the cargo against what has been sold. But if you say that you are shipping 200,000 barrels of oil to China per day to pay back loans, that is just fine. You owe, so you pay.”

  De Morais has coined the term “transparent looting” to describe the process known by other organizations as “trade mispricing.” This is a particularly urgent problem in Angola, as is shown in a recent report that puts forward some hair-raising figures to describe the extent of the pillaging: $6 billion in 2009 alone.55 This figure—the equivalent of one-sixth of the total national budget—describes the amount that the country’s political elites, with President dos Santos at the helm, supposedly diverted away from the country illegally that year by inflating bills and payments for projects that were never undertaken.

  CIF and its associate company CSIH play a key role in this process of systematic and well-disguised looting based on the artificial inflation of state costs: the two companies issue invoices for the loans and claim quotas of crude oil for their repayment, thereby justifying the transportation of thousands of barrels of black gold to China. This way, “in terms of international scrutiny, everything is transparent. You need a company [CIF] to launder what you are stealing from Angola. CIF provides the evidence needed [to justify what is supposedly being spent by the state],” de Morais explains. On the Angolan side, another ad hoc organization is just as indispensable in allowing this looting to continue: the (now defunct) National Reconstruction Cabinet (GRN).

  The cabinet was created in 2005 by the president and, under his direct orders, was supposedly in charge of administering the funding provided by CIF to rebuild the country. The GRN, which was not required to submit to any type of control or provide statements of accounts, was led by General Manuel Hélder Vieira, aka “Kopelipa,” chief of the president’s Military Bureau. “Since taking control of the relationship with China, General Kopelipa has basically surpassed everyone in terms of his personal business empire: aviation, banking, telecoms … Everything! Out of nothing, he has become one of the richest men in Africa. That has to do with the Chinese loans and the money he has managed as head of the reconstruction office [GRN]. The Chinese have become the most effective [vehicle] for corruption and for siphoning billions of dollars out of the country,” de Morais argues.

  What is the role of the Chinese state in all this? Research carried out by a group of experts at the US-China Economic and Security Review Commission shows that various Chinese shareholders in the CIF conglomerate have either current or former ties with Chinese state-owned companies. However, perhaps the most uncomfortable revelation for Beijing was the fact that one of the group’s shareholders, CIF’s director Wu Yang, lists his place of residence as the same address as the headquarters of the Chinese secret services (28/F 14 Dong Chang’an, Beijing).56 All the same, there is no irrefutable evidence that Beijing is behind CIF and its network, as there is in the case of the Angolan elites.57 However, it is still difficult to believe that the Chinese government does not know who is who, especially when several of its state-owned companies—such as railway specialists CSR, the state-owned construction company CITIC and the oil company Sinopec—are either subcontracted by or associates of CIF and CSIH.58

  How and why do these state-owned companies embark on million-dollar contracts with CIF when the Chinese state officially disowns the conglomerate? This question raises many others: How can a technically private company be capable of drawing on a volume of finance that would normally only be available to a state? How is it that a private Chinese company is, to all intents and purposes, competing with the Chinese state itself? And why hasn’t the Chinese government intervened to neutralize a company that is seriously compromising China’s reputation as a result of its shady business dealings in oil-rich African dictatorships?

  “If China hasn’t taken action against CIF it’s because it doesn’t want to risk its business interests in the Angolan oil sector,” explains Alex Vines, head of the Africa Programme at the think-tank Chatham House in London. “Some Western companies have decided not to play along with the Angolan political elites [referring to the widespread corruption], because they have access to the necessary technology and that has protected them. However, China doesn’t have that and so it has had to play the game,” he continues. “China has had to adapt somehow to the situation laid out for them by the Angolan government.” In other words, nobody can do business in the country without hands dipping into the till. Perhaps this explains why CIF seems to be nothing more than a structure designed to fulfil the demands of the Angolan elites without dirtying the hands of China’s state-owned companies. That way, China still manages to get a slice of the pie in the Angolan oil sector.

  THE CHINESE DREAMS OF CHÁVEZ THE TELEVANGELIST

  “You have to be really careful. Sometimes they stand on the bridges over the motorway and dangle a string from there with a spark plug on the end that makes the vehicle’s windscreen explode when it hits the car. When the driver stops the car, they attack him. Or sometimes motorcyclists tackle you at traffic lights, or in the middle of the road, and they point a gun in your face. You have to hand over everything you’ve got, there and then. That’s just the way things are here.” These are the somewhat worrying words of Eduardo, our driver in Caracas, the moment we arrive at the Simón Bolívar national airport and set out in his 4×4 towards the Venezuelan capital. While Eduardo continues with his long list of the life-threatening dangers that are a part of Venezuela’s violent reality, we make our way over hills covered in poverty-stricken houses which are home to the main body of voters for the president Hugo Chávez. Here they are called ranchos, rundown hovels piled one on top of the other without any degree of living space or privacy for their inhabitants: miserable holes where people struggle to get by any way they can.

  One thing that is not lacking here are the layers of red, blue and yellow paint which people use to cover their homes with: the colors of the national flag. These buildings form a
striking mosaic that presents a clear picture of the situation in this Latin American nation from the moment you set foot in the country. This has been Venezuela’s new landscape ever since Commander Chávez rose to power in the country with the biggest oil reserves on the planet.59 Venezuela is now a gigantic stage where ultra-nationalism and the encouragement of patriotic ideals—with those of Simón Bolívar prominent among them—have infected every aspect of society, dividing the country to such an extent that there are now only two options open to Venezuela’s 30 million inhabitants: you’re either a Chavista or you’re not. “You can’t go around openly saying you’re against Chávez. That would make lots of problems for you,” Eduardo tells us, always happy to offer a lesson in social norms during a long wait in one of Caracas’s infernal traffic jams.

  It is no easy task to describe this “televangelist,” as the Mexican historian Enrique Krauze calls Chávez in his great biography.60 Chávez is certainly an egomaniac, obsessed with power and with the omnipresence of the media. In Krauze’s words, “Chávez sees absolutely everything that happens to him as an integral part of Venezuelan History.”61 He is at once a populist figure, a conjurer who adores the drama of television (if you’re not convinced, take a look at his rigorously live television program, Alo, presidente, which starts at a specific time but has no rules about when it is going to end) and an ideologist whose foundations lie, as Krauze puts it, halfway between Fascism and Communism. He is the only person capable of appearing on live television to call the president of the United States a “donkey,” or to nationalize private companies—with a shout of “expropriate it!”—despite the fact that they had been operating in the country for decades. He is an “imitator” of both Fidel Castro, his present-day mentor, and the leader of Latin American Independence, Simón Bolívar, Chávez’s idol from beyond the grave. For better or for worse, this is the man who, with the support of the voters, decides the future of Venezuela and aims to build what he himself has nicknamed “twenty-first-century socialism”—much to the delight of China. Chávez was re-elected in 2012 as Venezuela’s president and, if his health allows him, he will lead the country until 2019.

 

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