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The Long Run

Zimbabwean officials back away from a massive deal to prevent antagonizing West.

12:45 PM, Aug 1, 2005 • By ROGER BATE
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A DRAFT AGREEMENT between Zimbabwean President Robert Mugabe and the Chinese government which would have handed over large chunks of Zimbabwe's mineral rights in exchange for a billion dollars was torn up last week. Mugabe's desperate cling to power requires hard currency to purchase much needed food and fuel for his imploding country. The lack of a substantive deal is forcing him to continue to negotiate with neighboring South Africa, which is increasing demands for democratic reforms.

The South African government has apparently negotiated a five-week International Monetary Fund reprieve for Zimbabwe--which faces imminent expulsion over arrears totaling $290 million--and may settle part of the debt.

South African Reserve Bank Governor Tito Mboweni will only sanction payment to Zimbabwe or to the IMF if Mugabe's government signals its commitment to conditions including political, human-rights, and economic reforms--including visible progress towards agreement with the opposition MDC on constitutional reform.

ZIMBABWE is more than a year behind on payments to the IMF, which has called in the total debt, but a payment possibly as low as $100 million could secure its membership and access to additional aid. After two 6-month reprieves, the Fund's executive board was to have considered Zimbabwe's expulsion in the first week of August. However, the IMF has only ever expelled one country (Czechoslovakia in 1954, reinstated 40 years later), and the decision on Zimbabwe has been postponed to the meeting on September 9. The five week reprieve was requested to buy time to test Mugabe's commitment to the promised reforms, and this may be Mugabe's last chance.

Yet for nearly 20,000 people their last chance at life will have come and gone unnecessarily in the next five weeks, the victims of malnutrition, malaria, HIV, and other diseases made worse by the appalling conditions in Zimbabwe. South African Finance Minister Trevor Manuel defended his support of Zimbabwe by saying, "The worst thing we can have is a failed state or a rogue state on our borders." Opposition spokesman Joe Seremane for the Democratic Alliance complained that "it is of no use to the people of Zimbabwe for the ANC [Manuel's party] to stand quietly by while the destruction continues unabated and then to offer empty gestures of support after the fact."

But while Mugabe has to once again negotiate with his vacillating African neighbors, the more interesting geo-political questions are over Chinese actions.

Chinese Puzzle

Mugabe did score with a pledge from Beijing to veto any tough United Nations Security Council resolutions on Zimbabwe. However, China failed to prevent the Council from debating Mugabe's controversial campaign to "clean up" what he claims are illegal businesses and housing. But in hard currency terms, Mugabe returned largely empty-handed. China has made a donation of $6 million for urgent humanitarian aid and is reported to have offered money to upgrade an electricity power station and to sell Zimbabwe a commercial aircraft.

The two governments also signed broad economic cooperation agreements, which include some deals over copper and coal mining, but sources said China had not made any "firm commitments" to a $1 billion comprehensive economic rescue package. The Chinese clearly prefer joint-venture, shared-risk business deals and had already signed a cooperation agreement to market coal from Wankie Colliery and pledged similar ventures in the transport and telecommunications sectors.

There are several apparent reasons for Chinese hesitancy over major mineral right deals with the Mugabe regime. The most important is that China is extremely reliant on South Africa, which provides many of the world's key minerals (including platinum), and for Mugabe to have given the Chinese enough in return for substantial loans he would have had to renege on deals with several mining firms, owned by South African interests. As one knowledgeable commentator put it to me: "[South African President] Thabo Mbeki may not care about the people of Zimbabwe, but he cares about the powerful mining sector in his own country. If SA's mining interests were undermined he would have to act. And while Mugabe may be desperate enough to have made enemies in South Africa, the Chinese think to the long term, and don't want to."

The other main reason for China's actions is that unlike those of the Soviet Union in the Cold War, they are not only interested in power in the region, they are interested in making money, and backing the Mugabe regime is seen as bad for business. They are perfectly happy to oppose the West politically and back Mugabe in the Security Council, but they will continue to work with capitalist businesses to ensure lucrative deals.