Angola
Angola is one of sub-Saharan Africa’s largest oil producers, second only to Nigeria. It is also a member of OPEC and one of the most influential powers in its region. Because oil revenues make up a large portion of the Angolan government’s budget, any substantial impact that new oil and gas production technologies have on Angola’s oil production could have significant implications for diplomacy and security in sub-Saharan Africa.
Energy Profile
Angola currently produces about 1.75 million barrels of oil per day. The country’s production potential has only grown with the rapid expansion of deepwater drilling off its western coast. Between 2002 and 2008, Angola’s oil production grew by an average of 15% per year as several of its deepwater fields came online, and international oil companies are in the process of developing new fields.1
Oil is the lifeblood of the Angolan economy; as of 2012, revenues from oil exports accounted for 97% of the government’s total export revenues. Normally, such a heavy reliance on a single industry would leave the country vulnerable to dramatic drops in the price of that commodity. But the Angolan government has established a sovereign wealth fund that softens the impact of significant changes in oil-related earnings, at least in the short term, because it allows the government to draw on income from the fund or draw down its principal in years when its direct oil revenues drop. Consequently, the country is somewhat insulated from temporary shocks to oil prices or changes in production. For example, when oil prices plunged in 2009-10, Angolan spending remained largely unchanged, though the government did temporarily halt some scheduled government salary increases.
Besides the sovereign wealth fund, Angola was also able to continue government spending by establishing new lines of credit. Angola negotiated loans from both the International Monetary Fund and China totalling over $2 billion. The substantial Chinese loan to Angola sparked fears of China using its financial aid to gain political influence in countries that are important to the United States.
Security Profile
Angola is an important stabilizing force in a chaotic region. It regularly contributes to joint peacekeeping and maritime security operations in the Gulf of Guinea. Because the Angolan budget — and by extension, the country’s military funding — is so reliant on oil revenues, many worry that Angola’s prominent role in regional security could be negatively impacted by declining revenue during periods of low oil prices or decreased production. But in reality, security spending is often one of the last areas to experience cutbacks in times of economic hardship, meaning that Angolan security spending likely would not drop alongside declining oil revenues in the short-to-medium term. In fact, despite the recent global economic crisis and resulting loss of oil revenue, Angola has boosted its defense expenditures since 2009.
Additionally, if Angola is able to use new production technologies to exploit its deepwater plays, it would have the option of using its newfound oil revenues to increase funding for its military. Given Angola’s substantial participation in African peacekeeping activities, a larger and better-equipped Angolan military could in turn contribute to greater regional security in the long run.
[1] “Country Analysis Brief: Angola,” U.S. Energy Information Administration (March 2015).
