Session 4: Global oil markets, geopolitics and diversification

Introduction

Global oil prices have been erratic since the global recession in 2008, falling dramatically in 2014 but, in 2019, are showing stuttering signs of increasing again. Alongside this decline, however, we have seen how many developing oil producers such as Nigeria can be plagued by political instability and conflict that affect oil supply and can negatively impact on investment in these countries. These international and domestic economic and political drivers have combined to produce a decline in oil investment in many areas. Yet, despite – or even in spite – of these issues, the Chinese are persisting in some African markets. In this session, you will consider what is driving Chinese companies’ long-term interests drawing on the example of Sudan and South Sudan, which was China’s first foray into oil investment in Africa, and where the experience of the interplay between domestic and international factors have combined to shape China’s investment strategy on the continent. Part of the answer will bring us back to China’s wider international aspirations to diversify its investments beyond natural resources.

After studying this session, you should:

• gain a greater understanding of how South Sudanese/Sudanese politics have shaped the countries’ oil economies
• have an appreciation of the factors that continue to compel China to engage in business with risky or less productive oil producing countries
• understand how Chinese national oil companies’ approaches to oil diplomacy and investment are changing.

A question to reflect on during learning:

• How does changing geopolitical and geoeconomic factors at the global level interact with complex national contexts to shape China’s oil investment decisions?

You will start by looking more broadly at China’s oil diplomacy and what role political risk has played, and continues to play in those relationships. Next, you explore Sudan’s domestic politics before looking at how international and national political processes come together to affect investment strategy. In Sudan’s case the international campaign around the Darfur region and China’s alleged role in it in the run-up to the 2008 Beijing Olympics was a key moment.