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Comparing Chinese Economic Statecraft in Angola and Brazil

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Comparing Chinese Economic Statecraft in Angola and Brazil The London School of Economics and Political Science China’s Oil Diplomacy: Comparing Chinese Economic Statecraft in Angola and Brazil Ana Cristina Alves A thesis submitted to the Department of International Relations of the London School of Economics for the degree of Doctor of Philosophy, London, June 2011 DECLARATION I certify that the thesis I have presented for examination for the MPhil/PhD degree of the London School of Economics and Political Science is solely my own work other than where I have clearly indicated that it is the work of others (in which case the extent of any work carried out jointly by me and any other person is clearly identified in it). The copyright of this thesis rests with the author. Quotation from it is permitted, provided that full acknowledgement is made. This thesis may not be reproduced without the prior written consent of the author. I warrant that this authorization does not, to the best of my belief, infringe the rights of any third party. 2 ABSTRACT This thesis aims to investigate the reasons for the variation in China’s oil diplomacy performance in Africa and South America in the period 2000-2010. Lacking sound experience in pursuing oil security overseas and enjoying strong financial muscle, China’s oil diplomacy is largely rooted in the extension of soft loans for infrastructure to oil-rich countries in exchange for steady oil supply and favoured access to oil acreage. Taking Angola and Brazil as case studies this thesis argues that differences in the institutional structure of the oil industry in each country, determined different outcomes regarding Beijing’s oil security goals. This thesis has found that although this template fitted well with the more centralised institutional environment in Angola, it was highly unsuitable for the more liberal and regulated Brazil setting. Furthermore, the advent of the recent global economic crisis (2008-2009) caused China to adjust its approach to the institutional particulars of Brazil becoming more efficient in that country regarding its oil security goals. Building on foreign policy analysis tools and concepts, an empirical analysis of the interplay between Chinese infrastructure-for-oil loans (hereby regarded as positive economic statecraft) and the institutional structure it met in each country, is presented. Through the case studies, this thesis aims to uncover to what extent the institutional context constrained Chinese oil diplomacy efficiency in Brazil for most of the past decade, and how innovation has surfaced in the context of the global financial crisis. This analysis thus gives interesting insights not only into the dynamics of China’s oil diplomacy in Africa and South America, but also into Chinese economic statecraft in general and how constraints that surface at the implementation level feedback into foreign policy formulation. 3 ACKNOWLEDGEMENTS I would like to express my profound gratitude to my supervisor, Dr. Christopher Alden, for his critical guidance, constant encouragement and enduring patience throughout this long process, and also for providing me with many opportunities to develop my knowledge and publish in this area of study. I would also like to thank Prof. Christopher Hughes, my co-supervisor, for his important advice and support in spite of my many blackouts. I also owe a word of thanks to Prof. Li Anshan at Peking University for supervising my fieldwork in China, and to Prof. Henrique Altemani for providing critical contacts for my research in Brazil. I am also highly indebted to Susana Moreira, a very dear friend and colleague, for her constant support and precious advice whilst reviewing all my writings from the first year to the completed thesis. A word of gratitude is also due to Georges Landau for reviewing the Brazil case study and Jose Oliveira for doing the same with the Angola case study. I am very grateful to Fundacao para a Ciencia e a Tecnologia (scholarship: SFRH/BD/21128/2006) and Instituto Superior de Ciencias Sociais e Politicas/Universidade Tecnica de Lisboa (ISCSP- UTL), for having jointly funded my work for four years. Special thanks are due to ISCSP-UTL, my ‘home school’, for granting me leave throughout this long period of time, and to the South African Institute of International Affairs (SAIIA), for the enduring support in the last stages of this project. Very special thanks are due to Prof. Narana Coissoro (Instituto do Oriente/ISCSP-UTL) - my mentor for many years - for encouraging me to pursue a doctoral degree abroad at the expense of Instituto do Oriente, and also for his constant support. Finally I am very grateful for the steady support of my relatives and close friends that kept me going at hard times. These individuals include my parents, Ana Fino, Andrea Valente, Jorge Lasmar, Jeff Reeves, Ramon Pacheco-Pardo, Soraia Rodrigues, Susana Chaves, Tania Martins and Thomas Giles. Last but not least, very special thanks are due to Rudolph Britten, who despite enduring months of neglect in the final phase of this project, was always very supportive and positive. 4 TABLE OF CONTENTS CHAPTER 1: INTRODUCTION ................................................................................................................................ 12 1.1. SUMMARY ........................................................................................................................................................... 12 1.2. SETTING THE CONTEXT ............................................................................................................................................ 13 1.2.1. China’s rise at the world stage ..................................................................................................... 13 1.2.2. The primacy of energy security concerns ..................................................................................... 15 1.2.3. Targeting developing regions ....................................................................................................... 18 1.3. ANALYTICAL FRAMEWORK : FOREIGN POLICY ANALYSIS .................................................................................................. 21 1.3.1. Foreign policy analysis and theoretical approaches to Chinese Foreign Policy ............................ 21 1.3.2. Foreign economic policy: economic diplomacy and economic statecraft .................................... 24 1.3.3. Foreign policy implementation ..................................................................................................... 30 1.3.3.1. Conceptualising the host institutional context .................................................................................................... 32 1.3.4. Learning and adaptation in foreign policy ................................................................................... 36 1.4. THE USE OF POSITIVE ECONOMIC STATECRAFT IN CHINA ’S OIL DIPLOMACY ......................................................................... 39 1.4.1. The economic drive and pluralisation of actors in Chinese Foreign Policy ................................... 39 1.4.2. Energy security in CFP: unpacking the domestic institutional structure....................................... 43 1.4.3. Infrastructure-for-oil loans as positive economic statecraft ........................................................ 48 1.5. METHODOLOGICAL NOTES ....................................................................................................................................... 54 1.5.1. Research question and hypothesis ............................................................................................... 54 1.5.2. Justifying the case studies ............................................................................................................ 56 1.5.3. Research methodology ................................................................................................................. 58 CHAPTER 2: CHINA’S ECONOMIC STATECRAFT IN SOUTHERN AFRICA AND SOUTH AMERICA: FROM IDEOLOGY TO RESOURCES .......................................................................................................................................................... 60 2.1. HISTORICAL BACKGROUND OF CHINA ’S FOREIGN POLICY TOWARDS THE DEVELOPING WORLD ................................................ 60 2.1.1. The Maoist period (1949-1977): ideology primacy ...................................................................... 62 2.1.2. The reform period (1978-1999): economic pragmatism awakening ............................................ 65 2.2. RESOURCES DRIVE IN CHINA ’S ECONOMIC STATECRAFT TOWARDS SUB -SAHARAN AFRICA AND SOUTH AMERICA ...................... 70 2.2.1. China’s charm offensive ............................................................................................................... 71 2.2.2. Uncovering economic complementarities .................................................................................... 74 2.2.3. Resources factor in bilateral trade ............................................................................................... 77 2.2.4. Resources factor in China’s investments overseas ....................................................................... 85 2.2.5. Resources factor in China’s economic statecraft .......................................................................... 90 2.3. CHAPTER CONCLUSIONS .......................................................................................................................................... 99 CHAPTER 3: COMPARING
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