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« Ozodi Osuji Lectures #16: Nigeria and International Relations | Main | Ozodi Osuji Lectures #17: Nigeria and International Organizations »

October 21, 2005

America’s National Security & Nigeria's National Security: Free Market, Forces of Demand & Supply Are Now Irrelevant?

by Paul I. Adujie (New York, United States) --- A major economic transaction of monumental proportions occurred in the first ten days of August, 2005; $18 billions dollars worth! And it was between the Americans and the Chinese; it was botched by pressures emanating from the Americans against the Chinese. The Chinese company is CNOOC and the American company is Unocal Corporation.

These strong-arm tactics on the part of the Americans ended the several month long negotiations in connection with the gargantuan petroleum oil deal, which was really between a Chinese company and an American counterpart, until external forces seeped in

The aforesaid transaction was transcontinental, it involved pure economic, gallons and barrels of petroleum oil, and it was supposed to be determined, ordinarily in the natural cause of events, by the tenet and ideals of the ubiquitous free market, of demand, supply and all. But those fine points of economic theories were summarily jettisoned.

Some American forces, outside of demand and supply chain of economic command, arbitrarily interfered and truncated the this purely economic transaction between an American company and a Chinese company, simply put, the same Americans who are quick to lecture the rest of the world about opening up markets, free markets and fair trade, where demand and supply reign supreme, actually found themselves resorting to extra legal, extra economic, big stick jungle justice, whereby, the American political leadership, some business leaders with Congressional Action invoked national security argument, as poor excuse, why the sale of goods and services by an American company should not go to the highest bidder, just because it happens to be a Chinese!

The American action was reminiscent of similar American overreaction and panic about twenty-years ago, during a period in which Japan experience major economic boom and as a result, Japanese individuals and their companies were splurging as they bought up many major landmarks real estate in American cities, especially New York City’s Rockefeller Plaza/Center skyscrapers. And suddenly! There was uproar! with, Oh, the Japanese are buying up America! Oh the Japanese now own everything sort of phobia.

When this summer, this oil deal negotiations between the Americans and the Chinese, was in progress, this old phobia was resuscitated and it finally truncated the sale. All Americans who were opposed to the sale to the Chinese company were quick to disregard every economic parameter and the usually talkative economists of Harvard Business School and elsewhere in the US, were all deathly silent!

Even the Nigerians who would want Nigeria to sell all of our national assets in the name of privatization, deregulation and removals of subsidies, were not commenting on, this usual usurpation of pure economic transactions, by politicians who were invited in, by private business concerns, who were desperate in their efforts to circumvent economic forces of the free market place, where the American business had been outbid by a Chinese competitors.

So, as it happened, the month of July and the first ten days of August 2005, was spent by this writer, observing the melodrama, resorted to by the Americans who wanted to thwart the transactions. As the American and Chinese transactions unfolded, then botched and unraveled, due the underhand chicaneries of deals, all aimed by the Americans, at thwarting the deal to the disadvantage of the Chinese, who were eventually pushed to the proverbial wall, but of course the Chinese were compelled to withdrawn and abandon their bid, which was higher, it was all about comparative strategic advantage over petrol-politics and it would appear that the Chinese chose to run away, just so, they could fight more effectively another day, while also marking down for history books, the precedent that the Americans have set with their admixture of economics with politics, in this crude oil, crude politico-economic petrol-politics of a mega transaction, that was worth eighteen billion whopping US Dollars!

CNOOC the Chinese oil conglomerate, sought to purchase an oil giant company with multi-various tentacles, and the Americans, thinking too far ahead, panicked and through blackmail and subterfuge, threw everything into the bargain, including the kitchen sinks of political intervention by the US Congress which summarily designated a pure business transaction with the speedy appellation it became ….known as, national security inspired defense of America ... a la French fries conversion to Freedom fries! Because the French had opposed the America’s invasion and occupation of Iraq, French Fries, was renamed!

While I followed and watched this oil saga of a transaction between the Americans on the one hand and the Chinese on the other, another oil transaction was unfolding in Nigeria, involving the Nigerian government agency which handles the Nigeria’s oil and petroleum businesses. Part of this transaction involved oil prospecting in Sao Tome, and there was competition between foreign oil companies and the growing consortium of indigenous oil prospecting companies in Nigeria.

And so it was that I received an email from a Nigerian in Nigeria, Mr. Jude Iyamabo who wrote the following, ..Quote I will appreciate it if you can comment on the attached document. I am trying to relate it to a recent Washington post editorial which alleged that President Obasanjo’s is been held hostage by Nigerian businessmen. Reason: many indigenous Nigerian oil companies for the first time in Nigeria’s history won lucrative oil blocks in Joint Development Zone (JDZ) of the Gulf of Guinea against the practice in the past where only multinational oil companies walk in and won the entire oil block on concessions.

While the American/Europeans claimed that the bidding process was not transparent, the Sao Tome and Principe’s government says that they considered more than the financial bids, technical competent and signature bonuses. One of the factors the Joint Development Zone Authorities (the agency which handled the bid) put into consideration was Nigerian/Sao Tome and Principe’s governments’ policy to get more indigenous players involved in their oil and gas industry. This policy is in continuation of both governments’ desire to open up the oil and Gas sector to more players and has been responsible for the recent entrance of the Brazilians, Chinese, Indians, Malaysians and South Africans into the Nigerian oil industry. I will like to believe the Nigerian government. Unquote.

This revelation and eye-opener, is shocking! It is as if the Americans and Europeans are perpetually telling us what to do, and usually something they would never ever do themselves! It is analogous of do what I say and not what I do? It is clear that the Americans frustrated the Chinese out of a legitimate oil business deal, where the Chinese, for all legitimate business purposes, were the highest bidder, and the Chinese conducted themselves fairly and properly in consonance with all the rules and precepts of free market, free economy and all the nary details of demand and supply, but, political intervention from high places, including by members of the US Congress, who argued that the simple oil business transaction portended some elephant size implications for US national security!

With that fiat or national security fatwa, and political pressures from the top, the fair deal, that had appeared a done-deal, for the Chinese, was aborted summarily! All this despite the Chinese bidders, Unocal Corporation haven been the highest bidder in the transaction under review. Then, as the deal was aborted and botched by the Americans against the Chinese, Chevron the American giant oil company and conglomerate got the sweet deal, despite its partnership with China in other oil deals, and this, regardless of the fact that, Chevron offered a lower bid for the purchase! Chevron’s offer that was then accepted was billions lower than the $18billion that the Chinese had offered!

Why are all this important at all to us? Nigeria and other developing countries are engaged in privatization and deregulation, including the removal of subsidies, and frequently, the purchasers of these national assets that are being sold off, in Nigeria and in other developing countries, are snapped-up, in rock-bottom bargain prices, by multinational companies, that are not of, Nigeria or of, any of these developing countries that are selling off, national assets without deliberative contemplations of national security implications of unbridled sale of their national assets and public infrastructures.

And what is worse? These multinational companies are now the same ones, whose home governments are quick to announce and pronounce political and economic fatwa of national security proportions and arbitrarily deny the Chinese of legitimate business transactions, in which the Chinese were the highest bidder. It should now be clear, that those who are happy to buy or acquire our national assets at cheap prices and ridiculous bargains, are unwilling to sell their assets, even to the highest bidder, if the bidder is not politically suitable geographically!

We see in this, brazen hypocrisy and double standards, including selective application of free market concepts, of demand and supply rules, fair trade or noninterference in business transactions by political leaders. It gets egregiously worse, when the comments ascribed to Washington Post is added to all these. The Washington Post is said to have commented that President Obasanjo of Nigeria is being held hostage, by local businesspeople, who as Nigerian citizens, want a chance to participate in Nigeria’s booming oil business, which, if truth be told, is currently being dominated and controlled by foreign oil companies. Foreign oil companies have operated for decades without plans for backward integration; there is no local input, in terms of local personnel and materials. Granted that oil prospecting, exploration and exploitation are capital intensive, requiring foreign partnering, even so, Nigerian engineers, geologist and seismologists ought to form the bulk and backbone of this crucial sector of Nigeria’s economy.

But instead, foreign oil companies have for the most part, operated as if they are mercenaries who are splendidly uninterested in the health and wealth of the locales, locales that are polluted, degraded and ruined with endless oil spillages, gas flaring, while these companies add no value to the lives of the people.

These foreign companies do not even pretend to be responsible or good corporate citizens of Nigeria! These companies are not contributing to public infrastructures, as they rather would engage in improperly influencing the authorities or sometimes resort to hiring thugs for protection, when their mercenary-type shortsighted policies returns to bite them.

It is time to wrest the Nigerian oil sector from foreign domination as such control by foreign concerns, have been the case for decades of Nigeria’s oil prospecting and exploration, exploitation. There have been no long term benefits, by way of technology transfer to Nigerians or enhancements of industrial processes as a byproduct of the oil sector in Nigeria.

The Americans have just showed Nigerians and the rest of the world, in their dealings with a Chinese oil company, that American oil companies represents American national interests and we, as Nigerians must be awake to our national security interests as well!

Nigerians must then learn to disregard the antics of commentaries such as the one that emanated from the Washington post regarding President Obasanjo efforts in the oil sector

Clearly, the Americans seem to chose when demand and supply or the so-called rules of free market are relevant or when the selectively deem such concepts irrelevant, regarding American agricultural products which America heavily subsidizes, as they do steel, aircrafts and many other American products, which also now include oil prospecting.

Considering all the above, it is crucially important that Nigerians support the efforts by President Obasanjo to elevate participation by Nigerians and indigenous Nigerian companies in the downstream and upstream sectors of Nigeria’s oil prospecting, oil exploration and exploitation. This means Nigeria’s oil wealth circulate among more Nigerians.

It also means nurturing and protecting Nigeria’s national security interests imbued in our oil wealth and when it pleases Nigeria, Nigeria must also dispense with demand and supply theory, or free market concepts, when we determine that such concepts run counter to Nigeria’s national security interests!

Paul I. Adujie

New York, United States

Posted by Administrator at October 21, 2005 12:30 PM


This poorly written diatribe doesn't merit a response, but I would make the observation that Nigerians led by President Olusegun Obasanjo have been very, very rigorous in demanding that domestic explorers and producers have a role in Nigeria's upstream oil. As is clear from the way ExxonMobil was rejected in Block 4 of the JDZ and Devon Energy dropped out of Block 3, US companies are being treated like any any other and are paying high signature bionuses for the privilege of working in Nigerian waters. Chinese comapnies come with tremendous amounts of baggage that can soon extend to political control as they gain a stronger grip on influential Nigerians. They reject democracy and reject criticism of any kind. If Nigeria wanted to take a block back from a Chinese company to which it hasd once been awarded, it might have to fight the Chinese Army and Navy to do so. American companies sufficiently respect the rule of law and the force of democratic opinion that they weill relinquish a block without resort to military action. I would advise Nigerians to look askance at people like this author who invite Chinese hegemony in Nigeria's oilfields. How many Nigerians want to live in Beijing?

Joe Shea
The American Reporter

Posted by: Joe Shea at October 22, 2005 06:20 PM

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