Cablegate: Request for Information On Chinese Engagement in Angola And

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OO RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHLU #0084/01 0571613
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O R 261612Z FEB 10
FM AMEMBASSY LUANDA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0010
INFO SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0001

UNCLAS SECTION 01 OF 02 LUANDA 000084

SENSITIVE
SIPDIS
DEPARTMENT FOR AF/RSA LOUIS MAZEL, LAURA GRIESMER, AND RYAN BOWLES

E.O. 12958: N/A
TAGS: PREL EAID ECON PGOV AO CH
SUBJECT: REQUEST FOR INFORMATION ON CHINESE ENGAGEMENT IN ANGOLA AND
POTENTIAL AREAS FOR COOPERATION

REF: SECSTATE 10152; 08 LUANDA 536

1. (SBU) The following responses are keyed to Department
queries (reftel):

A: Description of Chinese engagement in Angola: The Chinese are
heavily engaged in financing and implementing Angola's
reconstruction following the end of the nation's devastating civil
war in 2002. In the absence of a much anticipated (by the
Angolans) conference of Western donors to help fund reconstruction,
Angola turned to the Chinese. Chinese financing includes a (mostly
oil-backed) USD 4 billion line of credit through the Chinese Ex-Im
Bank. Although the terms of this line of credit are not entirely
clear, it seemingly provides concessionary interest rates and some
grace period for repayment. According to unconfirmed reports, an
additional line of credit of up to USD 4 to 6 billion has been
established through the Chinese Investment Fund (CIF), though Post
doubts that this fund, which was to have been funded by Chinese
investors, ever attracted enough Chinese capital to undertake
intended infrastructure projects in Angola. At the moment, the CIF
is partnering with state oil company Sonangol in extractive
industry ventures in Africa outside of Angola.

The Chinese Ex-Im Bank line of credit is linked to the use of
Chinese companies as prime contractors for Chinese-funded projects.
Many sub-contractors for these projects are Chinese companies as
well. Some of these companies have stayed in Angola after project
completion and are branching out into other areas, such as
import/export transactions and private housing. The feverish pace
of Chinese engagement in Angola cooled markedly in 2009 as the
global financial crisis gutted Angola's oil and diamond revenues,
precipitating sharp reductions in GRA expenditures. According to
the Chinese Ambassador in Luanda, China had to recall more than
25,000 workers in 2009 due to the lack of GRA funds to pay them.
Few new projects were launched in 2009, though most of those
previously underway continued, albeit often at a reduced pace.
However, those linked to preparations for the January 2010 Africa
Cup of Nations Football (soccer) Championship, which Angola hosted
by building four new stadiums, continued full-steam.

Recently concluded and currently underway infrastructure and
energy sector-related undertakings include:

---upgrading the electricity network in Luanda;

---rehabilitation of Angola's three railway lines: Luanda-Malanje
(completion in 2010); Namibe-Menongue (completion in 2011); and
Benguela-DRC(completion in 2012);

---improvements of infrastructure in Luanda, including building a
new international airport;

---numerous roads and highways outside of Luanda;

---social housing projects within Luanda;

---four football (soccer) stadiums (Luanda, Benguela, Lubango, and
Cabinda) that were used during the Africa Cup of Nations tournament
in January 2010;

---joint oil exploration venture with Angolan parastatal Sonangol
in Block 18; and

---a diamond mining venture with state diamond company Endiama.

B. Examples of U.S.-China cooperation in Angola. Chinese
contractors have successfully implemented DOD-funded humanitarian
assistance projects, and a Chinese national is engaged by an
implementing partner in our malaria program.

C. Potential areas for U.S.-China cooperation. As reported Ref B,
the Ambassador raised with the Chinese Ambassador in July 2008 the
concept of a joint agricultural development project, and the
Chinese Ambassador agreed to explore the possibilities. However,
determined efforts by USAID technical staff failed to identify a
project consistent with our development objectives to which the
Chinese could contribute meaningfully. Given shifts in FY-2010
USAID funding, Post will undertake again to explore possibilities
for cooperation with the Chinese in regard to either our expanding
agriculture program or in our malaria and/or HIV/AIDS programs.
Post experience has shown, however, that language can be a
considerable barrier; for example, the current Chinese Ambassador
speaks no Portuguese or English and only limited Spanish.

LUANDA 00000084 002 OF 002

2. (SBU) COMMENT: The Chinese presence looms large in Angola.
Although exact numbers are elusive, a minimum of 50,000 Chinese are
in the country; most other estimates are markedly higher. Few
question that the Chinese have contributed importantly to Angola's
ongoing national reconstruction. Nonetheless, some Angolans
express concerns that Chinese engagement, financed by loans that
Angola needs to repay, has failed to create jobs for Angolans, has
failed to transfer technology to Angolans, and has often resulted
in poor quality performance. Concerns have also been raised about
the opaque nature of the Chinese funding, which is channeled
through the Office of National Reconstruction of the Presidency.
END COMMENT.
MOZENA

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