A recent announcement by Uganda’s Oil Ministry that a Russian company – RT Global Resources – won the bid to build a $3bn oil refinery highlights the Kremlin’s attempts to return as a major player in Africa.
RT Global Resources is a subsidiary of Russia’s largest state-backed corporation Rostec whose CEO, Sergey Chemezov, is on US and EU sanctions lists after Russia’s moves in Ukraine.
Chemezov, nicknamed “Putin’s arms dealer” and a longtime friend of the president, is leading the company in moves designed to ease Russia’s access to strategic minerals, build much-needed trade, and bolster employment in Russia, analysts say.
Moscow’s interest in Africa is also about “soft power”, said Keir Giles, director of the UK’s Conflict Studies Research Centre.
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“They are alert to ways of gathering influence through third-party nations in order to increase their relative weight in international bodies like the United Nations,” Giles told Al Jazeera.
China’s many interests in Africa have received strong attention, but the return of Russia to its former Cold War theatre of operations has been mostly ignored, except by a few regional specialists.
Last year Russia launched a satellite system in partnership with South Africa, known as Project Condor, providing surveillance of the entire African continent, according to spy cables leaked to Al Jazeera.
The cables identify South African and Russian military intelligence (GRU) as being the “key role players” in the project.
In Soviet times
Relations between the former Soviet Union and Africa took hold when Nikita Khrushchev came to power following the death of Joseph Stalin in 1953.
At the same time Africa was kicking off the reins of colonialism and a wave of independence movements came to the forefront of African politics. Russia and the US then became locked in a geopolitical tussle that saw them backing constantly shifting rebellions by funding and arming opposing sides.
Within two years the Soviet Union made its first major arms transfer to Africa in a deal with Egypt.
But attempts to promote socialist revolutions among countries the Kremlin supported backfired with a series of military coups in Algeria, Ghana, and Mali.
Several African leaders were educated in Moscow and the USSR invested huge amounts of money and manpower in the form of military advisers, equipment and support from the KGB – the Soviet security service.
When the Soviet Union collapsed, more than 50,000 Africans had studied in Soviet universities and military institutes, and at least another 200,000 Africans had received Soviet training in Africa.
Then Russia lost interest in Africa – until recently.
A good deal could potentially generate more wealth, it could generate more jobs and development but a bad deal could leave Uganda subsidising an inefficient refinery.
Giles said what’s interesting is when Russia tried to resuscitate these Cold War links with Africa, “how much of a role was played by those who were active in Africa during those days – the military, the KGB always seems to be the first line into actually getting something done”.
Uganda’s developing story
For Uganda, the refinery is an opportunity to develop its newly found oil on the western borders with the Democratic Republic of Congo. The oil offers the nation a chance to transform itself into an important economic power in the region.
The project involves building a refinery with a capacity of 60,000 barrels per day, storage facilities on site, as well as a 205km pipeline to a terminal near the capital city, Kampala.
Foreign oil companies that have contracts to exploit the Ugandan oil blocs, including Tullow Oil and Total, wanted to build a pipeline to the coast in Kenya. Uganda’s oil is “waxy” so the pipe would have to be heated for the oil to flow.
Ugandan journalist Angelo Izama said a pipeline to the Indian Ocean coast would mean that Uganda would lose economic independence and the benefits of an internal market, thus a homegrown refinery would prevent the type of commodity export economy that went bust in the 1960s.
“Despite talk of industrialisation, countries like Uganda never recovered from the process of trying to build indigenous industries,” Izama said.
George Boden, from the activist group Global Witness, told Al Jazeera: “A good deal could potentially generate more wealth, it could generate more jobs and development. But a bad deal could leave Uganda subsidising an inefficient refinery – particularly with people counting the social and environmental costs.”
Some analysts fear the new-found oil wealth may cause Uganda to suffer from a “resource curse”, in which corrupt governments collude with oil companies to siphon off funds leading to a failure in public trust and an increase in political tension.
Izama said transparency in oil deals is vital. “It is a prophylactic against the kinds of excess we see in other countries – public access allows countries to build consensus around decisions it makes, therefore lessening the possibility for conflict,” he said.
Rostec, through its subsidiary Rosoboronexport, is the Russian state’s major defence company.
“There will be questions as to whether the oil refinery is the only part of the deal, or is it part of a broader package,” Boden said.
Rosoboronexport supplied six Russian-made Sukhoi fighter jets to Uganda in a 2011 deal that was said to be worth at least $744m. It was mired in controversy when it emerged the money was obtained from the Bank of Uganda, without parliamentary approval.
Uganda is a highly militarised nation with military officers holding 10 parliamentary seats, including General Aronda Nyakairima in the cabinet as the internal affairs minister.
By positioning itself as a key ally in the “war on terror” and sending troops to Iraq and Somalia, Uganda has developed strong relations with the United States.
Uganda is also giving military support to Salva Kiir in neighbouring South Sudan.
Officials close to the negotiations for the refinery contract – who spoke anonymously because they weren’t authorised to talk to the press – said initially Russia didn’t seem interested. Rostec appeared to be favoured only after President Yoweri Museveni dispatched the permanent secretary of the energy ministry to Moscow and “backchannels” were opened.
Giles explained this is the Russian way of doing business.
“You have a closed network of people who, despite the Russian system, have learned to trust each other because they go a long way back to military or KGB service,” he said.
Speaking on condition of anonymity, a security source told Al Jazeera the refinery deal is a problem.
“The Ugandan military, which has a good relationship with the Russian government, is at the centre of it. Seen from their perspective, it does make sense because they can provide concessionary terms for weapons.”
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Within days of the refinery deal announcement, Uganda media claimed the army was requesting $168m to buy military equipment and the Ministry of Defence had already negotiated a procurement loan of $170m from a bank in Russia with help from Rosoboronexport.
When asked if the story was true and whether the refinery contract was linked to a weapons deal with Russia, Ugandan military spokesman, Lt Colonel Paddy Ankunda, told Al Jazeera: “That is classified information and I can’t discuss that.”
He insisted the refinery contract was not linked to a weapons deal.
Professor Andrey Makarychev of Tartu University told Al Jazeera that Russia’s economic woes could weigh heavy on the deal with Kampala.
“The Uganda project looks problematic against the backdrop of growing financial problems inside Russia where funds are in deficit, the rouble is unstable, as is the banking system. Russia’s credit rating is at junk level.”
“Huge investments abroad in a situation of austerity measures at home might only exacerbate Russia’s troubles,” Makarychev said.