ERITREA Breaking News

Russia is Looking for New Economic Partners—in Africa

Western sanctions have isolated Russia from its usual Western trading partners, necessitating its move into new markets. This primarily includes countries and regions where governments have not participated in the sanctions against Russia. Amidst this endeavor to diversify its economic relations, Moscow has demonstrated a keen interest in Africa, where it increasingly seeks to involve itself in a number of industries.

For Western policymakers and observers, the dynamics of Moscow’s engagement with Africa is notable; partially for geopolitical concerns, partially for economic competition considerations, and partially because they help highlight what many in the West believe is a policy failure: the inability to inflict more severe economic damage on Russia is in part driven by the fact that the rest of the world was not willing to follow the West’s lead.

How and What Does Russia Invest in Africa?

In an interview late last year, Russian academic Natalia Piskunova indicated that Russia’s policymaking process regarding African investment is divided into two levels: what the Russian state does and what private Russian businesses do.

According to Piskunova, in the years before 2010, when Moscow started showing more open interest in Africa, Russian companies with interests in the African market such as Rusal, Rosneft, and Lukoil unsuccessfully lobbied for government support for their operations on the continent. It was only after the Russian government gradually began showing interest after 2010 that the state and companies began cooperating more.

Russian companies, regardless of whether they are private, state-owned, or have a level of state participation, receive assistance from the Kremlin in the form of subsidies and tax-free agreements. Aside from making up for lost time, this support enables Russian business interests to better establish themselves and expand operations. This is worth noting, as Moscow is particularly interested in some specific key fields and industries.

Logistics, Finance, and Sanctions Evasion

Many African ports are essential in terms of international trade logistics, including those in North Africa (Egypt, Tunisia, and Algeria), East Africa (Kenya), and Southern Africa (South Africa). Likewise, African airports, particularly regional airline hubs such as Cairo, are also helpful for Moscow, as Russian businesses and tourists make use of flights to Africa. One example is Ethiopian Airlines, which renewed its flights to Russia in August 2022. This access is important for Russia because the EU has closed its airspace to Russian-owned and-registered planes.

On a more cynical level, Africa’s trade infrastructure also serves an avenue for evading sanctions. These countries do not support Western sanctions and, unlike the European Union, have not prohibited Russian ships from using their ports. Russian ships can thus undergo repairs in these ports if necessary and pay for such services. As China and India account for 40 percent of Russia’s oil exports and the Red Sea is a significant transit route for oil tankers, port access in the Red Sea’s littoral countries—Egypt, Sudan, Eritrea, and Djibouti—is also crucial. In addition, the Port of Cape Town in South Africa is useful for Russian oligarchs—they avoid having their luxury yachts seized by docking them in countries that have not joined the sanctions.

On the financial side, the largely state-dominated banking sector on the continent can help Russia conduct international banking and financial transactions in the face of sanctions elsewhere. African finance uses China’s UnionPay payments system, which is essential for Russia given that Visa and Mastercard have left the Russian market.

Russia’s political and military backing of various regimes on the continent also grants it an additional financial boon: access to gold from Sudan and diamonds from the Central African Republic. These resources are essential for the Russian budget, making the country’s economy more resilient to foreign sanctions, especially since gold and diamonds are not as easily frozen and seized as other financial assets.

Extractive Industries: Mining, Agriculture, Oil & Gas

For the Kremlin, African gold and diamonds are not just financial assets. Russia’s mining industry, which has considerable expertise, has found considerable success in the continent and plays a major role in Moscow’s policymaking.

In Angola, the Russian company Alrosa, the world’s largest diamond miner, is one of the owners of Catoca, the world’s fourth-largest diamond mine. The country is important to Moscow because of its copper reserves, which are crucial in producing machinery and high technology, especially considering the fact that Russian copper ore is hard to extract. There are concerns that the sanctions against Russia and Alrosa may disrupt mining operations through a lack of spare parts and machinery. Meanwhile, in Guinea, Rusal, one of the world’s largest aluminum companies and owned by sanctioned Russian oligarch Oleg Deripaska, owns Dian, the world’s largest bauxite deposit. About half of Rusal’s aluminum ore bauxite production comes from its mining operations in Guinea.

Africa is also rich in “rare earth” minerals, which are essential in the production of hi-tech devices (such as smartphones and monitors), energy conversion systems (wind turbines, photovoltaic panels, and electrical machinery), and military equipment (lasers and radar). While the West, particularly the United States, has been wary of exploiting these elements owing to environmental considerations, the Russians and the Chinese have made inroads in Africa to secure these vital resources. As a result, Russia has leverage with the West, as the technology needed for transitioning to a green economy relies on these minerals. Even Russia’s Wagner Group, a private military outfit with Kremlin ties, frequently provides security to African governments in exchange for access to natural resources. It will most likely be compensated for its collaboration with the military junta in Mali, for example, through access to uranium, diamond, and gold mines.

Russia’s agriculture and fertilizer industry also enjoys success in Africa, granting it much policymaking heft in Moscow. The Russian Ministry of Agriculture views African nations as worthy agricultural partners. Its importance is reflected in its leadership: the ministry itself is headed by Dmitry Patrushev, the son of Nikolai Patrushev, who is the secretary of the Russian Security Council.

Relatedly, Russia is a major partner of the continent in terms of food and fertilizer exports. Food accounts for 40 percent of the consumer basket in Africa, which is directly impacted by the war in Ukraine, as Russia and Ukraine account for nearly 30 percent of global wheat exports. More than 50 percent of wheat imports in Burundi, Uganda, Rwanda, Tanzania, Sudan, and Somalia come from Russia and Ukraine. In addition, in 2021 Russia, was the leading exporter of nitrogen fertilizers, the most used fertilizer on the continent, and the second-biggest exporter of potassic and phosphorous fertilizers, accounting for 14 percent of global exports.

Somewhat unexpectedly, Russia’s oil and gas industries are not as successful in Africa as elsewhere owing to political security considerations. This is because oil and gas operation processes—extraction, refining, transportation, etc.—require specialized facilities, which themselves require significant capital and time to develop. For example, Russian energy giants such as Gazprom and Rosneft returned to Libya after leaving the country owing to NATO’s 2011 intervention there. Yet while countries such as Libya appeal to Russia as an investment destination, Moscow also views security and political stability as preconditions for the influx of capital, thus putting certain limits in place.

Nuclear Energy

In contrast to the oil and gas industries, Russia’s nuclear industry has recorded successes in Africa. Rosatom, a state-owned nuclear energy company, is active in constructing nuclear power plants and helping African nations address their energy supply needs. In both economic and political terms, nuclear power plant projects are suitable investments for Moscow, as they create a dependency on its nuclear expertise and materials.

After a delay of several years, in July 2022 the concrete was poured for Egypt’s first nuclear power plant, which Rosatom will build in the town of El-Dabaa. The project was agreed to in 2017 by Russian president Vladimir Putin and Egyptian president Abdel Fattah el-Sissi, and is “the largest Russian-Egyptian cooperation project” since the 1950s. Although South Korea has introduced sanctions against Russia because of the Ukraine invasion, a state-owned Korean company, Korea Hydro & Nuclear Power, will provide turbine-related equipment and construction services at the El-Dabaa plant.

Other countries are also potential partners for the Russian nuclear energy industry and Rosatom going forward, as the continent’s growing population forces it to address the issue of energy supply, with potential clients including South Africa, Nigeria, Ethiopia, Ghana, Zambia, and Rwanda. It is worth mentioning that South Africa planned to build more nuclear plants, with Russia’s Rosatom as one of the bidders. One project was announced by former South African president Jacob Zuma, only to be canceled by his successor, Cyril Ramaphosa, in 2018 for being too expensive. In 2017, the South African High Court declared the contract between South Africa and Rosatom on increasing nuclear capabilities at South Africa’s only nuclear power station, Koeberg, to be unlawful.

Defence Industry

Speaking of creating dependencies, Russia’s defense industry plays a prominent role in Moscow’s economic collaboration with Africa. Between 2015 and 2019 the Russian government signed nineteen agreements related to military cooperation with African governments, focusing on weapon sales. Russia’s presence in the African arms market is expedited by the fact that many national army arsenals come from the Soviet Union when Moscow was a major weapon supplier to the continent. In addition, Russia does not place conditionalities on arms transactions framed around human rights and governance standards. From 2017 to 2021, Moscow provided almost half of Africa’s imported military equipment (44 percent), followed by the United States (17 percent), China (10 percent), and France (6.1 percent). Algeria, Angola, Burkina Faso, Egypt, Ethiopia, Morocco, and Uganda are among the largest buyers of Russian weaponry.

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