We know that we will spend between $1.5 and 2 Trillion to invade Iraq, occupy it and service our maimed and wounded soldiers in the hope of contolling Iraq’s oil. So what did the Chinese do with a mere fraction of that expenditure to assure their supply of oil? They used some those dollars we send them in interest payments and Walmart payables to lock up long term supplies in Africa.
Two CEOs I know—one at an oil company, the other at a gold miner—recently had strange encounters with Chinese counterparts. A Chinese oil company and its apparent partner, Standard Bank of South Africa, offered to buy a lot of oil for five years. It would be a direct sale—no middlemen, brokers or spot market involved. “They didn’t care about the price,” the oil executive says. “All they cared about was locking up the supply.”
The article shows how the Chinese have locked up supply all over Africa, just with a piece of paper, a contact stating they will buy all of the oil output at whatever the prevailing spot price is, for 10 years. They then introduce the local oil company to their local banking partners which lend the driller money against the Chinese contract. So while we have spent six years getting our ass shot off in Baghdad, the Chinese have been busy locking up much more oil than us without even writing a check and without getting their soldiers killed.
In Nigeria, a $2-billion (U.S.) infrastructure and energy deal gave the Chinese a 45% stake in the offshore Akpo field. This means the Chinese are entitled to 45% of the production. Deals of the same size or bigger have been negotiated in Sudan and Angola, with lesser deals in Algeria, Libya, Congo and Zimbabwe.