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Cablegate: Nigerian - Chinese Dialogue

VZCZCXRO5395
PP RUEHBZ RUEHDU RUEHGI RUEHJO RUEHMA RUEHMR RUEHPA RUEHRN
DE RUEHUJA #0413 0641327
ZNR UUUUU ZZH
P 051327Z MAR 07
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 8764
INFO RUEHBJ/AMEMBASSY BEIJING PRIORITY 0043
RUEHWR/AMEMBASSY WARSAW 0137
RUEHCD/AMCONSUL CIUDAD JUAREZ 0135
RUEHZO/AFRICAN UNION COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC

UNCLAS ABUJA 000413

SIPDIS

SIPDIS

DEPARTMENT PASS TO USTR FOR AGAMA
TREASURY FOR LUKAS KOHLER/DAN PETERS/SEVERENS
USDOC FOR 3317/ITA/OA/KBURRESS
USDOC FOR 3130/USFC/OIO/ANESA/DHARRIS
DOE FOR CGAY

E.O. 12598: N/A
TAGS: ECON EFIN ENRG PREL PGOV NI CHINA
SUBJECT: NIGERIAN - CHINESE DIALOGUE

REF: STATE 24937

1. SUMMARY: China/Nigeria relations have intensified in recent
years. Nigeria's role as a major oil producing nation has elicited
Chinese (PRC) approaches in the energy sector and other areas. At
this time, there is no dialogue between the USG and PRC regarding
Nigeria. Potential areas of dialogue are in the oil and gas
extraction sector and due to the PRC's increased role in the Delta,
in working to assist in tempering the simmering troubles. END
SUMMARY.

Trade Relationship Growing
---------------------------

2. China's exports to Nigeria from January to December 2006 reached
$2,853,304,000, up 23.9 % from 2005. In contrast, China's imports
from Nigeria from January to December 2006 were $277,659,000, down
47.3 % from 2005. In 2005 trade volume between the two countries
reached $2.18 billion. Nigeria is China's second largest export
market and fourth largest trading partner in Africa.

Bilateral Investments
---------------------

3. The bilateral visits of the heads of State in 2005 and 2006 have
spurred closer ties. During President Obasanjo's 2005 visit to
China five agreements, covering investment, telecommunication
service and technical cooperation, were signed.
4. Following Chinese President Hu Jintao's 2006 visit to Nigeria,
the PRC committed to invest $4 billion in oil and infrastructure
projects in Nigeria. In addition, the PRC announced the intention
to take a controlling stake in Nigeria's 110,000 barrel-a-day Kaduna
oil refinery and build a railroad system and power stations.
5. The Chinese state-controlled energy company China National
Offshore Oil Corporation has announced a $2.3 billion deal to buy a
45 percent stake in a substantial off-shore oil field in Nigeria.
(NOTE: largest overseas acquisition for the company. END NOTE).
Several Chinese companies already have constructed factories in
Nigeria and more are planned for a free trade zone in the south-east
of the country
6. The PRC plans to invest in the Nigerian transport sector. In
October 2006, agreement was reached to help the Nigerian government
put back on track the country's foundering railway system. The
PRC's offer of a $2.5 billion grant and expertise comes after the
formulation of a 25-year comprehensive railway development plan that
includes redesign of the existing railway tracks and expansion of
the lines to new areas across Nigeria. In all, an estimated 7,800
km of standard gauge railway network, to connect all 36 state
capitals and major cities in the country, will be built by
concession-holders, which then will be responsible for
infrastructure upgrades, expansion and maintenance, and train
operations.
OGUN STATE SEEING CHINESE INVESTMENT
------------------------------------
7. According to the press, Ogun State, the home state of President
Obasanjo, has seen a major increase in PRC investment. About thirty
Chinese industries, have established factories in Ogun State. Also,
a Chinese investor has completed three huge industrial estates in
Ogun. Otunba Gbenga Daniel, Ogun State governor, has explained PRC
investment in Ogun State as a testimony to the state's the private
sector posture.
USG/CHINA DIALOGUE
------------------

8. There has been no USG/PRC dialogue on cooperation in Nigeria.
The USG and PRC are both assisting Nigeria in developing its oil and
natural gas industry and China's increased role in the energy sector
may be an opportunity to develop a dialogue. Moreover, Chinese
engagement in the Delta region has been affected by the kidnapping
of foreigners including Chinese citizens. The PRC might be
persuaded to work jointly with the USG to focus on the social and
economic factors that contribute to local tensions and make the
Delta a dangerous place for us both to operate.

CAMPBELL

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