China has emerged as the main financier for Uganda’s ambitious oil pipeline project, after several Western banks withdrew their support over environmental and human rights issues.
China’s Export-Import Bank and China Export & Credit Insurance Corporation are expected to provide more than 50% of the $3 billion debt needed for the project, according to Uganda’s energy ministry.
The project, known as the East African Crude Oil Pipeline (EACOP), involves building a 1,445-kilometer pipeline from Uganda’s Lake Albert oil fields to Tanzania’s port of Tanga on the Indian Ocean. The pipeline is expected to transport 216,000 barrels of oil per day and create thousands of jobs in the region.
The project is led by French oil giant TotalEnergies, which owns a 45% stake in Uganda’s oil production. The other partners are China National Offshore Oil Corporation (CNOOC) with 35%, Uganda National Oil Company with 15%, and Tanzania Petroleum Development Corporation with 5%.
The project has faced strong opposition from environmental activists, human rights groups, and local communities, who have raised concerns about the potential impacts of the pipeline on the climate, biodiversity, water resources, land rights, and livelihoods of millions of people. The project is also accused of violating international standards and agreements on environmental and social safeguards.
As a result of these concerns, many Western financial institutions have distanced themselves from the project, citing their commitment to green finance and corporate responsibility.
At least 24 banks have publicly stated that they will not provide direct funding for the project, including Barclays, HSBC, Credit Suisse, and Mizuho.
The European Parliament has also called for an immediate halt to the project and urged the European Union to withdraw its support.
However, China has stepped in to fill the financing gap and rescue the project from collapse. China has a strategic interest in securing access to Africa’s oil and gas resources, as well as expanding its influence and presence in the continent through its Belt and Road Initiative.
China has also been less sensitive to the environmental and human rights criticisms of the project, and has expressed its confidence in its feasibility and profitability.
The project is expected to reach financial closure by October 2023 and start operations by 2025. The project’s supporters say that it will bring economic development and energy security to Uganda and Tanzania, as well as boost regional integration and cooperation.
The project’s critics say that it will fuel climate change and ecological destruction, as well as violate the rights and interests of the affected people.