The discovery of a significant oil field off the coast of Suriname has grabbed headlines in the past few weeks. With less than a million inhabitants and a GDP per capita of $6,310, the new discovery could be a game changer small South American nation. It was Guyana’s offshore success that sparked interest in the adjacent waters of Suriname due to its similar geological characteristics. The gamble now appears to have paid off after American Apache and French Total discovered the country’s first offshore energy resource. The newfound oil wealth couldn't have come at a better for Suriname and its stagnating economy.
Suriname is a sparsely populated country slightly larger than Georgia with impressive natural resources. Its biggest export products are raw materials such as gold, precious metals, and wood from its tropical rainforest. Obviously, the slump in prices of raw materials has had a depressing effect on the country’s economy. The recent oil discovery has been a major boon for the country, enabling it to address the financial and economic disaster that had been unfolding over the past couple of years.
Although the first reactions have been positive, it is uncertain whether the potential financial windfall will be spent appropriately. According to experts, corruption is a significant obstacle to doing business in Suriname due to a lack of regulation and legal anti-corruption measures.
Besides corruption, critics fear that the political leadership will use the future income from oil production as collateral for additional loans. This wouldn’t be a big problem if Suriname didn’t already have a considerable debt burden. As of this year, the country owes $2.4 billion to creditors on a GDP of $3.4 billion.
As well as significant economic effects, the recent oil discovery will have major geopolitical repercussions. Suriname’s international ties are diverse for an array of different economic, political, and social reasons. The country’s three largest export destinations are Switzerland, Hong Kong, and Belgium-Luxembourg due to the export of gold and precious metals. And while Suriname’s relations with its former colonizer, the Netherlands, have deteriorated over the years, relations with China have flourished.
Beijing is financing a construction spree across the country. The potential is enormous as Suriname is relatively underdeveloped with plentiful natural resources alongside its recent oil find. China’s money, however, doesn’t come free.
Beijing is already the biggest creditor to Suriname with outstanding loans of approximately $500 million. During a state visit in November 2019, the two countries announced another loan of $500 million, which was before the recent oil discovery. This means that China could own more than a third of the country’s debt. According to Harvard professor Carmen Reinhart, Suriname is among the top ten biggest debtors of Chinese money on a percentage level. Related: Recession Fears Cap Oil Prices In 2020
The changing geopolitical landscape is a consequence of the South American country’s relative lack of options. Although there is a strong social connection with the Netherlands, political and economic activities between the countries have deteriorated. Many Surinamese have relatives in Europe who moved there after the country’s independence in 1975. However, The Hague has become a staunch critic of Suriname’s President Desi Bouterse due to the massacre of 15 political opponents of his military regime in 1982.
A recent verdict by the country’s court, made public during the President’s official state visit to China in November 2019, directly held him responsible for the killings. Bouterse, however, enjoys immunity due to his Presidency. He is also running for a third term in May. His popularity among young people, who didn’t witness the political turmoil of the 1982 period, and a potential economic boom due to the recent oil finds will likely ensure him a victory.
What is certain is that the energy wealth will strengthen Bouterse’s position which will further deteriorate Suriname’s diplomatic relationship with The Netherlands and Europe. Also, the country’s relationship with the U.S. has somewhat cooled due to the arrest and conviction of the President’s son in 2015 in the U.S. for offering Lebanon’s Hezbollah a base of operations in Suriname for $2 million. This means that Beijing’s position will remain strong for the foreseeable future.
China is the only country with the ability and willingness to offer a wide range of services that Suriname and its leadership need. Washington, however, will definitely be wary of another incursion by China into ‘its backyard’. Therefore expect 2020 to be the year that Suriname will be courted economically and politically by several major powers.
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By Vanand Meliksetian for Oilprice.com
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