Geopolitics

Russia in Africa Part III: Russia’s East African Expansion

June 24, 2020

Eren Ersozoglu

 

The purpose of this Grey Dynamics Africa Intelligence report is to assess Russian mining activity and interests in Africa. This will be used to forecast a predictive judgment for interest in the East African mineral market. Strategies utilised to secure interests will be analysed. As well as competition from foreign companies. Open-source intelligence (OSINT) and human intelligence (HUMINT) sources were used for this report.

 

 

Key Judgments

 

KJ-1. Russian mining activities are highly likely to attempt a further expansion into East African countries between 2020-2025. This is because of the intent to not only increase profit revenue but to undermine adversary spheres of influence.

 

KJ-2. How Russian strategies will likely approach expansion will be by leveraging political, military cooperation in unstable regimes such as Mozambique, Sudan, Zimbabwe to secure mining deals.

 

KJ-3. Russia is likely to target vulnerable/unstable East African countries. Somalia, Ethiopia, and Sudan are highly likely targets and Malawi is a realistically probable target. Mozambique will almost certainly continue to be a target with existing operations.

 

KJ-4. The competition will severely limit the extent of expansion. China is the main competitor in Africa in terms of mining investment. Saudi / Turkish mining ambitions will likely expand into the region. While Anglo-American companies are a major player in the industry.

 

KJ-5. The next 0-6 months are not reflective of future Russian mining in this context, due to the COVID-19 outbreak

 

 

Motivation for Expansion

 

Russian private and state-owned mining companies are expanding a network of mining operations in the African continent. Africa has 30% of the world’s mineral reserves, with Russia ranked as one of the world’s leading producers of mineral commodities. Currently, Russian mining presence is apparent in West and South Africa. However, East Africa is rich in mineral reserves that have not been fully exploited. The potential of the East African mineral market is an attractive prospect.

 

 

 

The success of Russia’s expansion will be significantly affected by stability in the East African nations. Weak democratic systems and legal framework are ideal conditions for expansion. By targeting vulnerable countries, mining concessions are gained. The current Russian expansion in West and South Africa is facilitated by the ‘package deal’ of political technicians and Wagner group mercenaries to secure the mining deals. Russian mining expansion is symbiotic with the aid of military aid through the Wagner group and arms deals, political technologists and nuclear programmes. Moreover, there are Russian troll farms operating in 20 African countries. These troll farms are used to protect mining interests and keep Pro-Russian elements in a regime in power.

 

 

Russia seeks to expand into East Africa not just for profit but to undermine competitor influence. This aggressive approach is intended to increase Russian presence in the region. China, USA, Saudi Arabia, Turkish are posing major spheres of influence in this region. Russian adaptability to operate in volatile, high-risk regions can combat their influence and counter their competition.

 

 

Case Study

 

First, in the Central African Republic, Russia has been somewhat a negotiator between the government and local armed groups, of which in February 2020 controlled an estimated 70% of the territory, to ensure stability in regions. Second, there have been alleged reports of operations in ‘blood diamond’ zones. Russian company Rusal, the world’s second-largest aluminium producer, mining of bauxite in Guinea coincides with relaxed taxes from Russia-Guinea cooperation agreement. In Angola, the Russian diamond company Alrosa to boost diamond production to 14 million carats in 2023. Alrosa is also set to spend $9 million on exploration 2020-22 in Angola. Third, Zimbabwe explorations between 2020-22 will be worth $12 million. These examples support the evidence of intent for expansion, at least in existing operations.

 

 

Russia’s Targets in East Africa

 

Gold extraction is a key factor for Russian expansion as this will secure profits while creating opportunities for cooperation in other areas such as military arms, and trade. Rwanda, Kenya, Mozambique, Sudan, and Ethiopia have substantial gold resources. Other minerals include tin, rare gemstones, iron, soda ash, chromium. In addition to there are deposits of bauxite, a key aluminium component for Russian manufacturing. It is likely Rusal, Russia’s aluminium giant will target these reserves.

 

In Sudan, political and economic instability will be a weakness for the investors can exploit, a volatile state of affairs is struggling for investors because of low business confidence which Russia can exploit. Ranking 171 among 190 economies for ease of doing business, Sudan’s need for investment can be exploited by Russian companies for favourable terms.

 

Mozambique is in the midst of an insurgency which Russia can leverage to provide more military aid through the Wagner Group, securing more mining concessions for Nordgold, Russian gold mining company, to operate in the Cabo Delgado region.

 

Rwanda, Kenya, and Ethiopia are relatively more stable, limiting success probability. The stability provides higher business confidence which has already attracted investment from competitors Luma investment S.A. (Rwanda), Base Titanium (Kenya), and Vale (Ethiopia).

 

Somalia is also rich in mineral reserves such as copper, gypsum, iron ore, tin and uranium. Somalia’s decentralised autonomous governance is a likely target for Russia. The upcoming elections may centralise governance which would decrease the likelihood of success. A high-ranking government official of Puntland said that Puntland would be highly welcoming for mining investment.

 

Malawi uranium mineral resources will highly likely be a target for Russia. This is to expand its energy sector which it has secured in the country with a nuclear power plant deal. Malawi’s intent to expand trade deals with Russia is an opportunity company can capitalise on.

 

Namibia is a likely target for uranium as well as diamond extraction through Alrosa. Nuclear power has also been a component for securing deals. Previous USSR amicable relations with Namibia, boosted with a history of aid towards the Namibian independence war provides a good relationship ‘launchpad’ for further cooperation.

 

 

Competition

 

Russian companies face intense competition for mining. Main competitors in East Africa are most likely to be Chinese, Anglo-American, and Canadian companies such as Barrick gold, currently capitalising on Tanzania’s gold rush. Russia is likely more willing to take more risk so will capitalise on unstable regions. There will likely be a trend between 2020-25, unstable countries will attract Russian mining interests.

 

President Putin has admitted they cannot compete with China financially. China seeks for industry and the establishment of Strategic Mineral Reserve. Therefore, aggressive competition is expected. In 2019, China invested $100 billion in Africa. Mali has battery materials which are a crucial component for Chinese industries. In Zimbabwe, chrome, iron ore, nickel, and coal are all critical materials China is the world’s largest consumer of copper so will almost certainly compete over mining rights in East African countries. China has already secured 85% of Zambia’s copper. By 2018, China was operating 24 mines in Africa. Focused on Zambia, DRC, SA, countries with relative stability. Tibet Huayu and Canada based East Africa Metals have already signed a binding letter of intent for mining in Ethiopia.

 

Saudi Arabia plans to spend $3.8 billion to enhance mineral exploration, with a foothold in East Africa this will also undermine Russian efforts in future. Turkey and Somalia have signed a memorandum of understanding for energy and mining cooperation. The US is concerned with Russia’s renewed interest in the region and will seek to undermine efforts. This comes amid a US withdrawal in the region which places China as the main competitor. African trade in 2018 was $300 billion with the European Union and $60 billion with the United States.

 

 

Image: Premium Times / Olaniwunajayi (link)

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