Russia's Invasion of Ukraine:
What Opportunities There are for Africa

Source: Money Control

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By Adebayo Abubakar

History tends to repeat itself in human affairs, particularly in international relations, diplomatic realms and political economics. Call it déjà vu for African members of the Organisation of Petroleum Exporting Countries (OPEC) – a repeat of what happened during the Gulf War between the US, allied forces, and Iraq in 1991, when the global supply of crude oil was drastically reduced due to Iraq’s production quota being reduced to almost zero. That type of circumstance has arisen once again, as a consequence of Russia’s invasion of Ukraine, which has left little space for the petroleum industry to reach its full potential. For African nations like Nigeria, Angola, and Libya, the 1991 experience offered up a lot of possibilities, either via a rise in the price of oil (and gas) per barrel or an increase in quotas for those with the ability to ramp up production. It resulted in a phenomenon known as “Windfall” for countries whose quotas were dramatically increased.

As the tension between Russia and Ukraine escalated to a full-blown war, with invasion of the latter, by the former, more imminent than not, European countries, especially those who are members of the North Atlantic Treaty Organisation (NATO), are ramping up pressure to dissuade President Vladimir Putin of Russia from going ahead with the war, using economic sanctions;. US President, Joe Biden, said, “We’ve cut off Russia’s government from Western financing” removing it from the Society for Worldwide Interbank Financial Telecommunication) (SWIFT).

Credit: Copyright  AP Photo/Roman Koksarov, File

Moscow has also been barred from Visa and MasterCard payment systems. Ditto for the German Chancellor, Olaf Scholz, who hit the Kremlin with a response, halting the certification of the Nord Stream 2 Gas Pipeline project, designed to bring natural gas from Russia directly to Europe. This is as Europe depends on Russia for about 40% of its energy needs. Meeting the demand now, Europe will have to look elsewhere.Should the supply of gas from Russia to Europe stop, the truth of the matter is that Europe will suffer, especially Germany, including countries that do not even receive supply directly from her. That will create a yawning gap in the supply chain of gas in that part of the globe. 

Despite the fact that Russia is not a member of OPEC, the sanctions imposed on her will increase demand for items from the Middle East, Africa, and maybe South America.. It is a no-brainer that OPEC will be the first port of call. If that be the case, African countries that are members of the organisation would benefit, either selling at an increased price, or having their quotas increased, or both, which translates to more forex earning. Nigeria, for example, holds 187 trillion cubic feet (Tcf) of proven gas reserves as of 2017, ranking 9th in the world and accounting for about 3% of the world’s total natural gas reserves of 6,923 Tcf. 

 Credit: Axel Schmidt / North Stream 2

But by 2020, Africa, with an estimated gas deposit of 624 trillion cubic feet, has Nigeria at the top, followed by Algeria, Mozambique, Egypt, Libya, Angola, with 200.4, 159.1, 100, 63, 53.1, and 13.1 trillion cubic feet, respectively. As Russian takes incursion into Ukraine’s territory, reports by “The Africa Report“, states that, ‘Margrethe Vestager, EU’s Executive Vice President met with Nigerian Vice-President Yemi Osinbajo on 14 February in Abuja, as the EU considers “all options” for increasing gas supply from the latter.’ 

As at 2021, Africa is said to be sitting on total crude oil reserves of 125.3 billion barrels, with Nigeria, having an estimated 37.070 billion barrels of crude oil reserve. It is therefore expected that African countries that are endowed with this and Petroleum resources should expect “good days” ahead in terms of forex earning, especially now that the price of crude now hovers around $130 per barrel.
 
Russia is the largest producer expected to supply at least 9.704 million barrels per day to the global market, in September 2021. Let us assume that demand for Russian oil stops, and its quotas are to be taken up by other countries with capacity, to meet up with the demand, this is what it will look like. Out of a total of 37.141 million barrels per day expected from all oil-producing countries in the world, Africa has a total of 4.639 million barrels per day, which constitutes 12.490% of the total. So if Russia’s 9.704 million barrels is to be distributed among the OPEC+coalition, according to the ratio of their holdings, it means Africa would have an additional 1.212 million barrels per day. With oil prices now at $130 per barrel, it translates to billions of dollars of additional revenue per day. That is a whole lot. 
 
 
Sweet as the music sounds to the ears, it is unfortunate that, most part of the earnings would be spent, importing refined products to meet local demands, due to lack of/ or inadequate refining capacity, thus eroding whatever gain that may be made from a surge in their quotas of oil and gas production, especially Nigeria which relies heavily on importation, to meet her local demand. This is because none of the 4 refineries (2 in Port Harcourt, 1 in Warri and Kaduna each) are working. African leaders are wise enough to be able to maximise the massive economic opportunity that the Russian-Ukrainian conflict presents to the continent. 
 
In terms of foreign direct investment, the Ukraine-versus-Russia conflict, would also be a very big plus for Africa, especially, in the oil and gas sector, as European countries like Germany are exploring the possibility of sizeable investments  in the gas sector as an alternative to what they lose, cutting ties with Russia. Multinational companies too, might see the need to divest from the two countries, first for safety reasons, and secondly, to avoid bearing the brunt of US and Europe’s sanctions against any company trading in or with Russia. Since Africa is blessed with massive deposits of oil and gas, most of which is yet to be exploited, the continent would be an ideal destination for investment in such ventures. All that is required of the various leaders in each of the oil-bearing countries is to provide an enabling environment, conducive for businesses to thrive, so that the people of Africa can benefit immensely from future investments. 
 
Adebayo Abubakar is a Nigerian journalist. You can reach him via  email: marxbayour@gmail.com