Oil Sanctions Against South Africa

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Alternative title Notes and Documents - United Nations Centre Against ApartheidNo. 12/78 Author/Creator United Nations Centre against Apartheid; Bailey, Martin; Rivers, Bernard Publisher United Nations, New York Date 1978-06-00 Resource type Reports Language English Subject Coverage (spatial) South Africa Coverage (temporal) 1971 - 1978 Source Northwestern University Libraries Description Oil in South Africa. South Africa's oil requirements. Sources of South Africa's oil. The oil industry in South Africa. South Africa's vulnerability to an oil embargo. The impact of an oil embargo on South Africa's neighbours. Attempts to impose oil sanctions against South Africa. An effective embargo. Format extent 97 page(s) (length/size)

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http://www.aluka.org TES AND DGUM!J1kS*

TES AND DGUM!J1kS* A ricanaune 19 OIL SANCTIONS AGAINST SOUTH AFRICA by Martin Bailey and Bernard Rivers ** This study was prepared and published at the request of the Special Committee against Apartheid. Mr. Bailey and Mr. Rivers are British economists who have done extensive research on the economies of southern Africa and have published a study on the violations of United Nations sanctions against Southern Rhodesia. The views expressed are those of the authors. * All material in these notes and documents may be freely reprinted. Acknowledgement, together with a copy of the publication containing the reprint, would be appreciated. 12/78

TABLE OF CONTENTS Page LIST OF TABLES ...... 3 LIST OF ABBREVIATIONS ...... 5 NOTE CONCERNING QUANTITIES AND PRICES ...... 6 INTRODUCTION ...... 7 CHAPTER 1: OIL IN SOUTH AFRICA -- Al OVERVIEW .... 9 CHAPTER 2. SOUTH AFRICA'S OIL REQUIREMENTS . . 13 2.1 The importance of oil as an energy source . 13 2.2 Oil consumption by sectors of the economy . 14 2.3 Military use of oil ...... 19 2.4 Predictions of future oil needs ...... 21 CHAPTER 3: SOURCES OF SOUTH AFRICA'S OIL ...... 23 3.1 Quantities ...... 23 3.2 Sources ...... 24 3.3 Shipping ...... 29 CHAPTER 4: THE OIL INDUSTRY IN SOUTH AFRICA ..... 30 4.1 The companies ...... 30 4.2 Refining ...... 40 4.3 Distribution . i...... 44 4.4 The role of the South African Government in the oil industry ...... 46 Pa CHAPTER 5: SOUTH AFRICA'S VULNERABILITY TO AN OIL EMBARGO ...... 50 5.1 Dependence on imported oil ...... 50 5.2 Oil exploration ...... 50 5.3 Oil--from-coal ...... 51 5.4 Stockpiles ...... 55 5.5 Reduction in consumption ...... 58 5.6 Conclusion ...... 60 CHAPTER 6: THE IMPACT OF AN OIL EMBARGO ON SOUTH AFRICA'S NEIGHBOURS ...... 61 6.1 Namibia ...... 61 6.2 Rhodesia ...... 62 6.3 Swaziland ...... 64 6.4 Botswana ...... 64 6.5 Lesotho ...... 67 6.6 Other countries ...... 69 6.7 Ship's bunkers ...... 70 6.8 Assistance for South Africa's hostages. 70 CHAPTER 7: ATTEMPTS TO IMPOSE OIL SANCTIONS AGAINST SOUTH AFRICA ...... 72 7.1 Initial attempts ...... 72 7.2 The 1973 embargo ...... 73 7.3 Assistance from the "majors" ...... 74 7.4 Current suppliers of South Africa's oil 77 CHAPTER 8: AN EFFECTIVE EMBARGO ...... 79 8.1 An OPEC embargo ...... 79 8.2 A United Nations embargo ...... 81 8.3 Costs of the embargo ...... 84 CHAPTER 9: SUMMARY AND CONCLUSIONS ...... 8 MY OF SOUTHERN AFRICA ...... 88

-3- LIST OF TABLES Table 1A: Estimated oil flows into and out of South Africa, 1978 Table 1B: Flow diagram :stimated oil flows into and: out of SouthAfrica,1978...... Table 2: Energy consumption within the final consuming sectors of South Africa and Namibia, broken down by source and consumption sector, 1974 . . . #...... Table 3: Percentage of energy consumption which is provided by oil for each of the final consuming sectors in South Africa and Namibia, 1974 ...... Table 4: Oil consumption within the final consuming sectors in South Africa and Namibia, 1974 . . . . . Table 5: Number of road vehicles in South Africa and,..... Namibia, 1970 and 1975 ...... Table 6: Estimates of South Africa's crude oil imports, 1971-75 Table 7: 14ajor sources of South AfricaTs crude oil imports, 1972 T-%'le 8: United Nations estimates of exports of crude oil -to South Africa, 197. and 1975, by source ...... Table 9A: Analysis of tanker supplies to Durban, January to October1977...... o ...... Table 9B: Tankers delivering oil to Durban, January to October 1977 Table 10: Table 11: Table 12: Table Table Table Table Table 17: IM1embers of the Iranian Consortium ...... Exports of oil products from OECD countries to South Africa, by category, 1975 ...... Exports of oil products from OECD countries to South Africa, by source, 1975 ...... Market shares of the oil companies in South Africa . . Ownership of the five main oil companies in South Africa Ownership of the smaller oil companies in South Africa Principal subsidiaries of the five main oil companies in South Africa . . . . . 0.... * ...*. . Principal subsidiaries of the smaller oil companies in South Africa ...... 0 ...... 11 12 17 18 A 24 25 A 25 B 26 A 26 B-C 27 A 27 -2, 28 31 * 32 * 33 34-35

Investments in South Africa; by the five main oil companies...... Oil refineries in South Africa ...... Estimates of South Africa's production of refined oil products, 1975 ...... South Africa's principal petrochemical plants...... Anticipated output of the Sasol II oil-from-coal plant Oil stock levels of selected OECD countries in 1975 S-aziland's imports of liquid oil products, 1973' and 1974 ...... *.....*#A Botswana's imports of oil products, 1975 and, 1976 .... Lesotho's imports of oil products, 1973...... Page Table 18: Table Table Table Table Table Table Table 25: Table 26:

-5- LIST OF ABBREVIATIONS ANC African National Congress of South Africa b/d barrels per day BP British Petroleum Capref Central African Petroleum Refineries CFP Compagnie Franqaise des Ptroles EEC European Economic Community IDC Industrial Development Corporation Moref Mobil Refining Company Southern Africa Natref National Petroleum Refiners of South Africa NIOC National Iranian Oil Company OAU Organization of African Unity OECD Organization for Economic Co-operation and Development OPEC Organization of Petroleum Exporting Countries Safmarine South African Marine Corporation Safor South African Oil Refinery Sapref Shell and BP South African Petroleum Refineries SAR South African Railways Sasol South African Coal, Oil and Gas Corporation Socal Standard Oil of California Soekor Southern Oil Exploration Corporation Sonap Soqiedade Naqional de Petr6leos Sonarep Soqiedade Naqional de Rafinaqdo de Petrdleos Swakor South West Africa Oil Corporation SWAPO South West Africa People's Organization UAE United Arab Emirates

-6- NOTE CONCERNING QUANTITIES AND PRICES Oil is measured by volume (barrels, barrels per day, gallons, or litres) or weight (metric tons). This report usually refers to barrels. The conversion from volume to weight depends upon the density of the crude oil or oil products. The conversion rates below, which have been used throughout this report, except when otherwise stated, are based on the density of Iranian light crude. To convert barrels to tons, divide by 7.37 To convert barrels to litres, mulitply by 160 To convert barrels to US gallons, multiply by 42 To convert barrels to Imperial gallons, multiply by 35 To convert barrels per day (b/d) to tons per year, mulitply by 49.5 The currency unit normally used in this report is the South African Rand. The mean exchange rates against the US dollar since 1950 have been as follows: 1950-1971: Rl.oo=$1.40 1972: R1.OO = $1.30 1973: R1.00=$1.44 1974: RI.0=$1.47 1975: R1.00=$1.37 Rl.00 = $1.15 Since 1975 :

- 7 -- INTRODUCTION Oil is the one vital raw material which South Africa does not possess. Yet without the continued supply of oil, the South African economy would rapidly grind to a halt. Fuel is essential for transport, industry, and agriculture. Oil is also refined into products other than fuel - ranging from bitumen to lubricants which are required in almost all sectors of the economy. Finally, oil has an immense strategic importance: fuel is essential for the mobility of South Africa's army, navy, and air force. South Africa is extremely dependent on imported oil. If the international community is united in its determination to apply economic pressure against South Africa, then oil appears to be the most effective instrument to use. The costs to the international community of an oil embargo wou'id be relatively low; yet the effect on South Africa would be enormous. This report represents the first evaluation of the feasibility of an oil embargo against South Africa to have been published since a short paper which was presented at a conference in 1964. j/ It does not attempt to analyse the political question of the timing of an oil embargo against South Africa. It is purely concerned with the technical feasibility of such a move. To begin with, however, it would be useful to distinguish three different circumstances in which the United Nations Security Council might decide to impose oil sanctions against South Africa: 1. To seal the loophole in the existing UN oil embargo against the illegal regime in Rhodesia. All of Rhodesia's oil requirements are now supplied by South Africa, and the most effective way of ensuring that oil to Rhodesia is cut would be to extend the embargo to include South Africa itself.?/ l/ Brian Lapping, 'Oil Sanctions Against South Africa', a paper contained in Sanctions Against South Africa (editor: Ronald Segal) (Harmondsworth: Penguin, 1964). Lapping's paper is now very dated, having been written fourteen years ago when South Africa's oil consumption was much lower and when the political map of southern Africa was very different. / This is elh- rated on in Section 6.2.

-8 2. To hasten the withdrawal of South Africa from Namibia. Sanctions against South Africa would certainly represent an effective form of pressure to help end the illegal occupation of Namibia. 3. To force the South African Government to introduce meaningful steps towards dismantling the apartheid system. -9 1. OIL IN SOUTH AFRICA - AN OVERVIEW Remarkably little information has been published on the oil industry in South Africa. This is mainly because the Government is so aware of the strategic importance of oil to the Republic, that it has extended the Official Secrets Act to cover almost anything to do with the oil industry. Just one example of the effect of this was provided by Mobil in 1976. The New York herd office of the company claimed before a United States Senate Sub-Committee that the President of Mobil's international division would have been in danger of being arrested as a foreign agent if, during a visit to their wholly-owned South African subsidiary, he had inquired too closely into the identity of its principal customers. j/ As the likelihood of oil sanctions against South Africa has increased, so it has become even more difficult to obtain information on the oil industry in the Re- _blic. Statistical data is particularly scarce. Since 1973, for instance, no details of oil imports or exports have been provided in South African official trade statistics. Yet in considering the feasibility of an oil embargo against the Republic, it is essential to have relatively accurate data on matters such as the level of South Africa's imports, the identity of its suppliers, the country's potential for producing different oil products from the imported crude oil, the extent of its dependence on oil in different sectors of the economy, the size of the country's oil stockpile, and so on. This study attempts to provide estimates of these and other basic statistics, all of which are necessary in order to analyse the feasibility of an oil embargo against South Africa. Many different sources have been drawn upon, and compared and contrasted, in an effort to deriie these statistical estimates. Table 1A lists the authors' best estimates for 1978 of the quantities of oil imported, consumed, and exported by South Africa. Figures are given in barrels per day (b/d), the measurement normally used in this report. All quantities are also shown as a percentage of 420,000 b/d, which is our estimate for South Africa's current rate of total oil importation (plus local oil production out of coal). Table 1B shows the same data, but in the form of a flow diagram, which makes it easier to see the relative proportions involved. These two tables represent the first published statistical overview of South Africa's use of oil. The statistics, and how they were calculated, are examined in later sections of this report. It should be understood that although some of the figures given are known with some precision, others are inevitably somewhat approximate. 2/ George Birrell, General Counsel of Mobil Corporation, testifying before the US Senate Subcommittee on Africa, 17 September 1976.

- 10 - Some of the terms used in tables 1A and 1B should be clahified. "Crude oil"is oil as it is extracted from the ground in the oilproducing countries. "Oil roducts"cover the various products into which crude oil is converted in refineries; some of these are fuels (petrol, diesel fuel, etc), and others are non-fuels (lubricants, solvents, etc). Oil products produced in South Africa (or imported into the Republic) are then used in three different ways. First, some are exDorted, both to other members of the Southern African Customs Union (Botswana, Lesotho, and Swaziland), and further afield. (Shis' bunkers also count as an export, because the oil is used to fuel ships sailing on the high seas.) Secondly, small quantities of oil products are used domestically in the conversion sector. Here they provide the fuel to power oil refineries ar.1 other installations which convert energy from one form to a more convenient one (eg coal into gas). V_/ Finally, the bulk of the oil products are used in the final consuming sectors of the South African and N&- aibian economies - for transport, for household use, for mechanised agriculture, and so on. 5/ 4/ About 7 per cent of all the oil input to oil rifi.,ries is consumed as refinery fuel, while a further 1 per cent goes to 'refinery loss'. (The Outlook for Energy in South Africa, Pretoria: Department of Planning and the Environment, 1977, p. 62.) 5/ Within this report, oil consumption within Namibia has not been separated out from oil ccnsumption within South Africa. The former constitutes only about 2-3 per cent of the total.

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- 13 - 2. SOUTH AFRICA'S OIL REQUIREMENTS 2.1 The importance of oil as an energy source Oil is extremely important to South Africa although it provides only about a fifth of the country's domestic energy needs. There are two main reasons for this low proportion. First, South Africa has considerable coal reserves. Given the extremely low wages paid to black miners, this makes South African coal among the cheapest in the world. Secondly, South Africa has no oil of its own, and the Government is extremely sensitive to the possibility of an oil embargo being imposed. As the Managing Director of the Industrial Development Corporation has stressed, "dependence on imported fuel is one of South Africa's most vulnerable points", and major efforts have been devoted to minimizing this weakness. _/ The 20 per cent of South Africa's energy which is provided by oil therefore represents an almost irreducible minimum, unless there is to be a major economic recession. Certain sectors of the economy which are currently dependent on oil cannot convert to other energy sources; others could only do so at considerable expense. Some of South Africa's coal is consumed in its original form; the rest is used to generate electricity, or is consumed after conversion to coke and other coal derivatives. South Africa is enormously dependent on its coal. However, there is a serious problem to be faced which is little appreciated by the South African public. Prcfessor W.C.J. van Rensburg, Director of the Institute of Energy Studies of the Rand Afrikaans University, has pointed out thst although South Africa has about 90 billion tons of coal in the ground, only 25 billion tons can be extracted by existing methods. According to Professor van Rensburg, it is now officially considered that by about 1990 coal production will be insufficient to meet the country's needs. 7_/ Table 2 shows how the overall use of energy within the final consuming sectors of the South African and Namibian economy is divided between different types of consumer. Sixty-two per cent of all energy is consumed in the industrial and commercial sectors, 14 per cent in the household and agricultural sectors, 11 per cent in the mining 'etor and 13 per cent in the transport sector. Twenty per cent of all energy used in the final consuming sectors is provided by oil, 32 per cent by electricity, 21 per cent by coal, and 27 per cent by coal derivatives. Most of the electricity / Quoted in Barbara Rogers, White Wealth and Black Povert,(Westport), Connecticut: Greenwood, 1976), p. 141. _ Sunday Times (Johannesburg), 6 November 1977. This point is also emphasized by Bill Marshall Smith, Chairman of Caltex-South Africa in tynyae~ment, July 1977.

Table 2 Energy consumption within the final consuming sectors of South Africa and Namibia, broken down by source and consumptiOn seoor 1974 Source Coal Oil Electricity Coal Derivatives Total Industrial & Commercial % 14% 16/6 27% 62% Household&Agricultural 4% 7% V 0% 14% Riaing if. 91% 1% 0% 11% Transport 10% 2% 1% 0%10 Total 20% 32% 2% 27% 100% Note, This table excludes wiargy consumed: (a) for ships' bunkers (which technically counts as an export), and (b) in the conversion sector (e.g. fuel consumed as part of the refining process). 4"Ure: Derived from data in Appendix D of The OUtl " or EnrY in South Afrif (Pretoria:Department of Planning and the Environmentl, 1977)(s) 8/ (a) 'boal derivatived means coal-gas, other coal-derived gases, coke, and gas- coke. (b) The table refers to what the South African Department of Planning and the Environment refers to as "useful" energy (energy actually produced when used in the final consuming sectors), rather than 'net' energy (energy made available to those sectors). The difference between the two is the loss of energy at the point of consumption. - 14-

- 15 - is produced in coal-burning power stations, though small amounts are also generated from two hydro-electric projects, and a nuclear power station is due for completion at Koeburg in 1983. 9/ Thus, directly or indirectly, a coal is responsible for providing 75 to 80 per cent of South AfricaTs present energy needs. 2.2 Oil consumption by sectors of the economy Table 3 shows, for each of the final consuming sectors of the South African and Namibian economies, what proportion of its energy needs is provided by oil. It indicates how the major part of all transporation energy is provided by oil, whereas only a small percentage of industrial and commercial energy comes from oil. Table 4 gives the consequential breakdown by sector in the overall use of oil in the final consuming sectors of South Africa and Namibia. The industrial and commercial sector is the principal consumer of energy in the South African economy (as shown in Table 2). This sector is only dependent on oil for 8 per cent of its energy needs (Table 3). Oil consumption in this so t came to 35,900 barrels per day (b/d) in 1974 (Table 4). This involved mainly light and heavy furnace oils, diesel fuels, kerosenes, and liquid petroleum gas. These products, which are usually employed as heating fuels or in stationary engines, became increasingly important for these purposes during the early sixties for reasons of convenience. However, according to the South African Department of Planning, "the wellknown events of 1973 _-the price rises and the Arab oil embargo7 reversed the situation completely, causing a decrease in the popularity of oil as a fuel "in this sector. Ll/ As a result, the most obvious areas in which coal can be substituted for oil have probably now been exploited, although the Department of Planning rather optimistically assumes that a steady decrease in the absolute amount of oil consumed within this sector is possible through the rest of the century. L/ Oil is also needed by the industrial sector for certain non-energy requirements. An obvious example of thi- is in the petrochemical industry, whose products are used in so many different industrial processes, and which would collapse without petrochemical feedstock. In addition, virtually all machines in the industrial sector would be inoperable without lubricants. 9/ Petroleum Economist, February 1978, p. 58. o Converted at the rate of 8.00 barrels per ton. ll/ The Outlook for Energy in South Africa, op.cit., p.14. 12Ibid., p. 15.

- lb - Table 3 Percentage of enerm consumption which is provided by oil- for each of the final consuming sectors in South Africa and Namibia., 1974 Note: This (a) (b) table excludes energy consumed: for ships bunkers (which technically counts as an export), and in the conversion sector (e.g. fuel consumed as part of the refining process). Source: Extracted from tables in Appendix D of The Outlook for Enermy in South Africa (Pretoria: Department of Planning and the Environment, 1977). Percent of energy Percent of energy used Sector used which is which is provided by Total provided by oil non-oil sources Industrial & Commercial 8% 92% 100% Household & Agricultural 28% 72% 100% Mining 3% 97% 100% Transport 79% 21% 100% Overall 20Y 80/ 100%

- 17 - Table 4 Oil consapmtion within the fir al co-%mir sectors in Soi~th Afri VA4 Almtbia, 19_74 Tons Urrels Proportion of total Sector (million) per day quantity of oil used in the final consuming sectors Industrial & Commercial 1.64 35 900 17% Household & Agricultural 1.42 31 100 1VO Mining 0.18 3 900 21 Transport 6.33 138 700 66% Total 9.58 210 000 100% Xt: This-table excludes oil consumed (a) for ships bunkers (which technically counts as an export), and (b) in the conversion sector (eeg. oil consumed as part of the refining process). Loc Derived from the 1974 Energy Balance in The Outlook for Ener=y in South Africa (Pretoria: Department of Planning and the Environment, 1977). - 18 - The household and agricultural sectors consume 14 per cent of South African energy (Table 2). Of this, the household sector is responsible for the majority. Most household energy needs are provided by electricity, but oil products are needed in the form of illuminating paraffin and liquid petroleum gas. The total oil consumption of the household and agricultural sectors in 1974 was 31,100 b/d (Table 4). The agricultural sector, despite its relatively modest total energy needs, is highly dependent on oil products, mostly in the form of tractor fuel (light diesel fuel, and a small amount of power kerosene). Twenty thousand six hundred barrels per day was used by the agricultural sector in 1974. 1/ 14hite-owned farms use considerable mechanized equipment, and also depend on petrol and diesel fuel to transport their goods to the railways for distribution. There seems little possibility tha b there could be any meaningful cutback in oil supplies to the agricultural sector without having a serious impact on the country's crop production. South Africa's fishing fleet is also dependent on oil for fuel. The mining sector is a major consumer of energy (11 per cent of the national total). Electricity, produced at coal-fired power stations, provides the bulk of the energy for this sector (see Table 2); but oil provides a small and increasingly important part of the mining sector's energy needs. L/ Oil consumption came to 3,900 b/d in 1974 (Table 4). South Africa is, of course, dependent on the export of gold and other mining products for a substantial proportion of its foreign exchange. It is, however, the transportation sector which is most critically dependent on oil. This sector-covering road, rail and air transport, and local shipping - is dependent on oil for 79 per cent of its energy needs (Table 3), and takes 66 per cent of all oil used in the final consuming sectors (Table 4). In 1974 consumption was 138,700 b/d (Table 4). Eighty-seven per cent of the oil consumed in this sector was used by road transportation in 1974. L/ Table 5 shows how in the five years from 1970 to 1975, there was an increase of 48 per cent in the number of road vehicles within the country. The correlation between economic growth and vehicle ownership means that this sector will consume considerably more oil in the years to come. Indeed 1/ Derived from The Outlook for Energy in South Africa, oR.cit. Table 2. 6. 14 See The Outlook for EnerLY in South Africa, o_.cit., Table 2.26. 15 The Outlook for Energy in South Africa, 2.cit., p. 28.

- 18A - % Ulmber o& rMaI vehioje n Savth Africa a, iamjbia. 19704 & 75 1970 1975 Motoo.-oars 1 580 000 2 153 000 Buses and mini-buses 38 000 80 000 Commercial vehioles 457 000 832 000 Total 2 075. 000 3 065 000 Source: T, 19gtook ko Eep 4n S.ut) Afrio (Pretoria: Department of Planning and Environment), Table 2.11.

-19 - the South African Department of Planning predicts that the number of road vehicles will have risen three or four times by the year 2000. 16/ No realistic alternative to oil is in sight as a principal source of fuel for road transportation. A policy of phasing out coal-powered locomotives has been initiated by the South African Railways (SAR). SAR expecV to increase its use of both diesel-powered and electrically-powered locomotives, but given the increasing cost and uncertain availability of oil, most emphasis is being devoted to electrification. E_/ Air transportation, which is growing at a very considerable rate, is: totally dependent on oil for fuel. L/ 2.3 Military use of oil The statistical information provided in the previous section does not reflect the immense strategic importance of oil for the armed forces and police. Oil products are crucial for their mobility. i/ Indeed, Paratus, the journal of the South African Armed Forces, has pointed out that the concept of "mobile warfare.. .has made petrol a critical item in the time of operations." ?-/ The strategic significance of oil is emphasized by the fact that, under South African law, oil appears to be considered a 'munition of war'. This was suggested in legal advice which Mobil received from its South African solicitors: As oil is absolutely vital to enable the army to move, the navy to sail and the air force to fly, it is likely that a South African court would hold that it falls within...the definition of munitions of war. ?J/ Under the South African legislation it is an offence for any oil company operating in the country to refuse to supply the armed 2/ Ibid., Table 2.15. /Ibid., pp. 33, 37, 38. Ibid., p. 33. L/ South Africa's armed forces includeintr alia , O Centurion tanks, 1,600 Eland armoured cars, 16 naval ships and submarines, and 362 combat aircraft. See The 14jifr17 1Balance 1977-1978, (London: International Institute for Strategic Studies, 1977), p. 47.. 20/ Major J.A.H.J. Smith, Verspreiding van Petrol tydens Operasies', Paratus, August 1973, p.23 (our translation from Afrikaans). Extract (Section 3.3.3) from legal opinion prepared by Hfayman Godfrey & Sanderson (Johannesburg) for Mobil, dated 14 July 1976 (submitted by Mobil as part of its evidence to the United States Senate, 17 September 1976.

- 20 - forces. ?./ It is therefore likely that all the five oil 'majors' in South Africa - Shell, BP, Mobil, Caltex, and Total - regularly sell oil products to the military. Further details of these sales, based on confidential sources, were recently given by the Haslemere Group in testimony to the United Y'ations Special Committee against Apartheid: Total has the exclusive contract to supply the police. Mobil and Total provide the great majority of the fuel needs of the army and air force in Northern Transvaal which is the main area where these forces are based. Q/ South Africa's military dependency on imported oil was clearly demonstrated by an incident in November 1973. A tanker carrying aviation gasoline to South Africa was delayed for a few weeks in the Middle East. This fuel is not produced by any South African refinery, and since stocks were limited, privately-owned light aircraft through out the country were grounded until the tanker arrived. Thousands of these aircraft are organized together under the Air Commando system, and make up a vital element in the Government's "counter-subversion" measures. Clearly oil plays a crucial role in sustaining the repressive forces of the South African State. As Reg September, a representative of the African National Congress (ANC) in London, has pointed out: oil sold by the Western 'majors' was used by the military "to drive the vehicles, helicopters and airplanes used 1,.iring the uprising in Soweto." ?J/ Furthermore, oil imported into South Africa and subsequently supplied to Rhodesia is of key importance for the armed forces of the illegal Rhodesian r4gime, both for internal repression and for attacks against neighbouring States. ?J/ Legislation on 'conditional selling' is embodied in the National Supplies Procurement Act, No. 89 of 1970. Q/ Testimony of 1 December 1977. g~/ See B. Rogers, White Wealth and Black Poverty, op.cit.., p. 262. ?5/ Statement by Reg September reproduced in Shell and BP in South Africa, (London: Haslemere Group and Anti-Apartheid Movement, 1977), p. 36.

- 21 - There are thus strong arguments for suggesting that the mandatory United Nations arms embargo against South Africa should be extended to include crude oil and oil products. 2/ 2.4 Predictions of future oil needs South Africa's future requirements of oil are principally dependent on the following four inter-related factors: (a) The extent to which partial or complete oil embargoes are imposed against South Africa; (b) The extent to which South Africa's economy is modified so that it uses more expensive forms of energy in order to reduce its dependence on oil; (c) The extent to which exploitable technological advances are made in alternative forms of energy-generation (such as solar power) and energy-use (such as battery-powered cars); g7/ (d) The extent to which South Africa is able to maintain steady economic growth. &6/ The mandatory arms embargo against South Africa was approved by the United Nations Security Council on 4 November 1977 (Resolution 418). In its principal paragraph, the Security Council: 'becides that all States shall cease forthwith any provision to South Africa of arms and related materials of all types, including the sale of transfer of weapons and ammunition, and spare parts for the aforementioned, and shall cease as well the provision of all types of equipment and supplies and grants or licencing arrangements for the manufacture of the aforementioned." ?/ Various novel methods of energy-generation (such as solar power, wind-power, and tidal power) have at different times been suggested for possible use within South Africa. However, it will clearly be a matter of decades before any such scheme could make a significant contribution within the Republic. In addition, work is being carried out to produce energy from nuclear power, and to generate more hydro-electricity. However, it should be noted that all of these actual and potential energy generation schemes would produce electricity; and the importance of oil as an energy source is that it can be used where electricity cannot be used - to power a farm tractor, for instance. The only circumstance in which the Republic's need for oil could be significantly reduced is if a very cheap and efficient form of batterypowered transport became widely available. The prospects of that happening within the next decade or so appear relatively slender.

- 22 - In April 1977 the South African Department of Planning released a sophisticated forecast of the country's future energy needs. L8/ Central to this study, however, are the assumptions that oil will continue to be freely available to the Republic, that no major energy-substitution programmes will be initiated beyond those currently under way, that no major alternative means of energy- generation or energy- consumption will become economically viable and that internal political dissent and external economic pressures will remain at sufficiently low a level to enable a steady growth in Gross National Product to take place. 29/ Given these various assumptions, the Department of Planning has considered two alternative growth rates for the South African economy over the rest of the century - representing lower and upper possibilities for economic growth. 30/ Given these economic growth rates, anticipated consumptions of oil, electricity, etc. have been calculated. If we assume that the actual growth rate will be the average of the two possibilities studied by the Department of Planning, then by the year 2000 each sector of the economy will be using roughly the same proportion of South Africa's total energy consumption as at present. However, there will be a changing pattern of how that energy is provided. The proportion of the total energy needs of the final consuming sectors of the South African and Namibian economies which is provided by electricity will have increased from 32 per cent in 1974 (see Table 2) to 44 per cent; oil will have gone down from 20 per cent to 17 per cent; and coal and coal derivatives will have deci- iid from 48 per cent to 39 per cent. L/ Nevertheless, because of the rise in total energy consumption, South Africa will by then need between three and four times as much oil in its final consuming sectors as at present, representing an average growth in oil consumption of 4 1/2 per cent to 5 1/2 per cent per annum. In this report, we have generally assumed a growth rate in South Africa's isumption of oil products of 5 per cent per annum between 1973 and 1985. This compares with an average growth rate of 10 per cent per annum between 1963 and 1973. 3/ L/ The Outlook for Energy in South Africa, o.cit. L21 The South African Department of Planning states some of these assumptions explicity; the others are implicit. 30/ The growth rates in Gross Domestic Product which are assumed by the Department of Planning are as follows: Lower growth rate: 5.5 Per cent per annum from 1974 to 1980, and 4.71 per cent per annum from 1980 to 2000. Upper growth rate: 6.4 per cent per annum from 1974 to 1980, and 5.5 per cent per annum from 1980 to 2000. (The Outlook for Energy in South Africa, o ., pp. 2-4.) It should be emphasized, however, that since the assumptions made by the Department of Planning are unlikely to all apply, these growth rates must be viewed as optimistic. 31/ Derived from data in Table 4.6 of The Outlook for Energy in South Africa op. cit. _ Based on Table 10 of World Energy Supplies 1971-75 (New York: United Nations Department of Economic and Social Affairs, 1977), and earlier editions. The fall in the consumption rate from 10 per cent to 5 per cent was due primarily to the rise in oil prices.

- 23 - The Department of Planning also estimates that by the year 2000, South Africa's requirements of imported crude oil will have risen from 300,000 barrels per day (in 1974) to between 750,000 and 950,000 b/d. 13/ 3. SOURCES OF SOUTH AFRICA'S OIL 5.1 Quantities No domestic deposits of oil have been found in South Africa, and virtually all the country's requirements have to be imported. There is a small oil-from-coal plant, known as Sasol I, which currently produces about 4,500 b/d. 3/ However, this represents 1 per cent of South Africa's consumption, and the country therefore imports 99 per cent of its oil requirements. Since 1973 the South African Government has stopped including data on oil in its trade statistics, for strategic reasons. For more recent years, the best published estimates are available from three sources: the International Petroleum Annual (Bureau of I/lines of the United States Department of Interior), World Energy Supplies (United Nations Department of Economic and Social Affairs), and The Outlook for Energy in South Africa (South African Department of Planning and the Environment). Table 6 gives the estimates provided by these sources for South Africa's imports of crude oil over the years 1971-75. The table shows that there is some level of disagreement about the precise level of South Africa's imports of crude oil, particularly from 1973 onwards, as a result of the increasing secrecy surrounding this subject. We estimate that South Africa's importation of crude oil in 1978 3/ Derived from Table 5.2 of The Outlook for Energy in South Afric op.cit / No official statistics are published on the output of Sasol I. However, our estimate of 4,500 b/d is based on the following: (a) the Financial Mail, (Johannesburg), 16 November 1973 and 20 September 1977, states an output figure of 255,000 tons per annum (about 4,750 b/d), and breaks this down into 180,000 tons of petrol, 27,000 tons of diesel fuel, 8,000 tons of other run-off fuels, and 20,000 tons of liquid petroleum gas; (b) the Financial Times, 7 August 1975, estimates 200,000 tons p.a. (4,000 b/d); (c) the Petroleum Economist, February 1978, p.37, estimates 210,000 tons p.a. (4,250 b/d); (a) George Birrell, of Mobil Corporation(hearings of United States Senate Subcommittee on Africa, 17 September 1976, p. 386) estimates 4,500 b/d. Certain other estimates, which appear less well substantiated, are rather higher. For instance, the Rand Daily Mail (Johannesburg) of 29 November 1973 estimates 12,000 b/d. These higher estimates could well result from the fact that Sasol also operates a naptha-cracking plant apparently delivering 400,000 tons p.a. (about 8,750 b/d) of petrol; however, the input for this plant comes not from coal, but from naptha obtained from oil refineries. (2inancial Mail,16 November 1975). In the event of an effective oil embargo, this naptha would of course cease to be available.

- 24 - Table 6 Estimates of South Africa's crude oil imports, 1911-75 ('000 barels pr day) Source 1971 1972 1973 1974 1975 International Petroleum Annual 249 249 274 257 336 (US Bureau of Mines) World Enezy Suglies 251 237 276 259 303 (United fattonsJ Outlook for Energy in South Africa 248 234 305 299 N.A. (S.Ao Department of Planning) Sjrces: Derived from data in International Petroleum Annual 1975 (Washin n: Bureau of Mines, March 1977), and earlier editions, Tables 1 and 6; World Energy Supplies 1271-1975 (New York: UN Department of Economic and Social Affairs, 1977)) Table 6; The Outlook for Energv in South Africa (Pretoria: Department of Planning and the Environment, 1977), Appendix C.05) 35/ Figures given in tons have been converted at 7.37 barrels per metric ton (the usual conversion rate for Iranian light crude), and figures in litres have been converted at 160 litres per barrel. - 25 - will be about 400,000 b/d (about 20 million tons per anneu). 36J This estimate is based on a study of all the published data, and a number of other factors. It is inevitably somewhat approximate; actual imports could be up to 10 per cent higher or lower. Our estimate is based on the assumption that about 70,000 b/d of crude oil is currently being added to South Africa's stockpile, leaving 350,000 b/d to be used by refineries. In addition to importing crude oil, South Africa also has to import relatively small quantities of various refined products (such as aviation gasoline, and specialized lubricants and solvents). These are products which South Africa is not able to produce in its own refineries, and they are therefore of considerable strategic importance. World Energy Slpplies (United Nations) estimates that in 1975 South Africa's imports of refined products amounted to over 24,000 b/d (7 per cent of total oil imports). International Petroleum Annual (United States Bureau of I'ines) gives an estimate of 4,900 b/d (1 1/2 per cent of total oil imports). On the basis of these diverging estimates, as well as on other information, we estimate that South Africa's imports of refined products in 1978 will probably total around 15,000 b/d, or 4 per cent (by volume) of the country's total oil imports. We have assumed above that in 1978 South Africa will import 400,000 b/d of crude oil, and 15,000 b/d of refined oil products. If we assume that the cost (including shipping) of the crud& oil is R12.50 per barrel, and of the refined oil products is R25.00 per barrel, we obtain a total oil import V-;1 for 1978 of R1,960 million. 37J This represents a ten-fold increase since 1973, when the oil import bill was about R195 million. -3V 3.2 Sources Until 1973 South Africa received its crude oil supplies from a number of Iliddle- Eastern suppliers - primarily Iran, Iraq, Qatar, Saudi Arabia, and United Arab irates. The sources of South Africa's imports in 1972 are shown in Table 7. For the period since 1973 it is much more difficult to obtain data on South Africa's crude oil suppliers. Estimates in World Energy Supplies (UN), give in Table 8, show that Iran has been the main supplier (90 per cent in 1974, and 85 per cent in 1975). Smaller Quantities apparently originated from Brunei, Iraq, Kuwait, Qatar, L/ A relatively small proportion of South Africa's crude oil imports is re-exported, after refining, to Botswana, Lesotho, Swaziland, Rhodesia, Namibia, Mozambique, Malawi, and probably one or two other countries. (See Chapter 6). 3/ The estimated cost of refined oil imports is inevitably very approximate; some specialized products are much more expensive than others. It is likely that most of South Africa's imports of refined products are relatively expensive, as they are mostly somewhat specialized. 18] The Outlook for Energy in South Africa (9.cit.), p.80.

- 25 A - Table 71 Major sources of South Africa's crude oil imports, 197-2 Country Quantity ('000 b/d) Per cent Iran 138 54% Iraq 50 19% Saudi Arabia 41 l0% Qatar 28 11% Total 2'57 100% Source: Based on figures in Annual Statistical Bulletin 1976 (Vienna: OPEC, September 1977).

-25B Table nied Nations estimates of xorts of crude oil to Sout.Afrioa 1 and -source Country Quantity ('000 b/d) Average per cent of South ...... Africats total oil imports 1974 1975 (1974 and 1975) Iran 254 256 87% Iraq 15 - 3% Qatar 13 36 8/ Brunei - 8 United Arab Emirate- - 3 Kuwait 1 Grand ToUa.1 283 303 100% !- Derived from data in World Department W7 Economic and Ener Suplies 1971 -5 Sooial Affairs, (New York: UN 1977), Table (34) 39/ The 'Grta Total' rigure for 19"A L; at variance with that given in Row 2 of Table 6, owing to the divergenee between the data io Tables 6 and 7 of World Ezergy Oupplies (U1). Sources

- 26 - and United Arab Emirates. L/ In order to obtain an understanding of the countries from which South Africa has more recently obtained its oil, the authors have carried out an analysis of oil tanker movements to South African ports during the first ten months of 1977. 3j, Their analysis is based on data obtained from Lloyd's of London. L/ The results, which are summarized in Table 9B and analysed in Table 9A, suggest that in 1977 about 91 per cent of South Africa's crude oil came from Iran. The remainder of South Africa's crude oil appears to have originated from a number of other oil exporting countries, which include Bahrain, Indonesia, Oman, Qatar, and United Arab Emirates (Abu Dhabi and Dubai). These nations " "Je iraq, are all understood have instituted embargoes on oil sales to South Africa (see Section 7.2). This suggests that oil has sometimes been sold by these countries to the oil 'majors', who have then re-sold it to South Africa without the knowledge of the Governments of the countries providing the oil. L/ It is clear that Iran has provided around 90 per cent of South Africa's crude oil since 1973. Iranian crude oil is exported to South Africa in two ways. First, the National Iranian Oil Company (NIOC), which is owned by the Iranian Government, has a longterm contract to supply crude oil to the refinery near Johannesburg, owned by National Petroleum Refiners of South Africa (Natref). In 1974 NIOC's direct exports to South Africa amounted to 1.9 million tons (38,000 b/d), and this amount represented just over half of Natref's requirements. 3J LO/ The Financial Mail, 18 April 1975, claimed that in 1975, some of Africa's crude oil came from Iraq and Indonesia. Llj This information was first released by the authors in a memorandum published in December 1977 by the Haslemere Group; see Oil Supplies to South Africa: Memorandum to the OAU Ministerial Committee of Seven on Oil Sanctions. (London:Haslemere Group, 20 December 1977). L/ Lloyd's of London is a major insurance company which, inter alia, monitors world maritime traffic. L3 However, it seems that in the case of Brunei, its Government is fully aware of the fact that its oil has been going to South Africa. The Far Eastern Economic Review (15 April 1977) reports that "South Africa has become a major market for Brunei's oil over th Vast three years, taking third place as far as sales is concerned, behind Japan and the United States. Oil exports to South Africa in January to August last year (1976) amounted to 847,000 tons (an average of 25,700 b/d). The foreign affairs of Brunei are handled by the United Kingdom, under an amended treaty signed in 1971. L4/ Fereidun Fesharki, Development of the Iranian Oil Industry: International and Domestic Aspects, (New York: Pra~ger, 1976), p. 205.

-26A- Table 9A Analysis of tanker supplies to Durban, January to Octobe The authors have obtained from Lloyd's of London a record of oil tanker movements to Durban, covering the period January to October 1977. The records do not show whether each tanker arrived at Durban in order to deliver oil, or for other purposes (such as taking .on supplies, or making repairs). Table 9B shows only those ships which sailed direct from an oil-exporting country to Durban, and then sailed direct to an oil-exporting country. This is in order to eliminate those tankers which may not have delivered oil. However, it is clear that some of the tankers not included in Table 9B did in fact deliver oill the table therefore'underestimates the number of ships delivering oil to Durban. Durban handles the imports of crude oil required for the two Durban refineries, and for the inland Natref refinery (which is fed by pipeline from Durban), and for the crude oil stockpiles in the Transvaal. The rest is imported at Cape Town, where there is one refinery. An analysis of the capacities of the refineries suggests that Durban therefore handles nbout 85 per cent of South Africa s crude oil imports. The deadweight of a tanker is assumed, for the purpose of this analysis, to represent the quantity of oil delivered. The overwhelming proportion of the deadweight (cargo, stores, and bunkering fuel) of a tanker consists of cargo- carrying capacity. Some of the ships may not have been fully laden, but in order to simplify the calculations it has been assumed that a tanker leaving an oil producing country would be filled. The actual amount of oil carried by an average tanker would be somewhat below the deadweight, but since the main value of this analysis is to show the proportions involved, this should not distort the results unduly. The total deadweight of the tanker deliveries to Durban as shown in Table 9B is as follows: From Iran: 7 429 000 tons (91% of the total) From other countries: 754 000 tons (9 per cent) Total: 8 133 000 tons (100 per cent) On the assumption that the deadweight represents the amount of oil delivered, and that Durban handles 85 per cent of South Africa's crude oil imports, and that deliveries during November and December 1977 were at the same rate as during the previous ten months, calculations would suggest that deliveries of crude oil to South Africa during 1977 would have been about 11.5 million tons (230,000 b/d). However, as stated above, this must in fact underestimate the total deliveries of crude oil.

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I

- 27 Secondly, the main supplier of crude oil to South Africa is the Iranian Consortium. The members of the Consortium, and their shareholdings, are shoin in Table 10. The oil sold by the Consortium is produced by NIOC, and then sold to the Consortium at the coastal ports for international marketing. It should be noted that all five oil 'majors' with subsidiaries in South Africa are members of the Consortium. 45/ The most recent available Iranian statistics for oil exports to South Africa are for 1974. These suggest that in that year the Iranian Consortium sold about 213,000 b/d to South Africa, compared with the 38,000 b/d sold direct by NIOC. / The 251,000 b/d of crude oil sent from Iran to South Africa in 1974, although it provided 90 per cent of South Africa's needs, only constituted 4.7 per cent of Iran's total exports of crude oil. 47/ Refined oil products, which make up about 4 per cent of South Africa's total oil imports by volume, are largely supplied by Western industrialized countries. It should be emphasized that although only a small proportion of South Africa's oil requirements are imported in refined form, these specialized refined products are absolutely essential for the running of the economy. Statistics published by the Organization for Economic Co-operation and Development (OECD) provide information on their exports to South Africa of refined oil products by value. This data is shown in tables 11 and 12. OECD countries exported around $70 million worth of oil products to South Africa in 1975. L/ ,_/ The two parent compar:' * which own Caltex (Texaco and Standard Oil of California) are both members of the Iranian Consortium. _6/ Total exports of oil from Iran to South Africa were 251,000 b/d in 1974 (compared with 116,000 b/d in 1973) according to Annual Statistical Bulletin 1976 (Vienna: Organization of Petroleum Exporting Countries (OPEC), September 1977). In 1974 NIOC's sales to South Africa were 38,000 b/d; hence a figure of 213,000 b/d for the Iranian Consortium. 7/ See Annual Statistical Bulletin 1976, op.cit. Table 52. L/ The total figures in Table 11 ($68,373,000) and Table 12 ($73,968,000) diverge.

-2TA- Table 10 Members of tke Iranium Consortium Company Shareholding BP 40o Shell 14% Mobil Exx=on Texaco 7% Gulf 7% Standard Oil of California 7% CFP (Total) Independents 5% 1 l~oo/;. Source: Anthony Sampson, The Seven Sisters: The Great Oil Companies and the World They Made, (London, Coronet, 1976), p. 146.

-27B- bis4Em- o-, 2f &U., irouu Em MD noudn a 80At AWOrio. Motor spirit, gasoline and other light oils Lamp oil and white spirit Distillate faels (ie diesel fuel, etc.) Residual fuel oils Lubricating oils and greases Pitch, resin, etc. 70TAL 15 037 6 956 11.695 2 099 15 040 17 546 68 373 , u - bec!QbUz Q7 (Paris: OECDO 1976).

-2PS rahIle 12 Lx)tsof oil nroducts; fro-r. O0'rIcountries to FSoutl AfricC, b,, soure., 1Vt5 (in~ 1 :000) United 'Kinsdom 13 577 Litthe riands 8 0 Germnany, Fecteral Retublic of 6 108 Lelgf.iuLii an. Luxerbourg 1 431 Greece 1 235 Australia 973 Japman 530 Sj~aii2(C1 Fran~ce 303 "Vitzerla±d 36 Dermarl:, 33 Ceana&a 20 Sweden 15 TOTAL 73 968 Source: Trade by Com~modities, ,Iarket Sunmaries- EXp~orts Vol. 1 January-:Decebrr17 Prs ODCD. 1976).

-29 - Among OECD countries, the major expc¢ 3ers of refined oil products to South Africa were Italy (31 per ce nt), the United States (25 per cent), the United Kingdom (18 per cent), the iletherlands (11 per cent) and the Federal Republic of Germany (6 per cent). Snll quantities of refined oil products cre also probably supplied by some non. 0ECD countries (such as Iran). 3.3 Sh __n According to the data presented in tables 9A and 9B, approximately one third of the oil tankers which deliver oil to South African ports are owned by the "majors". The remaining tankers are on charter, either to the ;'majors" or to other companies. ione of the ships shown as supplying oil to South Africaa<. South African-registered or owned, but sowte could be on charter to South African coi-panies. The analysis in tables 9A and 9B suggests that some 70 to 90 tankers probably delivered crude oil to South Africa during 1977. Just over half of then were VLCC's (Very Larg~e Crude Carriezrs) with a deadweight of over 200,000 tons. South Africa owns two oil tankers. These are the 'Gondwana' znd ":ulu' (both of 218,000 tons) which are owned by the statecontrolled company, Safmarine, and are on charter to two :majors (Shell end BP) until 1930. 49/ Both the Gondirana" end the "Kulu"' are used for shipping crude oil from the Gulf to Europe, and are not norLally used for transTlorting oil to South Africa. It should be stressed that in the event of oil sanctions ayainst South Africa, there would probably be little point in usirng South-African --registered tankers for attemrpting to break the embargo. A South Africanregistered taaker ould be easily recognisable as such an(' this jould )robably prove a liebility rather than an asset in attempting to load oil in defiance of an embargo. Around 85 per cent of South Africa s crude oil imports are landed at Durban (table 9A). In 1969 a single.-buoy mooring was built near Durban so that tankers could unload just outside the main harbour. The R10 million bucy was financed by Shell, BP, Mobil and Sasol. Five years later the buoy was modified so that it dan now handle tankers of up to 250,000 tons. The remaining 15, per cent of South Africa's crude oil is landed at Cape Town. 49_/ Star (Johannesburg), 24 July 1971, end Safmarine Annual Report. Safmarine (the South African ,Jarine Corporation) is controlled by the state-owmed Industrial Development Corporation, with a minority share held by British and Commonwealth Shipping Lte. (registered in the United Kingdom)

- 30 -- 4. THE OIL ., IN SOUTH FRICA -!.1 The cor.-2nies Th oil industry in South Ufrica is do inte 1 ive ferzijn-owne, oil co.:,aEnies : ?cbil l .itex -hell, 1P (British .t2oleu;) , 6.-'_ Tct.. !. bObil a-iC C ltex are Arericcn Shell is Lutch/iUritish BP is British)i end Total is French. The South African operatiois of the first four coipanies are 100 Oercent oirned by their parent companies in 'urope and America. The fifth company -- Total-South Africa - is 66 per cent o ned by its French parent company, and 31.1 per cent owned by South A.frican interests. These five main oil companies control 35 per cent of tue oil imarket in South Africa, and onerate 91 per cent of the service stations. Four other companies - Sasol, Trek, Esso ead 'onarep have smaller operations in South Africa. Esso (United States) and Sonarer. (Portugal) are foreign-owned. Trek, although partially foreign-owned, is Southl Africen .controlled. Sasol is South African-owned. The market share held by each comnpany, and the number of se-rvice stations operated are riven in table 13. The ownership of th± five r._in cil conrpanies is elaborated on in table 14, and taole 15 deals similarly with the four smaller comanies. The nine oil companies have all established a number of subsidiaries which are registered in South Africa. Tables 16 and 17 list tha principal subsidiaries (oritting holding coir.penies and idnor subsidiaries). They also show the shareholding of the parent compnyi an( the main activities of each subsidiary. It is ihportant to appreciate not only that the five main oil colpanies in South Africa are foreicn-owned. but also that their pr." rt companies are all amongst that small group of Western "majors which control the world's oil industry. These majors are so powerful that the turn-over of each one exceeds the C-P of most of the wzorld's nations. Thie importance of the ' majorsl for South Africa was emphasized in a 1971 supplement on oil in the Johannesburg Financial Without the massive resources of the big international oil companies, applied through their South African subsidiaries, the oil industry would not have built into a R700 million business. A stake in the South African market is of great benefit to the oil "majors:', for it is a lucrative one and ripe for expansion. In return they have put a vast amount of capital and know-how into the country. 50/

-31- Table 14- M1aket shares of thL oil coMoanies -in South AUr a Market =Ue51) The five lin oilo omPanies Caltex Mobil BP Shell Total (Oil Co.) l9.IL 18.50 3 17.5 a 84.5' 1.7. 5 Nuibpr -of 985978867 4242 853 559 TL iagher oil coamanies Sasol Trek Esso Sonarep UWa~ TotaL: US WGIi Finacial &il, 22 July 1977 51/ These figures may well refer to the market shares of each company at retail service stations (selling petrol, diesel and lubricants). The overall market shares of each company for all oil products (not just those sold at pervice stations) could vary slightly, but probably not by more than one or two per cent from these figures. 4.!% 2.0% 0 228 15.2% l00.oe. A 661

- 32 -Tabl- 14 O-knershir of the five nain oil comanies in Sout'i Africa 1) Caltex in South Africa is 100 per cent owned by Caltex Petroleum Corporation, an Aierican corpany, which in turn is jointly owned by the Standard Oil Company of California (Socal) and Texaco. 2) ±i.obil in South Africa is 100 per cent owned by '"obil Corporation, an 1merican coi:.pany. 3) BP in South Africa is 100 per cent owned by British Petroleur. a United Kingdom conrany. Fifty-one mer cent of the shares in BP are held by the United Kingdom Government. The United Kindo: Governirent has the right to nominate two directors to the BP Board with the power to veto decisions. In 1914, w4rhen the United Kingdom Government acquired its shareholding, it was established that there ,.:oulL be no interference in the normal commercial operetion of 3P, but that the veto could be exercised cver eertzin specified matters (which included foreign affairs). 4) Shell in South Africa is 100 per cent owned by the Shell groun, w:hica is 4o O- er cent owned by the British-based 'Shell' Transport an. Trading Corapany, and 60 per cent by the Nietherlands-based Poyal Dutch Petroleum Company (IN.V. Koninhlijke Nederlandsche Petroleum Maatschappij). Shell's South African holding company is technically owned by Shell Petroleum Supply, registered in London, but the close interlocking ties between the two parts of the Shell group mnean that responsibility for Shell's South African operations lies with both the British and Dutch companies. 5) Total in South Africa is controlled by the French company., Compagnie Francaise des Petroles (CFP). The French Government has a shareholding in CFP representing hO per cent of the voting rights which is considered sufficient to represent control. Four State Representatives are members of the Administrative Council of CFP. In 1969 CFP sold part of its shareholding in its South African subsidiary, to local investors. At presentCFP holds a 65.83 per cent shareholding in Total-South Africa. The renaining shares are held by three local investors; Volkskas Bank (18.06 per cent), Union Corporation (11.11 per cent), and Old ,iutual Insurance (5.0 per cent).

-- 33 - Table 15 0mershivJ of the srialler oil corarenies in Pouth frica 1) Sasol. Sasol is a wholly. owmnzd subsidiary of t-he Industrial Development Cor-poretion of South Af rica (IDC).--, 'i in turn is oureJ by the South African Govern-ent, 2) Trek. Tre- 1ele,-inLc is the only oil compeny in South Afr_'cn. whicA is largely owned by local non-state interests. Shareholders in Trek are Shell (17.5 per cent). BP (17.5 per cent), General 4ining and Finance Ltd. (22.5 per cent), Fef.erale Voll sbelecin ,. Industrial Selections, and the state .owned Industrial Developl-ent Corporation of South Africa (.5 per cent). 3) Esso in South Africa is 100 per cent oimed by Exxon Corporation, an ALerican company. 4) Sonarep: Sonarep-South Africa is a subsidiary of Sogiedade Tacional de Petr6leos (Sonap). a Portuguese corpany. Sonarep-1outh Africa obtained its oil from a refinery in ivaputo (rozanbique)I which was owned by Sogiedade Yaqional de Refinagao de Petr6leos (Sonarep). CFP had a 26 per cent shareholdin7 in Sonarep ,Tith the remainder of the shares held by Portuguese interests, but in HTer 1977 the Maputo refinery was nationalized by the - .Tozarbio.&ue Government, and is nowy known as .!mpresa Naqional Petr6leos de logbeabique (Petroyoc ).

- 34 Table 16 Principal subsidiaries of the five main oil companies in South Africa Subsidiary % shares owned Activity Caltex Oil (South Africa) South African Oil Refinery M'OBIL iobil Refining Company Southern Africa i obil Oil Southern Africa South African Oil Refinery Condor Oil Vialit Roadmix Holdings BP BP Oil South Africa Shell and BP South African Petroleum Refineries Shell and BP South African ilanufacturing Company BP Development Company of South Africa Trek Beleggings Duckhams Oil Africa Chemico Price-s South Africa -entrachem 100% 23.8% 1001c" 100% 32.9% 100% 100,/26% 100,11 50% 25% 00% 17.5% 100% 15,. 28% 20% Refining and marketing Lubricant refining Refining Marketing Lubricant refining Lubricant refining Manufacture of road surfacing materials Road surfacing materials Marketing Refining Lubricant refining Oil exploration Oil company Lubricant marketing Lubricant refining Candles Chemicals IELL ;Iell Oil South Africa 100% Oil marketing Shell end DP South African Petroleum Refineries 50% Refining 'Ohell and LP South African .anufacturing Company 25% Lubricant refining 'hell Eksplorasie Suid-Afrika 100% Oil exploration 52/ Tiic two .joiit owners of Caltex - Texaco and Standard. Oil of California - also have subsidiaries in South Africa which have been involved in exploration: Chevron Oil Company of South Africa (owned by Standard Oil of California) and Regent Petroleum South Africa (owned by Texaco).

Table 1" - Continued Suosidiary Trek Belecginjs Che-- ico Dragon Gas Service African Bitumen Emulsions Price's South Africa Shell Cheiic.l South Africa Uni foana Industries Styroce.te, Billiton .xploration South Africa TOTAL 53/ Total--South Africa W;.ational Petroleum Refiners of South Africa (G-atref) South African Oil Refinery Total Exploration South Africa 1.7.5;: 15: 100;' 514: 36, 1001, 100;' 25;>100;j, 100. 30,. 15o. "ctivity Oil conpny Lubrictints Liquid Tpetroleu' gas Bituren Candles Chenicals Chenic als Cheraiczls etal exnloration -arketinr Pefining Lubricant refininr Oil ng coal exploration: /It should be noted that CFP in Paris only has a (5.83 per cent shareholding in its South African..registered corpanies. The percentage given in Table 16 for Total subsidiaries represents the shareholding of Total's South African holding company.

-1:'-'bIe 17 Princi--,,.-l : .unsi(d, r--,z:s of t.ic s)-,,llcr oil co-nmies in c;out,' f Act ivi ty '0 f'j 0 L 1010", 52.5* Oil 7'.efinin.-Oil ex ,p!oration Cas - ?.rj-etin- ,,.2sol CUIT1011Y ..atioo-l r-otrol, Liv- - --finers of Souti-i Africa (.t'atr- f) ( out.ierr! Oil. E.:1doration Cori.,oration Sout';-r - ., ,.fricd Cas Dist-ribution Cor.poration TiiLk- 10C 100, Oil Oil -)urc31asin - end rrocessir! Lubricants Lubricent refini--,v,7, Lubricants and cherdcals Tre- -?ctrolewu Trek 01ic.j.zats -appy out'i Africz .ii Luur-c i2ts .',-i-ufz:-cturir, S--i: co LubricaLts arid Cjtc-dc,-,ls 10U ,3so-south "Uricr" so. fAIIE p , 'ol 1are-!:, -- ' out i Pfric,-- -)rl<:etinr, 100". . -r',etin-

.... 37 - It should be addei that since 1971 the retail value of thie oil busi.-ez- ii:. South Africa. has cro.n eno-.ousl,- fro-, the 1700 r.illion iuot d cabove. larcly because of the rise in the ,1rice of oil in 1-73. The active .trtici.-..tion of t.,e rajohs has been of iafense i.-portance to the developrient of te South African oil iadustry in sever-l 1-Tus. First, it has ensured that 'outh Africa hrs obtained adequate surplies of crude oil end oil products, d spite atteupts to irnose an oil ermbaro acainst the hepiublic. 54/ Secondly, it has meeat that ;3outh Afric. has had ace-ss to vital technical expertise: oil exploration, refininr, .etrochxaiical plants and Taining require a high level of technolojical know-how,which the '..jors have "rillin,- rd extensively' su~pplieC.. 55/ Finally. iuch of the capital used to develop South Africasz oil industry k'as beer -rovir-:d by the ajorm .5L/ Veri little inforration is available on the exact value of the current and planned assets of the oil cor-panies in South Africa, but an attei.Lpt to -rull together 77hat is knoim on this is jiva., in table 1. The cor'bined assets of the oil naJors in South Afric. are currently worth over 3lO00 million.57 54/ Tho role pl-yed by the oil 'majors in ensurinr deliveries of oil to South Africa is e;rariaed in section 7.3 below. 55/ Sir Eric Drake, Chairran of BP, s:id durinr q visit to South Africa in 1974: '!,'e are looking' for spheres -- such 'Is coVl -in which our expertise can hel-, in South Africa. - (Star, Johrennesbur)' *.aren 1)74). 6/ T~The Cniaimran of P-.South Africa, in announcin.7 investrent plans of B375 .million, pointeO out that most of the capital w-yould be Cirectly or indirectly funded froi,. outside South AfricP, rainly in the for., of direct investrent from BP's _rent company Pnd Essociates. See Eand Daily 1oil (Johan-nesburg), iurust l?7. 57/ Derived from table 18.

..38 - JXIK_ D ~ve~..~ts i, ~ct~."'frica3 !*,r t7' filve ~i oil c~ esti::ate value of .Uadc. invest' 'etts 58/ i~:±oin- furt'her ~wsr.r l~~ S ll 1>75 T: 50 iij.A furthier T'500 mdil1 ion b-,. 19" 59/ B 1.76 P 140 million A to ther -"375 illior _ 1)'1 Cn~tll-C 197 F230. -rdlion B3p; Soutii African fiiest, 30 PMr:ril 1976; and Pand Daily ,Tail, 15 Senteriber 12-76. Total. Fino.nciv-liai 4u -~ arch 1977 .7obil. George Dirrel1, General Counsel of "obil Corporation, in testiLi-ony before the US Sencte Subcomrmittee on Africa, 17 -,ept !2ber 1976. (Our fi~jure is a. conversion into Fetnds of nis figure of $333 tillion). Caltex. US 7 usi.,.ess r-nl '-outh A8frica: Tile "it'idra-I Issue. Center, 1.1overaber 1977) ~.35 (our fi,ure 5'- a. conversion into TPands of their ficure of t200 rrillior.), ivcs a. fip-.ure of R174 r1illion for P~76, thle Carc Tires (Cape Town). 5 Ly1077,,zt -ts t11hat a further P117 .idlJo uTSc to ) investeCd in thc: ex-nansion of tIe 56/ It cshould Le noted that the invest-ent values are norrnll'r -iven o. ; historic,. or de rmciated cost besi3-. Thre replacejient costs jeould be consiw~r:bly -reater. 591 / T1.L .G. Cclinr. Chief 2xecutivec of Sihcll-4South Africa., Said in Jure 1975: The vict-ility stu6.ies lie :-rc. undertakiri' on coel iqit-in , soli,!. pipelinia- and coJ conversiouf (coavertin;- coal into hyr'ro-crarbon .aUscs -nci liquiis) will1, if thcv co!-,.e to frcuition, invol've investi-ents of iiundcr i of iillio. z of rands. '(Ram- Dail, 'iail_ 13 June JP7 5).

.39 - .±iiJ ~~rve'-ts bout i.4 *Ter ce~nt of current tot',l direct :~kci, .~vt cnti.:~uh friCE. 60/ ~O MC.r -I~nSiorl I1JIMI-t _-- oletis i-,vcst4,cnt to over !'2M0 -Jllic.x iii th;,- lk?^Ys. 6LI Pc~L-t of tic ieasor for the iassive inve'stmnent ol_ ns of the oil 0co. i- tlict ti1%. ore now raniuclyr c.ivwrsif'rij. their interests ito rel2.tcd ficlu'.. T7ic cil conroan~e i'n soutber-a Africa have now exj~actce~t into chev, icals (S!.'ell enc_ P2), nuclear ener-'Y (Mlell has att ci . ,t .u to brcal' i.-nt-o tiijs field), metcl e.xploretion(Thl) ur~aius-oi~n- (Total) , i.. coal -4'j: - QCiell, 7,1 on(." Total). Vie oil -'-jors- re t,%,:refore playing :-niricrevasin,,,y i: 7.ortant role in sor.:L -:f ii.-iost, strete-i callyr ir.nortciit sectors of' Pic ou African ecoroi ,.y. Coniderabic secrecy,- surrou.' 1s tar' (Auestion of thc an~nual tur-iover of t rc il co,.!x':rdics ftSoitii Pkfrica. l-ovever th;: veil ~w;liftel.I' little i ±I arch 1977, when Tot al.Soutl- Pfrica, revealcOI ziiat t i .ir tur.-.over ia 1976 hac' reachc.cl 'P94 mil.lion. 62/ 1f wie e)ssu,--c tit th-cir turrove-1s c:r:c *roportior-. to t*he.ir rc'tsh,?res, ic -is possilhie to obtain an estiuirtion of tAe tui,7-over of the other t-l_ oil oia~o i.) " o Atl rien. rj'his ~ t' e -'011 o - turnover Sfor l 97(6: Caltex, JR0 i'!illion !VObil, 1.50 1-illion-. 13?. rh o .illioi; 'ndShell, 144~o ritillion. 63 / Te&:en tor-ethor -vitb' the k~nown turnover of Total (lP29I million), this rl,-hes a 1976 Combined turnover for the five main oil companies in South fifrica of' over 332,100 imllion. 60/ Total direct forei~n; invest-ment in South Africa in 1975 'wns Tl.42 k2jmillion. South Africa: An Apra isal , (Johan.- osbur-: The iecLbcanL_ Group, 1977), p. 225. 61 / Dorived f'rorr table lb. 62/ i-inaicia-l iil, 4 .'rc- 1977. 63/ fui elter-av-tive source quotes 1E76 sales (i.e. turnover) in South '"frice by i'obil as "i.re th.an T500 million' 0i435 ;,"lillion) , ar d by Caltex as $500 million (4R435 '.Allion). I-_'vch of these annuel anles fi'jurcs is larrg-er thai: tfut of' orm- othter Prnerica-i ovrned' cormpeny in Soutn- Aifrica. Tht; nearestc rivals arc Ford (sales of' 0,2CGJ64 v-illion in 11076) aind Gencel -otors ($250 1-illion) - US Dusiness tnnO. rout'h Africa: Tame 'Iitlhdrawal Issue ('aslin-'ton D.C. : Investor Tesjosibility ±iesa.crcii Center, Tovep'ber 1977), r-P. 33 aecid 44.

-. 4o - 1-2 Refiii .'bout 95 per cent cf South Africa's reruire-ents of refic. oil prouceG7s & re noi- pro-ivc!d by local refineries. Tlhese produce a ic range of fuel p.roducts (petrol, dierlel, 1-erosene, liquid 2.Ctrolzur ,a

9 a. 0; 0 0 CC, 0 C '4y (/3 4ra-4 4, J0'0tdUcF-40 C 41 0 $4 ca -4 - hl - 01 *4a'44 'U' H l -P 4) ; o )E 4) 0 ,H 4) 0 ) E-4 R HA r-k -) 0 p- Hr 4) -,4 '0 8C c2 4) 40f -0 4 H1 4.' 4 0) HA a) 0 LA U'% ,0 0 2 4O ) a r r.I, 0 0 F '0 4- H0H (1!0 PW 4-4-I0. CH? 0 0., 4 . 00 .H 2 4) ad Ur4 a -4 H0. 4) 0 (I 0-4 -4 0 -4 ad (L) c, r4 4 :2 0 0

-42- Furtiner investr.ent in refineries is currently talking, nlace. Obitex is ex-,1cndin the cap city of the Cape To.,n refinery fron 56,000 b/d to 105.000 b/., n.nd tiais work was due to br corpleted i-i April 17K. 66/ Sesol II, a second oil-fror-co-l plent, is scheduled to cove on strear in 1981 with an outout of around. 45,000 b/d. 67/ Condor, a subsidiary of (Vobil, is currently col:,pletir, a silall re-refining lubricant plant rhich will produce 500 to 600 b/d. 68/ In 1973, Trek received permission from the South African Governr.tent to build a 'lajor oil refinery at the new port of Ricaards Lay. But with the rise in oil prices, this project is no long er viable, and has been shelved. The capacity of South Africa's four rlain refineries plus the Sasol I oil-fro--coal plant vas about 433,000 b/a in 1975 althoug'h output was only ubout 296,000 b/d (68 per cent of capacity). j/ Table 20 provides details of total refinerj output for 1975. 70/ 1;y 19T,, caTacity of the four refineries plus the t~ro lasol plants should have risen to about 450,000 b/d. 71/ By 1982, when the second Sasol oil.- from-coal plant should be operational, the capacity of the four ,Lain refineries plus the two Sasol plants should have risen to about 540,000 b/d. 72/ If we follo the Department of PlanninLs estimate by assuming, South Africa's oil aceds wrill increase bY about five per cent per annurn, and also assure that in practice the refineries and plaiits are not able to operate at above 85 per cent of capacity on average, then South Africa will need yet further refinery capacity (or a new Sasol plant) to be in operation by 19"3, only a year or so after Sasol II starts onerating 73/ Decisions on refinery expansions will have to be rnade in the ne xt yecr or so. 66, South African Financial Gazette, 26 !Tovember 1976; ane. Capc Times, 5 iay 1977. 67/ See Section 5.3. 68/ Star (Johannesburg), 13 Aurust 1977. 69/ Based on table 20. 70/ This table probably excludes production at the Snsol I oil -froi-coal plant and probably includes nroduction fro-r tie two lubricant plants. 71/ Based on table 19. 72/ Based on 1977 ca~escity, rlus planned Sasol II capacity, flus known expcnsion of Caltex refinery to 105,000 b/d. 73/ This was derived as follows: 1975 production at the four v'ain refineries plus Sasol I was about 313,000 b/d, includin°refinery fuel (table 20). Applying a five per cent growth rate this will reach 462,000 b/d by 1983. Known expansion plans Iplus Sasol II will bring cap-acity to about 540,000 b/d by 1982. :cihty five I.er cent of this amounts to 459,000 b/d.

Table 20 Estimates of South Africa's production of refined oil products, 1975. T/ Barrels Per oent per day of total Gasoline 87 504 b/d 29.6 Jet fuel 8 614 b/d 2.9 Kerosine 9 315 b/d 3,1 Distillate fuel oil (i.e. diesel fuel) 82 794 b/d 28.0 Residual fuel oil 80 696 b/d 27.3 Lubricants (including grease) 5 948 b/d 2.0 Other 21 137 b/d 7.1 Total 296 008 b/d 100.0 (N.B. In addition, refinery fuel and loss was 18,222 b/d) Sm e: Derived from Intsrnational Pytroleum Annu. 1975 (Washigton Bureau of Mines, March 1977), Table 2. _74/ This table probably excludes production at the Sasol I oil-fromcoal plant and probably includes production from the two lubricant plants.

-44- '.outli Africc lso nes a nuL.ber of retrocnciaical plants. Details are ivcn in tLrole 21. .3 Distributicn Tac ni .,e oil cc . r .'ie ii.'out ' Africr beti.een ther hev . 4,,61 service st .ti ns (3e- tablc 13). Sasol is the onl-, oil co:-irar-y iithout its o-n service stctions. Uncr a .mrrketing eo.rec,.ent between1 Sasol Lnc the othe r oil rarketia, cor1,nies in oout.i Africa, service stations in the Transvcl and the northern Oran,;e Free State are cor-pelle-, ;jhea requestc . to install one ,asol pu. 75/ South Africa e.nd i.aji.ibia are divided into a number of refiner3y zon(s, and efforts are r.ade to rinirize the transportation of fuel betwcen zones. For instance, Caltcx >'os the only refinery in the Cr.oe Proviice, yet all five of tihe main oil co-nanies operate service stations ti_,re. To save the other cori-;nics having to transport fuel hundrecs of - iles to these outlets, they obtain surpilies fron: the local Cclte?:L refiner,,, and in return provide fuel for the Caltex scrvict sttions in the Transvaal. Details of the refinerr zones are given in teble 19. Fuel orocuced at the !,atref refinery is 6rawn on for r'rletinr by all of the five v.ain oil corrrenies. 7.6/ Four rajor ,-tet-iods of transport are used to carr- oil products -,itnin South Africa. First, a iipeline fron Durbei, (the Shell/1P Lrd obil refineries) to the . it ratersrand serves the deaselv populate6 industrial region around Johannesbur, an area of hi-h oil coi s wimtion. A second -ipeline to the .Titatersrnd ..-as coi plcted ii 1976. 77J 3econdly, South frican ailwurs' extensive rail ietrJork of 32,370 kiloi.eters is used to transport oil products. Thirdly. coastal tanLers carry oil nroducts betuecn the ports of South Africa a '1 .ulibia. (Cape Town, Port Zlizpbeth, Fast London, Lurban t.ld Ualvis Day). Finally, road tankers Ere use,' to carry oil products to depots and service stat4ons. 75/ Financial Ti:-,es (London),7 August 1975. 76/ Ibid. 77/ These two pipelines -re for carryin- oil nroduct.. ''here is also a pipeline carryin-, crude oil from Lurban to the iiatref rcfi-,)ery at Spsolburg.

- 5 - ThbL;s 1 South i1fricL-.,s ',riici; l petroc-eical plIwts C or.'; any Location of lr. f-coI 78/ Sasolburj (:Affrican xflosiJ¢s and Cheicels Industries) IT-outs to eth'-lene.. propylene, ethsano Products c"uantit,r producedl pr year vinyl chloride ',olvethvlene olyvinyl chlorice solvents refinery gas refinery gas but vdiene, styre!e aromatic concentrate ELmonia ureon;, am. lon-;a styrene buts/iene rubber carbon black 160 000 tons 150 000 tons 10? 500 tons 40 000 tons 55,000 tons Safri.ol Sasolburr7 Sasol Sasolburj tthylene, propylene synthesis rws petroleum naptha, benzene polyethylene poly.Propylene -acetone alphaolefins Primoni a aronatics Tlix butadiene butanol ethanol ethv lene methanol phenol propylcne strrene 50 000 tons 40 000 tons 2 000 4,ooo 67 000 20 000 27 000 1 000 10 000 150 000 oo C 500 120.000 1C. 000 tons tons tons tons tons tontons tors tonz tons tons tons Source. orlaide Petrochenical Directory 1970 (Tulsa, USA: Publishin,, Co., Joverpber 1977), T. 18 Petroleur 78/ AECl is 40 per cent owned, via subsidiaries, by Imperial Cbeivical Lidustries (ICI) of the United Xingdor. (ICI Amnual Report, 1977). 000 000 000 50O tons tontons tons ALCI Fe.jis .(arbocLe Phillips rlcn (-I- C o. Ui lo(intaini ,-ilaarton Sssolbur. 1 art i lizabeth rolo o P lt.'ie -autii N4ove.--.- (,-7 t in t,11,- oi u tr Dil is oc -C lcf- to oilren-, Sz:jO OYIC Africor- Gcv.- rn :..t ri i3t(;;r in 1',"TO.79-/ Tlxec lLter u iot,-,cr idaLtcr oiated oi -' ti)-:t strate-ic inCustry suc ti,,- -atrole-Lc! refini!4 int-ustry fir-,,I-,- rootea in t;ae -1-1cpuulic vnl..: Liot bc entirely cortroll,: ' fm "Us, 4T Govc --c -I iia sai - most i-porbunt fro.i t.e k _rn, --,tIs : oi.rt Cf view.80/ T&cc-, i7ith tile ;--rouilir-,- tlire :ts of an oil (-,m7bar,-o, :t k-. to the oil co----,--Je- )-eratim.Ln ',-ouCi 4Trics sorv,; tio iLtion; .! i- .at--rest. -"eccuse the rc,,-t ;:.Jor.ty of t'- oil --ustr,. is out, I-fric-a Gov i;jc:erit !ias dcv-A-o,)e . z-. ui c of .iff(;rCnt l.ct"lods of cont roll i r-,- it. Cow official, -tv-tin,? t-'-,c:t Vi-- rel ,.tionUir bet-Tei,12 t e .nL' t' --, ccm--ries i:: vex-/- clo ; -, ,d.Uc(- . tiiat c, ,e coull ussur.e tiiat arr7n--,. -ents -r,- - ;ci Tn- C to ,-o. t: e--aliii-oles of tile coii-Lrol thc Sout;- Africcn C-ov-rivent are i)elo-...-. 1. iz: 1' ot L',e Govern-c,,-.-t -lanou.;c -C. t---t -11 oil cu -,arji;,s to f,.roI-Uce sr.(;c-ic:lize('. oil --)m uct reqiu.ired or Strate.-ic rc;aso.z, irrt GT;cctive of ccTImrcir:,l 821 Tb- !L Ill ovem ber 1-77, cft .r the i), osition of t0c U : ar.1,s e-.!Ib-r'Io -,rraiast 'outa Africa., ti-csc re .ulations were oxt(.;-.Asiv,2lT strenrVirnet' Tue -!c-csur ,s... b-.cd o.,. t'ie -,-:,ntion,;1 Sur-lies. lrocuru-rer4t Act., uhicia arply to .11 i stri -s , -0 -Y 0 !2(11.1E. -)rovic 1-y to e --)ut on a -.r,)r ,: ffrz;ctivcl . e for tnc econo. footi.i!-,. The 1L.,istcr for Econoldc Affairc, in mnouncint-- i:cosures -:ade it clear tb, t they are ed t lproventin,,) ,,rent Co,, r- 4,-.7, - i 41 7 1, -. r,- .,,eir frorn controllin t- o , tions of V. subjidi!.-rics in Soutli Afric,-. Li t0c e7.r:2nt thrt tj-10,- Ittermt to foa 'uid tiic local .)ro,;uctir,,-, of strateric -'at-I-Irials -t Vie ii sti -rtioa of L:,cir G.)ver,2-.-c- !ts or -recm-kr- rczr s. 3' 79 / Tcyi-n)., 1 Auj-,ust 1,;170, 0 p 'I C, 80/ 1 29 w,1"73,quotin t1it)o'--i-istroI :L;Cono lic ISfairs r S. L. -uller. I uoteu iii Coj:-r-orate Pctivit, ,, i-n :-out.i .'frica: -tou. LivLstor nk sT orsioilit,, P S h ee,.rc Cent.r. 197( 82 See D. RoCers, I!hitc "ealth F-ad Blecl: Poverty 'o,0 cit. 83 Fina-ucial Tinec, 10 -'fove,:-fL)cr 1 )77.

47 2. ,roval trA(-h South /.fric-an S'ecretary for Industries : .,.rairc.! to construct -.ur - ear oil refinerie.; or to expnd :istinp-f rcfinarries. 81,/ h..s has -.?nt that t.-: Govern.enet .1... be n .ijle to rer-ulate the ,C'ev, lopient of rtfii in" facilities iy South Africa. .atref, for itstance.0 yas locateJ inland at Ssolbur, partly, for strateric re. 3ons. 3. The oil co-in, nis are obliged tbernselves to store certain minirtui quantities of oil products (13 %reehs supply of fuel)o In addition they c.re required to r2Tnta.n 12 ronths supply of both lubricants and refinery catalysts ana chc:riicals, althouC1h half of tids cover is financed by the Government.P_/ The Governmient has itself becove involved in the stora-i: of considerable quantities of oil (for further details see Section 5.4 below;). It. Under South African lawr, oil refining companies oTertiri in South Africa are req uired to set asi-e a certain percentat-e of thcir refined oil for qoverment purchase. ior instance, rO per c-,-t of total Caltex sales in South Africa in 107' -uere -aede to the Covernment.2 / Unler the j-!tionil Supplies Procurerent Act -To. 29 of 1970 (.Ti~ich superseded e-rlier le'islation) the oil companies in South ,frica are forbidden fror imnosi:-!, any conritions on tht. sale of oil products to customers. This means, for instance, that the oil Pc¢-.-!:.nies are obliged to neet orders from the South African Lrmed forces snd -police. The oil coi-.p'nies 'ave also uscr the existence of this "'conditional selli " leislation to argue that they have no choice but to sell oil to customers .ho T'ay well be involved in surmlyinr Rh±ode s ia. 37__/ J4/ George Birrell, of ;.,obil Cororation, testifying before the US Senate Subcour,- :ittee on Africa, 17 Sete:nber 11775. 65/ Ibid. Corporate Activity in Sout% Africe Analysis P, 'upplement Lo. _3, op. cit , p. F- 51. 67/ George Birrell, of obil Corporation., testifying before the US Senate Subcormaiittee on Africa, 17 9enteraber 1976.

-48 6. The official Secrets Act of South Africa covers information relating to the oil industry in the Republic. The head offices of the oil companies in Europe and the United States have argued that this makes it impossible for them to obtain information on sales within South Africa. They have even claimed that the Act means that the employees of their wholly-owned subsidiaries in South Africa can refuse to answer virtually all questions on such matters put to them in person or correspondence by the directors of the parent companies. There can surely be few precedents for such a situation, where a parent company has virtually lost control over a subsidiary on such matters. 7. The South African Coal, Oil and Gas Corporation (Sasol) was set up in 1950 as a wholly-owned subsidiary of the government industrial Development Corporation. Sasol's role was to develop the manufacture of oil from coal, in order to reduce South Africa's dependence on imported petroleum. In 1955, Sasol opened a small oil--from-coal plant with a capacity of 4,500 b/d (Sasol I). Sasol II, which is due to come on stream in 1981, will produce about 45,000 b/d. Sasol also has a controlling shareholding (52.5 per cent) in the Natref refinery. 8. The Southern Oil Exploration Corporation (Soekor) was established jointly by two government corporations, Sasol and the Industrial Development Corporation, in 1965. Soekor was set up to organize and participate in exploration for oil and gas in South Africa, in order to reduce the country's dependence on imported petroleum. 9. The Government has encouraged a reduction of oil consumption in South Africa. For example, in November 1973, steps were taken to reduce the number of hours that service stations could be opened, and new maximum speed limits were introduced in an effort to conserve fuel. The South African Government is able to determine the selling price of oil, and therefore influence consumption. Changes in retail prices by the oil companies have to be approved by the Government. The Government, of cuurse, is also able to help determine the price of oil products through customs levies and taxes. 10. The Government has established a Strategic Oil Fund which is financed from a levy, currently two cents per litre, on the sale of petrol in South Africa. The fund has been used to help pay for the costs of stockpiling oil and for financing Sasol II. 11. South African Railways (SAR) plays an important role in the transportation of oil. SAR owns the crude oil pipeline from Durban to Sasolburg, and the two product pipelines from Durban to the Witwatersrand. The country's extensive rail network is widely used for the transport of oil rol1uct'2. UP hay a protacted Do~tion bcr~uss the oil Loaganiis are requirci to use rai. or rii: oline axecyt for lacl dictribution. These oxaigllc shlow thte e, tiat to -11-ich tnie Soutb frc; Cuvcrnneat is able to Arect the oil industry. Clecrly, any Oesturn-ouned comp any in South Africp serves two r-asters: its overseas p-'rent co:,pany, :nd tl-;e 0soutki African Governr ct. TIhen thu. rolicics of the two niesters divert e, it would anpcar theot thc, Governnent Joi iates. Thi3 is a poirt -.rhich siould be liven serious corisiderytion by those who elieve tda t 'Jestern cornpnn'nies can be a stron , influence for pro ;ess within South Africa.

- 50 -5. SOUTH AFRICA'S VULNERABILITY TO AN OIL EMBARGO 5.1 Dependence on imported oil South Africa currently imports 99 per cent of its oil requirements. The country would therefore be very vulnerable to an effective international embargo. But the period for which the country could survive a total cut-off would be determined by four factors. First, whether current exploration efforts in South Africa lead to discoveries of significant oil deposits. Secondly, the quantity of oil internally manufactured by oil-from-coal plants. Thirdly, the size of oil stockpiles. Fourthly, the extent to which oil consumption could be reduced with rationing. An analysis of these factors provides some indication of how long South Africa could hold out in the event of a total cutoff of imported oil. 5.2 Oil exploration For many years efforts have been made to discover oil deposits in South Africa and Namibia. Uork intensified in 1965 with the establishment of Soekor, a Government-controlled corporation which was given overall responsibility for oil exploration. Soekor explores in its own right, and also awards leases and sub- leases to other companies. Already R160 million has been spent on oil exploration since 1965: Rl00 million by Soekor itself, and R60 million by other companies involved in prospecting. Sf/ The most important find was a deposit of natural gas discovered off Plettenburg Bay (West of Port Elizabeth) in 1971. This produced very little in the way of oil: only 100 b/d of condensate. __/ An oil rig, Sedko K, drilled off the Plettenburg Bay area for a two year period, ending in January 1978, but no further finds have yet been reported. In 1973 small gas deposits were found offshore from the Orange River estuary, on the South African-Namibian border. One year later another minor oil deposit was found in Mossel Bay, off the coast between Cape Town and Port Elizabeth. None of these discoveries showed any signs of being commercially viable for exploitation. Indeed Soekor announced in October 1977 that it was to end its search for oil on land, although off-shore prospecting would continue. 90/ 6__/ South African Digest, 27 January 1978. o9 / Condensate is a very light oil which forms gas when hot, and cools down to form oil. 90/ Star (Johannesburg), 1 October 1977.

- 51 - Considerable prospecting has also been undertaken in Namibia by Swakor (South West African Oil Corporation) a subsidiary of Soekor, and by other oil companies. 90Il It should be pointed out, however, that mineral exploration in the territory is prohibited by the UN Council for Namibia.'s Decree on Natural Resources (1974), and this has been partly responsible for the withdrawal of a number of Western prospecting companies from the territory. Most of the firms which originally took leases for oil exploration in South Africa and Namibia ir the late 1960s have now pulled out. This hardly suggests that the companies consider that prospects of discovering commercially viable oil deposits are good. This was confirmed by the General Manager of Soekor, Dr. Piet van Zijl, when he was asked for the reasons for the withdrawal of American prospectors. He replied: 'They've looked at our area. There aren't any obvious big (geological) structures attractive to them,so they left. 9_/ One economist has gone so far as to speculate that the initial involvement of some Western companies in prospecting was "dictated not by the expectation of finding oil, but rather by the need to curry favour with the Government to obtain marketing concessions."23/ It is still possible that oil may be discovered in South Africa, but the chances appear to be increasingly slim. Even if commercially viable deposits are found, it would still take many years before full production could be attained. David de Villiers, Chairman of Soekor, has estimated that even after a find it would take two years of further drilling and planning before a final production plan could be produced. four more years would be needed before actual pro.duction was begun. 94/ For the immediate future, therefore, there is little likelihood that discoveries of domestic deposits of oil could reduce South Africa's dependence on imported fuel. _5.3l Oil from coal South Africa has pioneered the commercial production of oilfrom-coal. Indeed South Africa is still the only country in the world which has a large-scale oil- from-coal plant. The process used is an adaptation of the Fischer-Tropsch method, which was developed in Germany between the two world wars. Two stages are involved: coal is converted into carbon monoxide and hydrogen; then the two gases are synthezised into liquid form. Sasol I, the first oil-from-coal plant, was built at Sasolburg (50 kilometers south of Johannesburg) in 1955. Its output is now about 4,500 b/d, which provides one per cent of South Africa's current oil requirements. 95/ 91 / For further details of oil prospecting in Namibia,see New African, February 1978, p.89. 92/ Financial Mail, 14 January 1977. 93/ Rogers, White Wealth and Black Poverty, op.cit. p.141. 94 / Financial Mail, 27 February 1976. 95_/ Sasol I also produces petrol as a by -product of the cracking of naptha (the main products being feedstock gases for the petrochemical industry); but an oil embargo against South Africa would include exports of naptha. For further information on the estimation of the capacity of Sasol I see footnote 34 .

52 A much lar er olant, 'uno.n as Sasol II, is nresently under construction near Secunda (130 kilometers south.-east of Johannesbur). The strate.ic importance of the project can be gauged from the enormous capital investment involved. Cost estimates escelated from R1.021 million to R2 1'5P million between 1974 and 1977. 96/ These figures do not include Worl.:ing capital, township developrent., housing, and interest charges durinr construction. It has therefore been -redicted that the project will not be comissioned at much under R3,000 million. 97/ Sasol II is being financed fromi three sources: R1%6( million fronm the Government's Strategic Oil Fund, P492 million in the form of export credits, and R300 million from Parliamentary appropriations. 9/ On completion in 1981 it will be the country's largest industrial complex. South Africa is nevertheless still critically dependent on foreign capital and technology for the construction of the project. As the Chairman of Sasol recently pointed out: "Foreign purchases and contracts (for Sasol II) are concerned mainly with specialized and pro-priet ary equipment not manufactured or normally obtainable in the Republic.' 99/ Indeed, 43 per cent of the estimated cost of Sasol II (i.e.Rl,050 million) will be incurred for goods and services from abroad. Fluor Engineers and Constructors, a United States company, is the idanaging contractor for the project-, Fluor will nerform the engineering and procurement for certain areas of the plant. and will undertake most of the construction. Equipment is also being provided by Badger, an American company which is 100 per cent owned by the Raytheon Corporation. The oxygen plant is a turn-key package provided by L'Air Liquide of France. Three companies from the German Federal Republic - Lurgi, Linde, and Deutsche Babcock - are also supplying equipment. Some South African press reports have suggested that once Sasol II is completed, the two Sasol plants will provide about a third of the country's oil requirements. However, a detailed analysis of the available data suggests that this is far from true* in fact the two coal from-oil plants will supply only a small part of South Africa's oil needs. The most authoritative statement on the output of Sasol II was made to the Financial Mail in December 1976 by the Managing.Directordesignate of Sasol, Johannes Stegmann.100/ He revealed that the total annual production of Sasol II for all products will be 2.155 million tons (45,000 b/d). This includes 1.5 million tons (33,000 b/d) 9U/ Financial Mail. 10 December 1976 and 4 November 1977. 97/ Financial Mail, 10 June 1977. 9/ Chairman's statement at the 1977 annual general meeting of Sasol, reprinted in the Financial Mail, 4 November 1977. a/ Ibid. 100/ Financial Mail, 10 December 1976.

-53 of petrol, diesel, and light fuel oil (see Table 22). Mr. Stegmann then added that the 1.5 million tons of petrol, diesel and light fuel oil would represent just under 35 per cent of the 1976 domestic petrol requirements. This is, strictly speaking, correct, but misleading-it should instead be compared with the domestic requirements of the same products -- petrol plus diesel plus light fuel oil (i.e. about 195,000 b/d in 1976). 101/ Such a comparison shows that the planned fuel production of Sasol II represents only 17 per cent of the 1976 consumption of these products. Furthermore, the country's demand for these fuels will haw increased to about 260,000 b/d by 1982. 102/ So by the time Sasol II comes into full production, it will only provide about 13 per cent of the Republic's requirements of these motor fuels. Sasol II has been designed to produce mainly motor fuels, and not many other products (such as petrochemical products, waxes, etc. ). Sasol II's production of all products together will be about h5,000 b/d (ten times the estimated Sasol I production). Planned production by Sasol II represents 14 per cent of South Africa's total 1976 output of all oil products, or 11 per cent of the Republic's anticipated production of oil products at the time Sasol II comes into full production in 1982. 103/ These figures are basically confirmed by a statement made in April 1976 by the Assistant General Manager of Sasol, in which he claimed that Sasol II's production would replace about 3 million tons of crude oil imports per year (i.e. 60,000 b/d). 104/ South African imports of crude oil in 1932 would be between hl4,000 and hh0,O00 b/d (if Sasol II did not exist), according to Department of Planning estimates. 105/ This means that when Sasol II comes into full production, it will only save about l4 per cent of this. Bearing in mind these factors, we estimate thet by the time the project comes into full production in 1982, Sasol II will only provide 12 per cent of South Africa's oil needs. Sasol I's production will by that time only provide 1 per cent of the Republic's requirements. The two oil-from-coal plants will therefore provide 13 per cent of the country's oil needs. 101/ The figure of 195,000 b/d was obtained by aggregating the first four rows of Table 20, and then assuming a 5 per cent growth in demand for oil from 1975 to 1976 (see following footnote). 102/ Assuming an annual growth of 5 per cent in demand for oil products, which is the mean rate assumed by the South African Department of Planning over the rest of the century (see Section 2.h). 103/ Taking 1975 production of all oil products as 296,000 b/d (Table 20), and then applying the 5 per cent growth rate assumed above. 10)4/ Rand Daily Mail, 14 April 1976. 105/ Based on Table 5.2 of The Outlook of Energy in South Africa ,op. cit .

Table 22 Anticipated output of the Sasol II oil-from-coal plant. 106, Ptoducts (tog. ger ear)a Motor fuels: petrol, diesel, and light fuel oil Ethylene aulphur Ammonia Pitch Creosote Alcohols and acetones I"ta 1 500 000 165 000 75 000 110 000 0 000 155 000 2155000 45000 33 000 12 000 Sourc. Financial N1ail, 10 December 1976. 106/ The low density of the motor fuels has been taken account of in converting to barrels. It should be noted that the figures given in the table are very close to those released by a West German contractor to the Sasol II project - see paper on Sasol II Project (Munichs Linde Aktiengesellschaft, 10 December 1976). The figure of 1.5 million tons for production of motor fuels has been quoted several other times in the Financial Mail.

55 - South Africa's demand for oil products (including the amount required for exports) is expected to go up from about 324,000 b/d to about 394,000 b/d between 1978 and 1982 - an increase of 70,000 b/d- 107/ The total estimated production of Sasol I plus Sasol II (4,500 b/d plus h,000 b/d) will provide only 70 per cent- of this expected increase in demand. South Africa will therefore still need to import considerably more oil after the completion of Sasol II than at present. 108 / It has recently been suggested that a third Sasol plant night also be built. However, the Minister of Economic Affairs announced in February 1978 that "capital expenditure and manpower requirements for such a project are vast, and we are not at this moment planning the construction of a further Sasol.' 109_/ It is therefore clear that South Africa's present and planned oil-from-coal plants will continue to provide a relatively small contribution to the country's requirements rnd will not nr.av dntherd__eing an increase in oil importation. 5.4 Stockpiles South Africa has been building up strategic stockpiles of oil for over a decade. In 1966 press reports revealed that the construction of new storage tanks had begun. 110_/ The Johannesburg Sunday Express commented at the time: VIt is believed that the Government plans to maintain a perpetual stock of oil and vital goods no matter what the outcome of the Rhodesian and South Iest Africa issues are, so that the policy of separate development is assured of unimpeded progress over an indefinite period." 3.11/ The oil companies in South Africa have from the beginning shared with the Government the work involved in reducing South Africa's vulnerability to an oil embargo. 112_/ Professor Peter Odell, an oil expert, has emphasized the extent of this co-operation: 107 / For the 1978 estimate, see Tables 1A and lB. Thereafter, the usual 5 per cent growth rate has been assumed. 108_/ This is confirmed by a studir of Table 5.2 of The Outlook for Energy in South Africa, op.cit. 109 / Star (Johannesburg), 11 February 1978. 110_/ New York Tines, 9 October 1966. 111 / Sunday Express (Johannesburg), 25 December 1966. 112 / Financial Vail, 26 August 1966.

- 56 - 'The South African Government has required the gradual build-up of stocks of crude oil and oil products in an effort to improve its short- term bargaining power in any crisis. It has in part been prepared to finance these itself (particularly stocks of products required for possible military use) but has also required an undertaking on the part of the oil companies concerned that theywill hold large stocks at their own expense. This requirement was, indeed, made on condition of the franchise given.to oil companies to build or expand refineries." _l _j The construction of large storage tanks for crude oil was started at the main oil refineries in the mid-1960s . Then in 1967, the first use was made of disused coal mines for storing crude oil. Modifications had to be made to the mines, in order to minimize seepage. The R39 million contract to complete the first underground storage facilities was given in the mid-1960s to an American company, Fenix and Scission. 114 / Much of the oil is stored in disused mines in the iWitbank area (east of Johannesburg). In 1970 a spur was constructed from the crude oil pipeline running from Durban to the Natref refinery at Sasolburg, in order to take the surplus crude oil to Ogies (near Witbank) for storage. 115 / The size of South Africa's oil stockpile is a closely guarded secret. The local press has generally quoted a figure of two to three years' consumption at present levels,which could be stretched out to four to five years with rationing. But there are strong grounds for believing that tul fu1.: v if y urr xrdrth 6f oil 31C ;illion b-rrels or 42 i :llion to:is ( t currcnt consiLtion r:'tr!3 - rcrrese- ts consi:crablu cx -. .r~tio" . 11';Oil stockpiling is very expensive. In 1975 the US National Petroleum Council estimated the costs of surface storage at six to twelve dollars a barrel, and underground storage at $0.85 to $1.55 a barrel.. 117 / Because of the costs of storage, most countries maintain relatively small stocks of oil. Table 23, which gives the stock levels of selected OECD countries, shows that most of these industrialized nations have less than 3 months supply of oil. 113/ Peter Odell, Oil and Torld Power: Background to the Oil Crisis, (Harmondsworth: Penguin, fourth edition, 1975). 114/ Southern Africa (London), 24 April 1967. 115/ Financial Mail, Supplement on Oil, 5 March 1971. and Star (Johannesburg), 21 August 1971; 116/ To give some idea of the quantities involved: if this amount of oil was stacked in oil drums (of one barrel), it would reach the moon! 117/ National Petroleum Council, Petroleum Storage for National Security (Washington DC: NPC, August 1975). quoted in Edward Krapels, Oil and Security_ Problems and Prospects of Importing Countries, Adelphi Paper 136 (London: International Institute of Strategic Studies, Summer 1977), p. 8.

-57- Oil stock levels of selected OECD countries in 1975 Stock level (million barrels) Months' consumption (approximately) Belgium Canada France 40 133 214 Germany, Federal Republic of Italy Japan Natherlands United Kingdom United States 3-1/4 2-3/14 3-3/14 2-1/2 2-3/14 2-1/14 1-3/14 3 2 Source: Office of Economic Research, Central Intelligence Agency, International Oil Developments: Statistical Survey (Washington DC: CIA, 6 May 1976), quoted in Edward Krapels, Oil and Security: Problems and Prospects of Importing Countries, Adelphi Paper 136 (London: International Institute for Strategic Studies, Summer 1977), P. 33. Table 23 Country

-58- South Africa would have to put up an enormous financial outlay to build up large stockpiles of oil. Taking costs of storage facilities at R1.00 a barrel (a very low figure) would mean that stockpiling 310 million barrels (2-1/2 years' consumption) would cost R310 million. Actual costs of storage facilities could well be considerably higher. Furthermore, this cost also excludes the capital tied up in the purchase of the oil: at present oil prices (about R12.50 per barrel), this would mean that South Africa had invested around R4,200 million in oil storage. Statistics on oil consumption provided in the International Petroleum Annual (US Bureau of Mines) and in World Energy Supplies (UN Department of Economic and Social Affairs) give estimates for South Africa's addition to its stocks of crude oil in each year up to 1975. If we cumulate these additions to stocks from 1966 (when the storage programme started) to 1975, the data in International Petroleum Annual suggests that total stocks then amounted to 70 million barrels, and statistics in World Energy Supplies gives a figure of 60 million barrels. These sources therefore suggest that South Africa's stocks of crude oil by the end of 1975 totalled only about 6 to 7 months' consumption at current consumption rates. 118/ However, it does appear from various reports that South Africa has increased the rate at which it has added to its oil stockpile in the last few years. We therefore estimate that the stockpile,if consumed at the current rate, could last about one and a half years. This figure inevitably represents only an approximation; but press reports suggesting a higher figure do appear to have exaggerated the size of South Africa's oil stocks. 5.5 Reduction in consumption The South African Government has already taken a number of steps to reduce the country's consumption of oil. This has been done for two reasons. First, almost all the major oil exporting countries have embargoed supplies to South Africa, and the country is dangerously dependent on imported oil. Secondly, the oil price rises since 1973 have had a severe effect on the country's balance of payments: oil imports are now costing around R1,960 million per annum, or about 18 per cent of total visible imports. 119/ 118/ Assuming current consumption of crude oil by the refineries is 330,000 b/d, i.e. 120 million barrels per year (Tables iA and 1B). 119/ See Section 3.1.

- 59 - Speed restrictions of 80 kilometers an hour have been in force since November 1973. Current oil conservation measures, which were introduced in February 1978, limit the sale of petrol to a maximum of 60 hours a week. 120/ Since major restrictions were first introduced to discourage petrol consumption, the annual increase in consumption has been reduced. Any reduction in oil consumption, to be effective, has to cover all major oil products, otherwise refineries would find themselves with a shortage of certain products. To take an example: if private motorists reduced petrol consumption, then it would be important to secure a parallel reduction in diesel fuel. This would be more difficult, however, since diesel fuel is widely used for public and commercial transport and mechanized agriculture. Oil refineries have some tolerances of flexibility, enabling them to alter yields of petrol and diesel over a few percentage points, but major changes of balance would be impossible to introduce in the short term, and expensive in the long term. This problem has been emphasized by the Minister of Economic Affairs: "If a major switch from the use of petrol to diesel or liquid petroleum should take place because the public wants to escape from the restrictions on petrol, this could lead to imbalances in the refinery production pattern, resulting in increased rather than decreased imports of crude oil' 121-122/ Rationing would almost certainly be introduced in the event that a universal oil embargo was imposed against South Africa. A rationing programme would probably enable South Africa to reduce its consumption fairly quickly by around 20 per cent without severe disruption to the economy. At the present domestic consumption rate (i.e. excluding exports and bunkers) of nearly 250,000 b/d of oil products (Table 1A) this would involve a reduction of 50,000 b/d to a lower consumption rate of 200,000 b/d, Nevertheless such a move would-have a serious effect on business confidence and would lead to a rise in white emigration from South Africa. A large reduction in consumption would almost certainly result in a fall in the country's gross national product. Such an economic recession would eventually threaten the continued existence of the present economic and political system in South Africa. 120_/ Service stations are only open from 8 a.m. to 6 p.m., Monday to Saturday (South African Digest, 10 February 1978). 121-122/ Star (Johannesburg), 11 February 1978.

-60- 5.6 Conclusion Prospects of finding domestic oil appear to be minimal, and in any case commercial exploitation would take many years. Internally, produced oil-from- coal, which at present provides one per cent of the country's requirements, will only supply about 13 per cent when Sasol II comes into full production in 1982. Existing stockpiles of oil probably comes into full production in 1982. Existing stockpiles of oil probably amount to one and a half years' consumption at current rates. Rationing could probably reduce consumption by 20 per cent, but any greater reduction would cause severe disruption. Based on the assumption above, it is possible to make a rough estimate of the period during which South Africa could theoretically survive in the event of an effective oil embargo. If all South Africa's oil imports were cut off, then the country could probably last for a maximum of two years (even after Sasol II comes on stream). During this time, however, there would be enormous economic and social disruption. Some oil products would run out faster than others, and some sectors of the economy could only survive at the expense of a more rapid rundown of other sectors. To suggest, as some South African sources have done, that oil stocks could keep the country going until Sasol II starts full production in 1982, and that the two Sasol plants could then somehow provide most of their needs, is clearly not based on an accurate evaluation of the situation. - 61 - 6. THE IMPACT OF OIL EMBARGO ON SOUTH AFRICA'S NEIGHBOURS Several of the countries in southern Africa receive part or all of their oil requirements from refineries in South Africa. It is therefore important to analyse their dependence on oil supplies from South Africa, in order to determine the extent to which they would be affected by an oil embargo against the Republic. 6.1 Namibia The basis of the Namibian economy is fishing (which requires diesel and fuel oil) and mining (requiring bulk transportation for export). Politically oil is vital to sustain South Africa's illegal occupation of the territory. The vast distances between settlements in the territory makes Pretoria's control of Namibia dependent on a reliable transportation network. The escalating armed struggle in Namibia has also meant that South Africa has increased its military forces in the territory; these troops require large quantities of fuel to retain their mobility. Namibia has no oil refinery, and all its oil requirements are presently supplied from South Africa in refined form. The usual method of transport is by tanker to the port of Walvis Bay. If an oil embargo was imposed against South Africa while it was still in illegal occupation of Namibia, then sanctions would presumably also apply to the territory. Indeed an oil embargo could well be imposed against South Africa as a means of pressure to hasten the Republic's withdrawal from Namibia. On 4 November 1977 the UN General Assembly approved a. resolution which requested "all States to cease and prevent forthwith ... any supply of oil and petroleum products or any other fuel to South Africa" while it continues to occupy Namibia. Voting was 117 in favour, none against, with 24 abstentions. 123/ This followed the call of the South ITest Africa People's Organization, recognized by the United Nations as the legitimate spokesman of the Namibian people, for an oil embargo against South Africa. In resolution S-9/2 of 4 May 1978, the General Assembly, inter alia, urged the Security Council to impose an oil embargo against South Africa because of its continued illegal occupation of Namibia. Namibia would, of course, be excluded from an oil embargo against South Africa if the territory had already attained independence under an internatinnally accepted settlement. It would then be relatively simple to supply Namibia with refined oil products from other sources by ship. 124/ 123/ General Assembly resolution 32/9D. 12WT/ It is assumed that Walvis Bay would be part of an independent Namibia.

-62- 6.2 Rhodesia We estimate that Rhodesia's oil consumption in 1978 will be about 16,000 b/d. 125/ Since the imposition of a UN oil embargo against against Rhodesiashortly after its UnilateralDeclaration of Independence, most of the country's oil requirements have been supplied from South Africa. Until the closure of the Mozambique-Rhodesia border, on 3 March 1976, oil products were normally sent from South Africa to Maputo (formerly Lourengo Marques), and then transported by rail into Rhodesia. Since that date, however, most of Rhodesia's oil has been transported directly from South Africa via the road and rail links at Beit Bridge. Evidence has emerged in recent years to show that the South African subsidiaries of the oil 'majors" have themselves been involved in supplying Rhodesia. Secret Mobil documents, published in The Oil Conspiracy report, revealed how Mobil-South Africa had set up what it described as a N paper-chase' to sell oil products to Mobil-Rhodesia. An internal Mobil-Rhodesia memorandum described the purpose of the Tpaper-chase" as being to hide "'the fact that MOSA (Mobil South-Africa) is in fact supplying MOSR (Mobil-Rhodesia) with (oil) product(s) .. 126 / The ifpaper-chase" worked as follows: Mobil-South Africa would sell a bulk consignment of oil products to a South African intermediarycom pany - usually part of Freight Services Limited - who would then resell the same shipment, via further South African intermediaries, to GENTA, a Rhodesia government agency responsible for importing all the country's oil requirements. GENTA would finally sell the oil to the Rhodesian subsidiaries of the oil "majors", including Mobil, for eventual distribution to the public in Rhodesia. Since 1976 evidence has emerged to show that the South African subsidiaries of Shell, BP, Caltex and Total have also been involved in supplying Rhodesia through similar methods. 127 / The oil "'majors" have argued that South African legislation on "conditional selling" makes it impossible for them to prevent their South African subsidiaries from selling oil to local companies who then resell to Rhodesia. For this reason it appears that the only effective way to close this gaping loophole in the existing oil sanctions against Rhodesia is to extend the embargo to cover South Africa. This was accepted by the Commonwealth Committee on Southern Africa (on which all Commonwealth countries, including the United Kingdom" 125/ Based on the estimate in Martin Bailey and Bernard Rivers, Oil Sanctions Against Rhodesia (London: Commonwealth Secretariat, 30 July 1977) p. 20. 126/ The Oil Conspiracy (New York: United Church of Christ, 21 June 197 6, p. 3. 12_f/ See, for example: (a) Martin Bailey, Shell and BP in South Africa, (London: Haslemere Group and Anti-Apartheid Movement, 1 March 1977); (b) Submission to British Government Inquiry on Allegations of SanctionsBusting by Shell and British Petroleum (London: Haslemere Group and AntiApartheid Movement, 25 April 1977); and (c) Oil Sanctions against Rhodesi op. cit.)

-63- are represented), following a detailed study of the problem. 128/ The Committee, meeting on 21 October 1977, unanimously agreed that guarantees should be sought from the South African Government that oil supplied to South Africa should not be re-exported to Rhodesia. If South Africa was unwilling to provide such guarantees, then the Committee stressed the need "for seeking from the Security Council a decision to impose in mandatory form an embargo on the supply of crude oil and petroleum products to South Africa itself." 129/ Subsequently the UN General Assembly approved a resolution on 16 December 1977 which requested "the Security Council to impose a mandatory embargo on the supply of petroleum and petroleum products to South Africa in view of the fact that petroleum and petroleum products are transported from South Africa into Southern Rhodesia." Voting was 113 in favournone against, with 10 abstentions. 130/ An oil embargo against South Africa could therefore be considered as a means of tightening sanctions against the illegal regime in Rhodesia. It is also important to consider the situation that would exist after UN sanctions have been lifted from Rhodesia, following an internationally acceptable settlement. The country would then presumably be able to obtain virtually all its oil reauirements through Mozembique. In 1965, only a few months before Rhodesia's Unilateral Declaration of Independence, an oil refinery was completed at Umtali (near Rhodesia's eastern border) which was fed with crude oil by a pipeline from the Mozambican port of Beira. The Umtali refinery, which has a capacity of 20,000 b/d, was originally built to serve both the Rhodesian and Zambian markets. 131/ In 1968, however, a refinery was completed at Ndola to provide ZambiaTs requirements from crude oil piped from Dar es Salaam. 132 / Even with the rise in Rhodesian consumption since 1965, however, the-Umtali 128/ The Committee used as its primary working document a specially commissioned report: Oil Sanctions against Rhodesia, op. cit.,,. 129/ Commonwealth Secretariat (London), press release, 21 October 1977. 130/ General Assembly resolution 32/116B.The ten countries abstaining on the resolution were Belgium,CanadaFrance, Federal Republic of Germany, Iran, Israel, Italy, Luxembourg, United Kingdom and United States. 131/ The Umtali refinery is owned by Central African Petroleum Refineries (Capref). Shareholders in Capref are Shell (20.75%), BP (20.75%), Mobil (17.75%), Caltex (15.75%), Aminoil (15%), Kuwait National Petroleum Company (5%), and Total (Oil Co.) (5%). 132/ Zambia's oil consumption in 1975 was estimated at 17,750 b/d. Only 700 b/d was imported in refined form; the remainder was refined at Ndola. (International Petroleum Annual op. cit. *, Table 1.) refinery could still provide sufficient refined products for Rhodesia (except for certain specialized products). 133/ Oil products could also be imported into Rhodesia by rail from Mozambique. An independent Zimbabwe should therefore find no difficulty in importing all its oil requirements via Mozambique after the lifting of sanctions. 134/ 6.3 Swaziland Swaziland currently imports its oil requirements in refined form from South Africa, mostly via Mozambique. Transport is usually by ship to Maputo* and then by road and rail to Swaziland. In 1974, Swaziland imported 1,727 b/d of liquid oil products worth R8.262 million (see table 24). Assuming a 5 per cent growth rate in consumption, this suggests that in 1978 Swaziland will import about 2,100 b/d of oil products. In the event of an oil embargo against South Africa, Swaziland could still import all its oil requirements via Mozambique. Oil could either come from the Maputo refinery, or be imported in refined form from other countries via Maputo. 135/ 6.4 Botswana Botswana's oil requirements are currently imported from South Africa as refined products. These are transported along the rail line which runs from South Africa (via Mafeking) through the eastern part of the country. Botswana's total imports of oil products were valued at R15.3 nillion in 1975,and R17.5 -illi6n in 1076 further details are given in table 25. No statistics are available on the quantities of oil products imported. However, we estimate that Botswana's 1978 importation rate of oil products will be about 3,400 b/d. 136 / 133/ The,.Umtali refih zry, ateitsrpr4eent:capaeity ,lavLl, coulhe prbbablase- rvetRhdd!slas feq nqements until the early 1980s. It would no doubt be possible to expand the refinery to increase its output.. 134/ A further possible route for oil products would be from the oil refinery at Ndola, in Zambia. 135/ According to Agence France Press, 4 October 1977, the Swaziland Government announced plans in October 1977 for building a $35 million oil refinery. Studies have apparently already been carried out with the aid of the EEC. 136/ We derive this estimate as follows. Although Botswana has only published statistics on the value of its oil imports, Swaziland has published statistics on both the quantity and value of its oil imports. In 1974 Swaziland imported 630,000 barrels of liquid oil products at a cost of R8.262 million (see table 24), which averages out at R13.11 per barrel. If we assume that the same cost applied in Botswana, and allow for a 10 per cent price increase by 1975, we can estimate that Botswana's oil imports cost R14.42 per barrel in 1975. Oil imports that year cost a total of R15.3 million, which at R14.42 per barrel gives an import rate of 2,900 b/d. Assuming a grovth irn demand of 5 per cent per annum, that gives a 1978 import rate for Botswana of about 3,400 b/d.

-65- Table 24 Swaziland's imports of liquid oil products, 1973 and 1974 1973 1973 1974 1974 Products Volume Value Volume Value (b/d) (million Lilangeni) (b/d) (million Lilangeni) Motor and aviation spirit 510 2.216 544 3.365 Lamp oil and white spirit 102 0.298 105 0.469 Gas oil, diesel oil, etc. 1018 2.048 1033 3.898 Lubricating oil 42 0.404 45 0.530 Total 1672 4.966 1727 8.262 Source: Derived from Annual Statistical Bulletin 1975 (Mbabane: Central Statistical Office, 1976), pp. 72-23 One Lilangeni was equivalent to one Rand.

-66- Table 25 Botswana's imports of oil products, 1975 and 1976 Products 1975 1976 Value Value (million Pula) (million Pula) Petrol and aviation spirit 5.0 6.4 Distillated fuels (e.g. diesel fuel) 8.0 8.7 Lubricating oil and greases 0.9 1.3 Kerosene 0.8 0.8 Other oil products 0.6 0.3 Total 15.3 17.5 Source: External Trade Statistics (Gaborone: Central Statistics Office, 1977), p.46. One hla was equivalent to one Rand.

-67- If an oil embargo was imposed against South Africa, then Botswana's needs could probably be supplied from Zambia. Oil products could be sent south by rail from the Ndola refinery to Livingstone. The oil would then have to be transported by road tanker to Kazungula, the ferry crossing point (over the Zambezi River) into Botswana. From the Botswana border an untarred, but improved,road runs south to Francistown and Gaborone. This route would be a feasible (albeit expensive) method of supplying Botswana's oil requirements. In the event of a lifting of UN sanctions against Rhodesia, Botswana could import its oil requirements by rail from a number of sources: from the Rhodesian refinery at Umtali, from Mozambique (via Rhodesia), or from the Zambian refinery at Ndola (via Rhodesia). 6.5 Lesotho All Lesotho's oil requirements are imported in refined form from South Africa. The oil originates from the Shell/BP and Mobil refineries at Durban, and is normally sent by rail to Maseru. Lesotho's total imports of oil products were valued at R2.48 million in 1973; further details are given in table 26. We estimate Lesotho's 1978 importation rate of oil products will be about 1,100b/d. 13/ 137 / This estimate is derived as follows. In 1973 Lesotho imported R2.h48 million of oil products (table 26). In the same year, Swaziland imported 610,000 barrels of oil products at a cost of R4.966 million (table 24), making the average cost of oil products to Swaziland that year R8.14 per barrel. Assuming roughly the same cost per barrel applied in Lesotho, we can estimate that in 1973 Lesotho imported 305,000 barrels of oil products, or 835 b/d. An increase of 5 per cent per annum in the five years since then would give a 1978 importation rate of about 1,100 b/d.

-68- Table 26 Lesotho's imports of oil products 1973 1973 Value Products (million Rand) Motor and aviation spirits 0.958 Diesel 0.413 Paraffin 0.786 Lubricating oil and greases 0.232 Mineral jelly 0.095 Total 2.484 Source: Annual Statistical Bulletin, 1973 (Maseru: Bureau of Statistics, 1974), p.27.

-69- One possibility would be to fly oil products from Maputo to Lesotho, a journey of about 650 kilometers. 138/ The cost of such an exercise would be high, of course, although not as high as the cost of flying oil to Zambia, as was done in 1966 after sanctions were imposed against Rhodesia. 6.6 Other countries Other African countries, and possibly certain Indian Ocean islands, currently import small proportions of their oil requirements from South Africa. 139/ Most of Mozambique's needs are provided by the Maputo refinery, or imported from abroad in refined form, but certain products are currently purchased from South Africa. During 1975 domestic consumption was 11,397 b/d: 8,619 b/d was supplied by the Maputo refinery, and the balance of 2,778 b/d was imported from various sources in the form of refined products. 140/ In the event of an oil embargo, however, alternative sources could be found for those refined products which are now imported from South Africa. In 1975 it was reported that Mobil was supplying some oil products to Zaire via South Africa, in order to provide part of the requirements of Shaba Province. 141/ Supplies, which commenced in October 1975, were then being sent at the rate of about 320 b/d - about 2 per cent of Zaire's total needs (16,000 b/d). It is not known whether Zaire is still importing small quantities of oil products from South Africa; in the event of an oil embargo, alternative sources could presumably be found. Malawi also imports certain oil products from South Africa. In 1973 importation from South Africa was about 800 b/d. 142/ Products currently purchased from South Africa could presumably be obtained from other sources, and imported through Mozambique, in the event of an oil embargo against South Africa. We estimate that South Africa's total 1978 exports of oil products (excluding ships' bunkers) to all countries other than Namibia, Botswana, Lesotho, Swaziland and Rhodesia will only amount to about 4,000 b/d. 138/ The main runway at Lesotho's principal airport, Maseru, is of limited length. However, it is capable of taking modest-sized turboprop aircraft easily able to fly non-stop to Maputo (650 kin) or Gabo:rone (630 km). (Report on Aesistance to Lesotho, United Nations: document S/12315, 30 Marcn ±4yU.) 139/ The Malagasy Republic, however, has its own refinery, and is a net exporter of refined products. 140/ International Petroleum Annual,(op. cit.), Table 1. 141/ Star (Johannesburg), 27 December 1975. 142/ Derived from information in Annual Statement of External Trade 1973 (Zomba: National Statistical Office, September 1974).

-70- 6.7 Ships ' bunkers When crude oil is refined, 25 to 30 per cent is converted into fuel oil, which is the heaviest of the fuel products of the refining process. Fuel oil is primarily used for furnaces and power stations. Since coal is normally used in South Africa for such purposes, however, the country has a relative surplus of fuel oil. The principal remaining use for fuel oil is for ships' bunkers (i.e to provide fuel for passing ships). Except when used for local coasters, this use of fuel oil counts as an export, because the oil is actually consumed outside South Africa. We estimate that during 1978 the Republic will provide about 50,000 b/d of fuel oil for ships' bunkers. There is still a heavy flow of shipping round the Cape, and some of these ships currently call in at a South African port for bunkers. But since the reopening of the Suez Canal, in June 1975, bunkering of international shipping in South African ports has fallen by 40 per cent. 143/ Large ships (such as the supertankers which are increasingly used to carry the world's trade in oil) now normally round the Cape without calling in for fuel. In the event of an oil embargo against South Africa, it is possible that the Republic would be willing to continue providing bunkers to international shipping while it was living off its oil stocks, on the grounds that a refusal to do ao would hit the normal import and export trade upon which its economy i' dependent. But if at some point the Republic did refuse to provide ships' bunkers, the ports elsewhere in Africa - particularly neighbouring countries such as Mozambique, Malagasy Republic and Angola - should be able to provide bunkers for all except the largest ships, and these larger ships would be the very ones capable of rounding the Cape without refuelling. Oil sanctions against South Africa therefore need not have a serious effect on international shipping. 6.8 Assistance for South Africa's "hostages" Many of the countries of southern and central Africa import all or part of their oil requirements from South Africa. In the event of an oil embargo against South Africa these supplies would presumably cease to be available. Indeed, the South African Government has used the dependence of neighbouring states on the flow of oil products from South Africa to discourage the imposition of an oil embargo against the Republic. 143/ Sunday Times (Johannesburg), 16 October 1977.

-71- Ore expert suggested that in late 1973, when an oil embargo was placed on South Africa, the South African Government attempted to persuade Botswana, Lesotho, and Swaziland to ask the Organisation of African Unity (OAU) to reverse the decision: The South Africans added they would not accept a "neutral' stand by their three neighbours on this matter, and that their oil requirements could only be guaranteed if they used their influence at the OAU. Not unnaturally such a demand was unacceptable, and it seems that Pretoria has not attempted to pursue this method of influence further. 144/ Vorster has stated that in the event of oil sanctions it would be "every man for himself". The embargo might hurt South Africa, he added, but it could "kill independent black countries in Southern Africa like Botswana and Lesotho." 145/ However, there are reasons for believing that the South African Government has exaggerated the dangers. The Financial Mail explained: The actual effect of oil sanctions against South Africa for BLS (Botswana, Lesotho and Swaziland), despite Vorster's dramatic warning, are likely to be fairly small. The major suppliers in SA all have independent companies in the three countries, and are confident that overseas suppliers would export direct to BLS in the event of sanctions. 146/ In the case of Lesotho, it is true, an oil embargo against South Africa would pose grave transport problems. For Botswana there would be serious difficulties, but these could be overcome if the financial resources were available. For the other countries of Southern and Central Africa (Swaziland, Mozambique, Malawi, and Zaire,and at some stage Namibia and Zimbabwe), the direct costs would be relatively small, and again these could be relieved with international assistance. 144/ Jonathan Baker, "Oil and African Development", Journal of Modern African Studies, (USA, 1977 , p. 201. 145/ Financial Mail, 9 December 1977. 146/ Ibid.

-72- 7. ATTEMPTS TO IMPOSE OIL SANCTIONS AGAINST SOUTH AFRICA 7.1 Initial attempts Since the early 1960s efforts have been made to impose an oil embargo against South Africa. At the Conference of Independent African States, held at Addis Ababa in June 1960, a call for economic sanctions against South Africa was approved. The resolution,.inter alia*: invited the Arab States to approach all petroleum companies with a view to preventing oil from being sold to the Union of South Africa and recommends that the African States refuse any concession to any company which continues to sell petroleum to the Union of South Africa. The Organization of African Unity, since its formation in 1963, has also made frequent calls for oil sanctions against South Africa. In July 1964, for instance, OAU heads of State resolved "to appeal to all oil producing countries to cease as a matter of urgency their supply of oil and petroleum products to South Africa." 147/ The first occasion on which the UN General Assembly specifically called for an oil embargo against South Africa was in a resolution on Namibia in November 1963. One clause urged "all States to refrain from the supply in any manner or form of any petroleum or petroleum products to South Africa." 148/ The United States delegate proposed that this clause should be deleted, a move supported by 21 other countries, but the original resolution was approved by 67 votes to 22 (with 14 abstentions). The following year a UN Security Council Committee of Experts was set up to examine the economic dnd strategic aspects of sanctions against South Africa. l4 The Committee emphasized the importance of a total trade embargo against South Africa, and highlighted the particular effectivemess that a ban on the supply of petroleum and petroleum products to South Africa would have. 147/ Resolution 6 adopted at Cairo, 21 July 1964. 148/ Resolution No. 1899 (XVIII). 149/ The Security Council Committee of Experts on South Africa was established under Security Council resolution 191 (1964).

-73- 7.2 The 1973 embargo The 1973 oil crisis led to the first concerted attempt to impose an oil embargo against South Africa. At the OAU Council of Ministers' meeting, held at Addis Ababa between 19 and 02 Xbvibe.r1973, the OAU Secretary General proposed a five-point programme which linked African support for the Arab cause against Israel with the struggle against minority rule in southern Africa. The OAU Secretary General pointed out that 90 per cent of South Africa's oil came from the Gulf. He added that "the time has come for our Arab brothers to use the oil embargo as a weapon against the white regimes" in southern Africa. The OAU Council of Ministers called on the oil exporting countries to impose an oil embargo against South Africa, Rhodesia, and Portugal until they complied with UN resolutions. In another resolution on the Middle East the OAU Council of Ministers "invited all Member States of the OAU and appealed to all friendly countries to impose a total economic embargo and in particular an oil embargo against Israel, Portugal, South Africa and the minority racist r6gime in Southern Rhodesia.": A few days later an Arab summit conference was convened at Algiers between 26 and 28 November 1973. The meeting adopted a resolution which, inter alia, called for "a complete Arab oil embargo" against South Africa, Rhodesia, and Portugal. This marked the first serious attempt by the oil exporting countries to impose an oil embargo against South Africa, and led to considerable concern within South Africa. In South Africa it was feared that the impact of the embargo on the economy would be severe. The Standard Bank Review predicted: Apart from shortages of petrol, reduced supplies of crude oil will adversely affect the petro-chemical industries, which provide inputs for industries such as plastics, synthetic fibres, chemicals, paints and synthetic rubber. Thus, although South Africa is less vulnerable than countries which depend heavily on fuel oil for heating and generation of electrical power, any cutback of oil supplies to industry will have far reaching and potentially disruptive implications. 150/ Within days of the imposition of the Arab embargo, the South African Government took action to reduce the country's oil consumption. On 10 December 1973 restrictions were introduced to close petrol stations on Sundays, and to bring in lower speed limits. A few weeks later rationing regulations were prepared, and ration coupons were printed as a precautionary measure. In the end, however, rationing was not actually introduced. 150/ Standard Bank Review, December 1973, p.27.

-74- 7.3 Assistance from the "majors" South Africa continued to receive adequate supplies of oil. Probably the most important reason was that the oil "majors" helped to ensure that the embargo remained ineffective. Immediately after the imposition of the embargo it was reported that "chiefs of South Africa's major oil companies ... have been advising Government and their head offices on how best to conserve and utilise supplies." 151/ The attitude of the "majors" was summed up by Sir Eric Drake, Chairman of BP, during a visit to South Africa in March 1974. The Rand Daily Mail quoted him as saying that the oil companies, and BP in particular, had intentionally set out to thwart Arab attempts at enforcing oil embargoes on countries like South Africa. 152/ Once South Africa had the support of the oil "majors", it was possible for the companies to ensure that the country received regular supplies. Their ability to control international oil distribution has been graphically explained by Anthony Sampson in a detailed study of the industry: On the twenty-fourth floor (of Exxon's New York headquarters) is the mechanical brain of the company, where the movements of its vast cargoes are recorded. A row of TV screens are linked with two giant computers, and with other terminals in Houston, London and Tokyo, in a system proudly named LOGICS (Logistics Information and Communications Systems). They record the movement of five hundred Exxon ships from 115 loading ports of 270 destinations, carrying 160 different kinds of Exxon oil between sixty-five countries. 153/ Sampson went on to explain the importance of "Logics" during the 1973 crisis: Now, overnight, Logics faced its ultimate test of rationality: to work out how to supply and cut back every country equally. As the embargo descended the staff worked late into the night and into weekends, calculating the effects of the Arab cutback, diverting the movements of the tankers, trying both to obey Arab instructions and to fulfil long-term contracts. "It became clear to us that it wasn't a business operation but a political one", as one executive recalled... 154/ 151/ Financial Mail, 16 November 1973. 152/ Rand Daily Mail, 5 March 1974. 153/ Anthony Sampson, The Seven Sisters: The Great Oil Companies and the World They Made. (London: Coronet, 1976), p. 26. 154/ Ibid., p. 274.

-75- The South African Government realised that the country would be in a more secure position if it became more financially attractive for the "majors" to operate in the Republic. When the embargo was first imposed, the Financial Mail proposed that: The companies should be given the maximum financial incentive to seek out alternative supplies of both crude and refined spirit.., given the incentive, the oil companies could well divert a lot more non-Arab oil to a small market like South Africa, while the kosher countries like Britain would get more Arab crude than in the past from the international pool. 155/ At the end of 1973 the South African Government took the opportunity provided by rising oil prices to allow the oil companies a higher profit on sales. A writer in the official South African Yearbook, published by the Department of Information, speculated on the reasons behind this move: Nobody was saying so, but it seemed clear that, by ensuring that South Africa remained one of the most profitable and attractive of the world's smaller oil markets, the government was helping to secure maximum co- operation from the international oil companies in the difficult days ahead. 156/ The oil "majors" were able to supply South Africa by arranging for one of their non-South African subsidiaries to purchase crude oil. The way in which this took place emerged during a tax case relating back to 1967 which was heard in 1974. Caltex-South Africa obtained most of its supplies of crude oil from Caltex Services (registered in the United Kingdom). The transactions were arranged as follows: The procedure was for Caltex SA to inform the British company about a year in advance of its requirements and at the same time indicate the desired date of delivery. Caltex UK would then purchase the supplies and arrange for them to be loaded, usually at ports in the Persian Gulf. 157/ 155/ Financial Mail, 30 November 1973. 156/ South Africa 1974 (Johannesburg: Department of Information, 1974T, p. 32. 157/ Financial Mail, 22 November 1974.

-76- The oil "majors" had little difficulty in arranging crude oil deliveries to South Africa after the 1973 embargo. The Financial Mail described how it was done: Only expert and artful juggling by international oil companies is keeping some refineries going. Basically, the plan is to send unembargoed oil to countries under boycott, while "political" oil is shipped to countries classified as "friends" and itneutralists". .158/ By June 1974 the situation had improved. The London Financial Times reported that: ... the supply squeeze has eased progressively as more and more countries have been taken off the Arab list of embargoed destinations. This has enabled the oil companies, by a complicated series of swaps, to allocate more Iranian crude to South Africa. 159/ There is some evidence to suggest that the oil "majors" may have made contractual obligations to provide South Africa with supplies. If these reports are correct, then it means that South Africa was positively singled out by the oil companies for more favourable treatment than most oil importing countries. Clearly the political implications of such arrangements are of considerable importance. In 1967 it was reported that the oil companies in South Africa were to be asked for guarantees that their parent firms would not stop the flow of crude oil to the Republic. If supplies were cut, for whatever reason, then their shareholdings in South African refineries would be compulsorily purchased. 160/ Professor Peter Odell, in his book Oil and World Power, points out that Iran undertook to supply specified quantities of crude oil to South Africa. He goes on to state: 158/ Financial Mail, 14 December 1973. 159/ Financial Times, 19 June 1974. 160/ Southern Africa (London), 24 July 1967.

-77- The (South African) Government has tried to secure similar guarantees from the foreign companies working in South Africa. It is highly likely that all have given an assurance that they will do what they can should the occasion arise, but French companies (i.e Total) in particular appear to have satisfied the South African Government in this respect to a greater degree than have the American or British ones - perhaps reflecting contrasting government attitudes to South Africa. 161/ In any case, whether or not formal guarantees were given, it is clear that the oil "majors" played a crucial role in ensuring that the embargo did not cripple South Africa. The Financial Mail, in voicing its appreciation, pointed out: There can be no greater blessing for South Africa apart from the fact that Iran is well-disposed than that the oil business is still largely in the hands of international companies with no discernible leanings of excessive patriotism. 162/ 7.4 Current suppliers of South Africa's oil Since the 1973 embargo it appears that around 90 per cent of South Africa's crude oil has come from Iran. The Iranian Government never accepted the decision of the Arab OPEC countries to impose oil sanctions against South Africa. Iran's attitude to this matter was explained in the Fourth Committee of the UN General Assembly on 8 December 1977. The Iranian representative claimed that his Government "always considered oil as a commodity and not a political weapon." He went on to point out that with respect to the oil marketed by the Iranian Consortium, the main source of Iran's oil exports to South Africa, "the Iranian Government does not have any control on its final destination." 163/ Although Iran appears to be unwilling to impose any oil embargo unilaterally or in conjunction with only part of the world community, it can be assumed it would comply with any UN Security Council decision to impose a mandatory oil embargo against South Africa. 164/ A decade ago Iran appeared less cautious, for it even introduced an oil embargo against Rhodesia in November 1965, before such a move was made mandatory by the Security Council. 161/ Peter Odell, Oil and World Power: Background to the Oil Crisis, op. cit.), p. 185. 162/ Financial Mail, 7 December 1973. 163/ This is a verbatim quote taken down by the authors, and whose accuracy was confirmed by the spokesman in question. 164/ This is supported, inter alia, by an Iranian source quoted in the Rand Daily Mail, 15 December 1977.

-78- Quite apart from the threat of a UN oil embargo, South Africa has considerable cause to worry at its dependence on the continued support of Iran. No Government likes to know that 90 per cent of its oil comes from a single supplier. Furthermore, South Africa's needs for oil are increasing by around 5 per cent a year, and it is not at all certain that Iran will continue to be both willing and able to provide these needs. Iranian reserves of oil, particularly the light crude which South Africa needs, are unlikely to last much beyond the 1980s at present extraction rates, especially given the country's ambitious domestic industrialization drive. 165/ In addition to the oil supplied to South Africa by Iran, around 10 per cent of South Africa's oil originates from other sources. As was explained in Section 3.2, it appears that at different times since the imposition of the 1973 oil embargo, relatively small quantities of oil from Bahrain, Brunei, Indonesia, Iraq, Kuwait, Oman, Qatar, and United Arab Emirates (Abu Dhabi and Dubai) have been reaching South Africa in most cases, without ti.e knowledge and against the decisions of the Governments of the countries concerned. It has been claimed by the Haslemere Group, in testimony before the UN Special Committee against Apartheid, that the oil "majors" have deliberately undermined the embargo against South Africa. A source within the oil industry in South Africa was quoted as saying that: Ships belonging to one or more of the parent oil companies sometimes carry crude oil to South Africa having purchased it from certain Middle East countries which are members of OPEC and which have in recent years attempted to enforce an oil embargo against South Africa. Indeed, some of the documents relating to these supplies of oil to South Africa actually have printed on them in large letters the words "Not for delivery to South Africa", or some similar expression. 166/ It is likely that as more effective methods are evolved for policing such activities by the "majors", South Africa will find it harder to obtain oil in this way. South Africa has been able to survive the 1973 attempt to impose an oil embargo for two main reasons. First, the "majors" have ensured that regular supplies of oil have been delivered to South Africa. Secondly, Iran has been willing to provide most of the country's oil requirements. Nevertheless, as the next chapter suggests, it would be quite feasible for the UN Security Council to take measures to ensure that an effective oil embargo is imposed against South Africa. 165/ Financial Mail, 19 July 1974 and 18 April 1975. 166/ Testimony of 1 December 1977.

-79- 8. AN EFFECTIVE EMBARGO 8.1 An OPEC embargo Control over the use of oil deposits has given the oil-exporting countries enormous power. This has been clearly demonstrated by the growing strength of OPEC. 167/ The 1973 embargo against South Africa has not been effective, it is- true, but this does not mean that the OPEC countries lack the muscle to cut off oil supplies. South Africa would certainly find it difficult to obtain a regular supply of crude oil if all OPEC members were to act as forcefully over supplies to the Republic as they have over prices. In 1973, the OAU set up a "Committee of Seven", whose function was to study the effects of the oil crisis on African countries and to discuss with the Arab producing countries how best to alleviate its impact on black Africa. Another OAU Committee was established in June 1977, under the chairmanship of the Zambian Foreign Minister, "to consult OPEC members with the objective of seeking their co-operation to impose a total oil embargo on South Africa." 168/ Its membership includes all the African OPEC members (Algeria, Gabon, Libya, and Nigeria) as well as three other States (Ghana, Sierra Leone, and Zambia). In October 1977 the OAU Committee set out on a mission to visit all non-African members of OPEC. It is understood that all the Arab members of OPEC, and all the non-Arab members excluding Iran, received the mission cordially and expressed their full intention that their oil should not reach South Africa. The fact that such sentiments were expressed by most of the non-Arab members of OPEC - who had not officially participated in the original embargo - is of considerable importance. However, the mission encountered two problems. First, there was an admission in certain cases that it was difficult to ensure that oil sold to the "majors" did not eventually find its way to South Africa. Secondly, the Iranian Government let it be known that the mission was only welcome in Iran if the members entered as tourists on a non-official basis; this was naturally a setback, and the mission therefore by-passed Iran. 169/ There is little doubt that Iran, as the only OPEC member not to have officially cut off oil supplies to South Africa, is facing increasing pressure to do so. Certainly the cost of halting supplies to South Africa would cause it no great financial hardship: although South Africa obtains 90 per cent of its oil from Iran, this represents under 5 per cent of 167/ OPEC members are: Algeria, Ecuador, Gabon, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates, and Venezuela. 168/ Africa, December 1977. See also the Financial Times, 11 October 1977. The Committee was particularly concerned at the fact that oil was continuing to reach Rhodesia via South Africa, in defiance of existing United Nations sanctions. 169/ Rand Daily Mail, 13 December 1977.

-80- Iran's total oil exports. 170/ A decision by Iran to join the embargo would probably mean that no oil-exporting country would then be willing to step in as a direct supplier of crude oil. This would certainly create grave problems for South Africa: it would mean that supplies could not be guaranteed (particularly during periods of shortage on the international market), and it would almost certainly increase the costs of purchasing oil. Nevertheless, if no other measures were taken, South Africa would probably be able to buy a fair amount of oil through international brokers and other intermediaries. In these circumstances, however, the oil "majors" would probably be reluctant to become too overtly involved in supplying South Africa. These companies, which dominate the world oil trade, are themselves dependent on the oil-exporting countries for their supplies of crude oil. It is not our intention in this paper to provide a comprehensive set of proposals as to how the members of OPEC, with support from other countries, could strengthen the effectiveness of the 1973 oil embargo. Nevertheless, it seems appropriate to outline various possibilities: 1. The OPEC countries could institute a system of refusing sales to any company which was in turn selling oil to South Africa (This proposal would no doubt raise practical and legal problems, since in many cases oilexporting countries are contracted to supply crude to these companies, but a start could still be made to implement such a scheme). 2. As an alternative to the above, OPEC members could impose an extra "tax" on sales to firms known to be supplying oil to South Africa from any source. The funds so raised could be paid into a Liberation Fund - or a fund to help the "hostage states" - to be administered by the UN or the OAU. 3. Similar action to Scheme 2 above could be instituted against the five oil "majors" who dominate the oil industry in South Africa 171/ (In many cases, of course, these are the same companies who supply oil to South Africa, and who would therefore be affected by Schemes 1 and 2 above). These companies could be subject to an extra "tax" on their operations in OPEC and other countries until such time as they undertook to withdraw from South Africa. 170/ In 1974 only 4.7 per cent of Iran's oil expbrts went to South Africa (Annual Statistical Bulletin, 1975, OPEC). 171/ Shell, BP, Mobil, Total, and Caltex (jointly owned by Texaco and Standard Oil of California).

-81- 4. In support of the above, the members of the OAU could also impose a "tax" - possibly an increased tax on profits - on the local subsidiaries of those oil companies which also have subsidiaries in South Africa. In those cases where an oil company has a larger operation in a black African country than it has in South Africa, this tax could act as a powerful incentive to withdraw from the Republic. 172/ 8.2 A United Nations embargo As has already been explained, an embargo on South Africa by all members of OPEC would have a dramatic effect, but could also contain a number of loopholes. Furthermore, it is clear that at present Iran is not willing to participate in such an embargo. The disadvantages of an embargo in which only some members of OPEC participate are numerous, as has been clearly illustrated in recent years. In effect, oil from the embargoing countries and oil from the non- embargoing countries is all fed into a global pool - a pool which is controlled by the oil "majors" - and out of this pool, the "majors" are able to supply South Africa. The situation would be very different, however, if a mandatory oil embargo were imposed against South Africa by the United Nations Security Council, acting under Chapter VII of the UN Charter. This would have two main advantages over the present embargo. First, it would mean that all countries (including Iran) would presumably be willing to participate in the embargo. Secondly, oil companies based in all countries, including non-OPEC countries, would become compelled by law to observe the embargo. An effective embargo would require legislation by all states to render illegal: a) The sale or supply of petroleum or petroleum products to any person or body in South Africa, or to any other person or body for the purpose of eventual supply to South Africa. b) Any activities by their nationals or in their territories which promote or are calculated to promote the sale or supply of petroleum or petroleum products to South Africa. 172 / The Nigerian Government's action against the local subsidiary of Barclays Bank in March 1978, because of the bank's involvement in South Africa, provides an important precedent.

-82- c) The shipment in vessels or aircraft of their registration, or under charter to their nationals, of any petroleum or petroleum products to South Africa. d) The supply of any services (technical advice, spare parts, capital, etc.) to the oil companies in South Africa. It has sometimes been argued that since oil sanctions against Rhodesia have failed, an embargo against South Africa would be equally ineffective. The two cases, however, are very different: Rhodesia was only able to survive sanctions because of support provided by a friendly neighbour (South Africa); South Africa has no similar local ally with access to oil. It has also been argued that such an embargo, even if universally accepted by the international community, would not prove effective because there is currently a glut of oil on the world market. The South Africans, it is said, would be able to purchase a tanker full of oil on the high seas from "pirate" companies. It has therefore been suggested by some observers that an oil embargo could only be effective if a naval blockade was established off the South African coast. A precedent already exists when oil sanctions were imposed against Rhodesia: the "Beira Patrol", which was mounted off the Mozambican coast between 1966 and 1976, prevented supplies of crude oil reaching Beira (from where a pipeline runs to Rhodesia). This patrol, operated by the Royal Navy of the United Kingdom, was authorized by the Security Council acting under Chapter VII of the UN Charter. 173/ There are important differences, however, between the Beira Patrol and a naval blockade to prevent oil reaching South Africa. The Beira Patrol did not interfere with Mozambique's own supplies of crude oil - which were shipped to the refinery at Maputo - so that the blockade hardly posed a direct threat to the nation which was being "patrolled". Consequently, the Portuguese authorities in Mozambique did not engage in a military confrontation with the Royal Navy. A naval blockade of South Africa would, however, be a very different matter: the survival of the South African regime would be threatened, and an attempt to impose a blockade could in the limit lead to a military confrontation. A naval blockade, however, is probably not necessary to cut off South Africa's oil supply. Much simpler, but effective, steps could probably still be taken: the UN Security Council could require measures to be introduced so that any tanker which had delivered oil to South Africa would be liable to seizure after such a delivery had been made. 173 Security Council Resolution . 221 (1966).

-83- There are no insurmountable problems in determining which tankers have delivered oil supplies to South Africa. A number of methods could be used. First, Lloyd's of London publish up-to-date information on tanker movements to all ports, including those of South Africa. This data does not distinguish between tankers which have unloaded oil, and those which are merely bunkering or taking on supplies, but those tankers which stop at South Africa between two ports in oil-exporting countries can probably be assumed to have delivered oil. 174 / Secondly, the mooring points for crude oil tankers at Durban and-Cape Town are visible from the two cities. Thirdly, aerial reconnaissance (by aircraft or satellite) could show which tankers had delivered at South African ports. Finally, a rather less sophisticated naval patrol could be used simply to observe which tankers had entered South African ports. If the patrol had no mandate to intercept these tankers, a confrontation with the South African navy would be much less likely to develop. Furthermore, the patrol could be operated by relatively small ships, possibly provided by non-aligned nations. An obvious advantage of an oil embargo, compared with other forms of selective trade embargoes, is that ships carrying oil in bulk - i.e. tankers - are easy to distinguish visually from ships carrying other goods. 175/ The data obtained by all these methods of observation could be fed into a clearing house operated by the United Nations, which would then pass on the information to all Member States. The tankers could then be seized next time they entered a non-South African port. In the case of tankers which had actually delivered oil, this would normally be the port of an oil-exporting nation. Seized tankers could either become the property of the United Nations, or else heavy fines could be imposed for their release. The tankers themselves - or their owners, operators, and charterers - could also be black-listed from entering the ports of UN qember Otates for fixed periods of time. A variation to this proposal would involve the withdrawal of national registration facilities to any tanker which had delivered oil to South Africa. Without a flag to fly, a tanker would find that normal commercial operations were impossible. Similarly, insurance facilities could be cancelled for any tanker which had been involved in supplying South Africa. 174/ Lloyd's of London obtain their information from ship owners and from agents in the various ports. In the event of an oil embargo, Lloyd's of London might find it difficult to obtain information on tanker deliveries to South Africa. 175/ If, following the imposition of a mandatory oil embargo, South Africa were to refuse to provide bunkering facilities to tankers sailing round the Cape, then the problem of distinguishing between tankers calling in to deliver oil and tankers calling in for bunkers would of course disappear.

The scheme we have outlined, if implemented, could not guarantee that no tanker ever delivered oil to South Africa. But it would mean that it would become extremely difficult - and very expensive - for South Africa to obtain transport facilities for importing oil. Tanker owners would certainly be reluctant to lease a tanker to a client who might be using it for carrying oil to South Africa. 8.3 Costs of the embargo An oil embargo would be one of the most cost-effective forms of pressure that could be applied on South Africa by the international community: the costs to South Africa would be enormous, but the costs to the international community would be relatively small. 176/ The costs to the international community would be two-fold. 17/_ First, the costs of actually enforcing the embargo: this would obviously depend on whether a naval blockade was instituted, or whether one of the much simpler schemes outlined above was used. Secondly, the costs of assisting those neighbouring countries in southern Africa which currently import oil products from South Africa; these costs would depend on whether precautionary measures had been taken, and on the level of oil stocks in these countries. An oil embargo would have an enormously disruptive effect on South Africa. If all oil supplies were cut off, the Republic would probably not be able to survive for more than two years. The economy would grind to a halt: transport would become extremely difficult; industry would be severely hit; production in the modern agricultural sector would rapidly fall; and the armed forces and the police would lose their mobility. Clearly, the primary economic impact would be in those sectors most dependent on oil products - transport, agriculture, petrochemicals, local commerce and so on. But the secondary effects could be even greater. The cost of living would escalate rapidly. The motor industry would enter a slump. People would find it difficult to travel to work. An oil embargo would also accelerate the withdrawal of foreign capital. A senior executive of General Motors (USA) made it clear in late 1973 that if oil sanctions against South Africa reached a certain level of effectiveness, their South African subsidiary would start making a loss, in which case they would close down the operation. 178/ 176/ It has been argued by some that one should also consider the cost of retaliatory measures that South Africa might take. However, if the oil embargo was imposed after a multilateral decision, through the UN Security Council, it is difficult to see how South Africa could retaliate against the international community without suffering even greater economic damage itself. 177/ There is also a further non-financial question. Some countries have felt uneasy about the use of oil as a "political weapon" since they fear that an oil embargo might one day be introduced against themselves. It should be remembered, however, that a Security Council embargo cannot be imposed if any one of the five permanent members vetoes it. 178/ Quoted in Barbara Rogers, White Wealth and Black Poverty .'op. cit.T, p. 262.

-85- The dangers of an oil embargo to South Africa were summarized by the Financial Mail in September 1977: Even the threat of (oil) sanctions against South Africa has far-reaching consequences. The blow to confidence could prove a severe setback to the nascent economic recovery. Investment, lending and home-buying plans are among those that would be reconsidered. A new wave of skilled South Africans could decide to vote with their feet. It's also widely accepted that our ability to withstand prolonged sanctions is not nearly as great as the Rhodesians' has been. Not only does the smooth running of the South African economy depend on a wide variety of sophisticated, imported products, but can we be sure we can match Ian Smith's success in finding a friend in need? 179_/ The political question of what type of sanctions should be imposed against South Africa - and the timing of such moves - lies beyond the scope of this study. This report merely attempts to present a preliminary analysis of the technical feasibility of an oil embargo. The conclusions suggest that it certainly would be feasible to impose a virtually complete cut-off of oil supplies to South Africa. This would not be without problems for the international community. But, providing the political will exists, it appears that these difficulties could be overcome. Oil sanctions probably represent the most effective form of external pressure that could be exerted on South Africa. 179/ Financial Mail, 16 September 1977.

-86- 9. SUMMARY AND CONCLUSIONS Oil is the one vital raw material which South Africa does not possess. As a result, the Republic has to import virtually all its oil requirements. The only exception is the small amount which it is able to convert from coal at its Sasol I plant. South Africa currently imports about 15,000 barrels per day (b/d) of refined oil products, and 400,000 b/d of crude oil. About 70,000 b/d of the latter is added to the Republic's oil stockpile; the remainder goes to four refineries for conversion into petrol, diesel fuel, and other oil products. The cost of oil imports during 1978 is expected to be nearly R2,000 million ($2,300 million). The sectors of the South African economy most dependent on oil are transportation, local commerce, agriculture, fishing, and the petrochemicals industry. Oil also has a vital strategic importance in ensuring the mobility of the country's armed forces. South Africa's stocks of oil would last about one and a half years at current consumption rates. If there was a cut-off of imported oil, then the country could probably last about two years; but the economy would enter a severe recession long before the end of that period. A new oil-from-coal plant (Sasol II) is currently under construction, at enormous expense; but after it comes into full production in 1982, the two Sasol plants will still only contribute about 13 per cent of the country's oil needs. Indeed, the Republic will need more imported oil after Sasol II comes into full production than it needs now. In 1973, Arab and African oil-producing countries introduced an oil embargo against South Africa. This did not achieve the desired result, for two reasons. First, Iran refused to participate in the embargo, and now provides 90 per cent of the Republic's oil needs. Secondly, the oil "majors", having continued to purchase oil from certain countries which have declared their intention to participate in the embargo, have then re-sold some of this oil to South Africa. These two problems would probably not arise if the United Nations Security Council were to introduce a mandatory oil embargo against South Africa. The simplest way of enforcing such an embargo would be to introduce a scheme whereby any oil tanker which had delivered oil to South Africa would be liable to seizure when it next called at a nonSouth African port. This would make it extremely difficult, if not impossible, for South Africa to obtain transportation facilities to import its oil requirements.

-87 A number of black African countries depend to some extent on imports of refined oil products from South Africa. In the event of an oil embargo against South Africa, one country (Lesotho) and to some extent two others (Botswana and Swaziland) could be seriously affected, and would require international assistance. An oil embargo against South Africa is a feasible proposition if tackled on a multilateral level under the authority of the United Nations Security Council. It probably represents the most effective form of economic pressure that could be put on South Africa.

North\wesc~rn 1....i ir d9LOF Asrc 97ary Ar i 9 1979 ANGOLA NAMIBIA BOTSWANA SOUTH AFRICA Key I Caltex refinery 2 Mobil refinery 3 Shell/BP refinery 4 Natref refinery 5 Sasol I oil-from-coal plant 6 Sasol II oil-from-coal plant (under construction) 7 Petromoc refinery (formerly Sonarep) 8 Capref refinery (not operational) 9 Indeni refinery (Zambia) 10 Companhia de Petroleos de Angola refinery