01-14-2019, 11:21 PM
*** 15-Jan-19 World View -- Kenya's leaked BRI contract reveals shocking China debt trap details
This morning's key headlines from GenerationalDynamics.com
****
**** Kenya's leaked BRI contract reveals shocking China debt trap details
****
![[Image: g190114b.jpg]](http://Media.GenerationalDynamics.com/ww2010/g190114b.jpg)
Celebrations at Kenya's Standard Gauge Railway (SGR). (Railway Gazeti)
China has signed Belt and Road Initiative (BRI) contracts with
dozens of countries, with the requirement that the details be
kept secret, even from the countries' ministers or central banks.
For months I've been describing the onerous details of such
contracts, based on incomplete reports or vague statements by
politicians. It's always been clear that the reason why China
demanded total secrecy was because these contracts are
extremely favorable to China and are used for "debt trap diplomacy,"
allowing China to take control of a country's infrastructure when
unable to make the loan payments.
The poster child for debt trap diplomacy is China's seizure of control
of the Port of Hambantota after Sri Lanka was unable to pay the
onerous debt payments that China had demanded. China has already
acquired or is about to acquire ports and other assets in several countries
-- Sri Lanka, Democratic
Republic of Congo (DRC), Ghana, Zambia, Kenya -- through its "debt
trap diplomacy." Several other countries, including Pakistan and the
Maldives, are at risk. Malaysia is still at risk, as well.
Now, a partially leaked BRI contract between Kenya and China reveals
details that are far more shocking and onerous than have been revealed
or inferred so far. With Kenya's debt repayments to China scheduled to triple this year,
all of
Kenya's national assets are at risk, unless public pressure forces
China to relent.
The new headline revelation is that all Kenya's assets, within Kenya
or abroad, are now subject to Chinese seizure if Kenya can't make its
debt payments. Up until now, Kenyans had worried that its Port of
Mombasa, which would be extremely valuable to China for use as a
military base, was in danger of seizure by China. But the leaks
reveal that any Kenyan asset can be seized.
The leaked document refers to the Standard Gauge Railway (SGR)
project, a railway from Mombasa to Nairobi, funded by two separate
$1.6 billion loans from China. The debt was to be repaid from revenue
from the SGR, but that has been far below the optimistic estimates
made in 2014. Clause 5.5 of the "Preferential Buyer Credit Loan
Agreement on the Mombasa-Nairobi SGR" says the following:
<QUOTE>"Neither the borrower (Kenya) nor any of its assets is
entitled to any right of immunity on the grounds of sovereignty or
otherwise from arbitration, suit, execution or any other legal
process with respect to its obligations under this Agreement, as
the case may be in any jurisdiction."<END QUOTE>
Strictly interpreted, this clause forfeits all of Kenya's rights,
sovereign or otherwise, to any Kenyan asset, whether the Port of
Mombasa, another asset within Kenya, or a Kenyan asset abroad. None
of the news reports I've seen provides a list of foreign assets that
might be vulnerable, except to suggest that all of them are.
According to legal experts, in case of default, China can take over
many critical resources — anything from airports and natural resources
to embassies abroad.
****
**** Leaked clauses in Kenya-China BRI contract
****
Other clauses of the leaked contract reveal the following:
The agreement contains other clauses that protect China, and
almost guarantee that the loan will not be repaid, allowing
China to seize Kenyan assets.
Kenya's government has repeatedly promised to publicly release
the contract, but has always stalled, presumably because doing
so would violate the contract with China, and and would
also expose massive corruption and incompetence among
Kenyan government officials.
Kenya's government is promising to release the contract by the end of
the week. Now that many of the clauses have already been publicly
revealed, perhaps it might actually happen. The Nation (Kenya) and Mwakilishi (Kenya) and Tuko (Kenya)
Related Articles:
****
**** Uganda's auditor warns that Uganda may be in similar China debt trap as Kenya
****
Uganda's Auditor General John Muwanga is warning that Uganda
may be subject to the same risk as Kenya. He points out that
Uganda's national debt had gone from $3.3 billion in June 2017
to $4.1 billion in June 2018. Furthermore, according to Muwanga,
Uganda's contracts with China contain exactly the same clauses
as Kenya's contracts. According to Muwanga:
<QUOTE>"These conditions include waiver of sovereign immunity
by government over all its properties and itself from enforcement
of any form of judgment, adoption of foreign laws in any
proceedings to enforce agreements, requiring government to pay all
legal fees and insurance premiums on behalf of the
creditor."<END QUOTE>
However, Uganda's Minister of Finance Matia Kasaija dismissed
the Auditor General's report:
<QUOTE>"I am not worried about China taking our assets. They
can do it elsewhere, I don’t know, but not here. I don’t think it
will ever happen."<END QUOTE>
Tuko (Kenya)
****
**** India pledges $1.4 billion to Maldives to help with China debt trap
****
India will provide the Maldives with a $1.4 billion credit line, after
the new president Ibrahim Mohamed Solih visited India's prime minister
Narendra Modi in New Delhi last month. The credit line will permit
the Maldives to avoid default on payments on its debt to China, which
is estimated to be between $1.5 billion and $3.2 billion.
Solih shocked the Maldives by winning the presidential election on
September 23 by unexpectedly defeating the incumbent Abdulla Yameen
Abdul Gayoom. Yameen had close relations with China, and had signed
several BRI infrastructure contracts with China that place the
Maldives into a great deal of debt.
When Solih took office, he discovered that it was almost impossible to
learn the details of the contracts with China. ( "24-Nov-18 World View -- Maldives can't determine how much money it owes to China"
)
Solih vowed that he would find out exactly what was in the deals with
China, and at the time I expressed the hope that Solih would make the
China deal public so that, for the first time, we could see all the
details in one of China's BRI deals.
Unfortunately, that hasn't happened yet, though I'm still hoping. In
an interview last week, Solih said:
<QUOTE>"Our government is still reviewing the extent of the
debt incurred under the previous government. No doubt, the debt
situation has put us in an extremely challenging situation. A vast
number of infrastructural projects have been undertaken and we are
in the process of reviewing the terms of these
agreements."<END QUOTE>
Perhaps the leaking of the Kenya deal will make it possible for Solih
to release the details of the Maldives' deal.
The Maldives islands occupy a major strategic position in the Indian
Ocean. India's promise of $1.4 billion in aid to the Maldives has the
geopolitical effect of moving Maldives away from China and closer to
India. India Times and Maldives Times and Diplomat
Related Articles:
KEYS: Generational Dynamics, Kenya, Standard Gauge Railway, SGR,
China, Belt and Road Initiative, BRI, debt trap diplomacy,
Mombasa port, Sri Lanka, Hambantota port,
Democratic Republic of Congo, DRC, Ghana, Zambia, Pakistan,
China International Economic and Trade Arbitration Commission, Cietac,
China Road and Bridge Corporation, CRBC,
Edward Ouko, Uganda, John Muwanga, Matia Kasaija,
Maldives, Abdulla Yameen Abdul Gayoom, Ibrahim Mohamed Solih,
India, Narendra Modi
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
This morning's key headlines from GenerationalDynamics.com
- Kenya's leaked BRI contract reveals shocking China debt trap details
- Leaked clauses in Kenya-China BRI contract
- Uganda's auditor warns that Uganda may be in similar China debt trap as Kenya
- India pledges $1.4 billion to Maldives to help with China debt trap
****
**** Kenya's leaked BRI contract reveals shocking China debt trap details
****
Celebrations at Kenya's Standard Gauge Railway (SGR). (Railway Gazeti)
China has signed Belt and Road Initiative (BRI) contracts with
dozens of countries, with the requirement that the details be
kept secret, even from the countries' ministers or central banks.
For months I've been describing the onerous details of such
contracts, based on incomplete reports or vague statements by
politicians. It's always been clear that the reason why China
demanded total secrecy was because these contracts are
extremely favorable to China and are used for "debt trap diplomacy,"
allowing China to take control of a country's infrastructure when
unable to make the loan payments.
The poster child for debt trap diplomacy is China's seizure of control
of the Port of Hambantota after Sri Lanka was unable to pay the
onerous debt payments that China had demanded. China has already
acquired or is about to acquire ports and other assets in several countries
-- Sri Lanka, Democratic
Republic of Congo (DRC), Ghana, Zambia, Kenya -- through its "debt
trap diplomacy." Several other countries, including Pakistan and the
Maldives, are at risk. Malaysia is still at risk, as well.
Now, a partially leaked BRI contract between Kenya and China reveals
details that are far more shocking and onerous than have been revealed
or inferred so far. With Kenya's debt repayments to China scheduled to triple this year,
all of
Kenya's national assets are at risk, unless public pressure forces
China to relent.
The new headline revelation is that all Kenya's assets, within Kenya
or abroad, are now subject to Chinese seizure if Kenya can't make its
debt payments. Up until now, Kenyans had worried that its Port of
Mombasa, which would be extremely valuable to China for use as a
military base, was in danger of seizure by China. But the leaks
reveal that any Kenyan asset can be seized.
The leaked document refers to the Standard Gauge Railway (SGR)
project, a railway from Mombasa to Nairobi, funded by two separate
$1.6 billion loans from China. The debt was to be repaid from revenue
from the SGR, but that has been far below the optimistic estimates
made in 2014. Clause 5.5 of the "Preferential Buyer Credit Loan
Agreement on the Mombasa-Nairobi SGR" says the following:
<QUOTE>"Neither the borrower (Kenya) nor any of its assets is
entitled to any right of immunity on the grounds of sovereignty or
otherwise from arbitration, suit, execution or any other legal
process with respect to its obligations under this Agreement, as
the case may be in any jurisdiction."<END QUOTE>
Strictly interpreted, this clause forfeits all of Kenya's rights,
sovereign or otherwise, to any Kenyan asset, whether the Port of
Mombasa, another asset within Kenya, or a Kenyan asset abroad. None
of the news reports I've seen provides a list of foreign assets that
might be vulnerable, except to suggest that all of them are.
According to legal experts, in case of default, China can take over
many critical resources — anything from airports and natural resources
to embassies abroad.
****
**** Leaked clauses in Kenya-China BRI contract
****
Other clauses of the leaked contract reveal the following:
- Kenya must keep the contract secret. Clause 17.7: "The
borrower (Kenya) shall keep all the terms and conditions hereunder or
in connection with this agreement strictly confidential. Without the
prior written consent of the lender (China), the borrower shall not
disclose any information hereunder or in connection with this
agreement to any third party unless required by applicable law."
- The agreement is governed by Chinese law. According to one Kenyan
lawyer: "The agreement is being made in Kenya, the railway is built in
Kenya and the assets they are talking about are in Kenya, so why is it
being governed by the laws of China? Had there been more transparency
or choices of who funds the railway then Kenya may have got a better
deal."
- Any disputes can be resolved only by a Chinese agency, the China
International Economic and Trade Arbitration Commission (Cietac).
According to the agreement, "The arbitration award shall be final and
binding on both parties. The arbitration shall take place in Beijing."
In normal contracts, disputes are settled by a neutral and impartial
arbitrator. For example, in 2017 Kenya signed a pipeline security
commercial contract with Israel, and disputes will be submitted to an
arbitrator in London.
- Kenya pays the China Road and Bridge Corporation (CRBC) $10
million per month to run the railway. As is usual in China's BRI
contracts, the Kenyans are not permitted to run their own railroad or
to hire their own workers. This despite the fact that CRBC has been
repeatedly accused of abusive behavior towards Kenyans,
and of "neo-colonialism, racism and
blatant discrimination." Kenya's Auditor-General Edward Ouko has
repeatedly violated Kenya's laws by not releasing regular reports on
payments to CRBC.
- Kenya is compelled to import goods, technology and services from
China. This is standard practice for China's BRI deals. China loans
a huge amount of money to a country like Kenya. Kenya must use the
money to pay Chinese workers. and buy goods, technology and services
from China. So all the money goes right back to China and benefits
Chinese factories and workers, rather than Kenyan factories and
workers. And yet, Kenya still has to repay the loan, which means that
it's repaying the loan twice, or else have all its assets seized and
confiscated by the Chinese.
- China is charging considerably more for the project than would be
standard in other countries. This is a sign of corruption.
- If Kenya tries to pay off the loan with alternate funds (I assume
this means a loan from another country), then China can refuse to
accept that payment.
The agreement contains other clauses that protect China, and
almost guarantee that the loan will not be repaid, allowing
China to seize Kenyan assets.
Kenya's government has repeatedly promised to publicly release
the contract, but has always stalled, presumably because doing
so would violate the contract with China, and and would
also expose massive corruption and incompetence among
Kenyan government officials.
Kenya's government is promising to release the contract by the end of
the week. Now that many of the clauses have already been publicly
revealed, perhaps it might actually happen. The Nation (Kenya) and Mwakilishi (Kenya) and Tuko (Kenya)
Related Articles:
- China may seize Kenya's Mombasa Port as debt repayments triple (03-Jan-2019)
- China's railway contractor in Kenya accused of 'neo-colonialism, racism and blatant discrimination' (14-Jul-2018)
- African Cédric Bakambu joins China's Sinobo Guoan Football Club (04-Mar-2018)
- Zambia denies defaulting on infrastructure loans from China (15-Sep-2018)
****
**** Uganda's auditor warns that Uganda may be in similar China debt trap as Kenya
****
Uganda's Auditor General John Muwanga is warning that Uganda
may be subject to the same risk as Kenya. He points out that
Uganda's national debt had gone from $3.3 billion in June 2017
to $4.1 billion in June 2018. Furthermore, according to Muwanga,
Uganda's contracts with China contain exactly the same clauses
as Kenya's contracts. According to Muwanga:
<QUOTE>"These conditions include waiver of sovereign immunity
by government over all its properties and itself from enforcement
of any form of judgment, adoption of foreign laws in any
proceedings to enforce agreements, requiring government to pay all
legal fees and insurance premiums on behalf of the
creditor."<END QUOTE>
However, Uganda's Minister of Finance Matia Kasaija dismissed
the Auditor General's report:
<QUOTE>"I am not worried about China taking our assets. They
can do it elsewhere, I don’t know, but not here. I don’t think it
will ever happen."<END QUOTE>
Tuko (Kenya)
****
**** India pledges $1.4 billion to Maldives to help with China debt trap
****
India will provide the Maldives with a $1.4 billion credit line, after
the new president Ibrahim Mohamed Solih visited India's prime minister
Narendra Modi in New Delhi last month. The credit line will permit
the Maldives to avoid default on payments on its debt to China, which
is estimated to be between $1.5 billion and $3.2 billion.
Solih shocked the Maldives by winning the presidential election on
September 23 by unexpectedly defeating the incumbent Abdulla Yameen
Abdul Gayoom. Yameen had close relations with China, and had signed
several BRI infrastructure contracts with China that place the
Maldives into a great deal of debt.
When Solih took office, he discovered that it was almost impossible to
learn the details of the contracts with China. ( "24-Nov-18 World View -- Maldives can't determine how much money it owes to China"
)
Solih vowed that he would find out exactly what was in the deals with
China, and at the time I expressed the hope that Solih would make the
China deal public so that, for the first time, we could see all the
details in one of China's BRI deals.
Unfortunately, that hasn't happened yet, though I'm still hoping. In
an interview last week, Solih said:
<QUOTE>"Our government is still reviewing the extent of the
debt incurred under the previous government. No doubt, the debt
situation has put us in an extremely challenging situation. A vast
number of infrastructural projects have been undertaken and we are
in the process of reviewing the terms of these
agreements."<END QUOTE>
Perhaps the leaking of the Kenya deal will make it possible for Solih
to release the details of the Maldives' deal.
The Maldives islands occupy a major strategic position in the Indian
Ocean. India's promise of $1.4 billion in aid to the Maldives has the
geopolitical effect of moving Maldives away from China and closer to
India. India Times and Maldives Times and Diplomat
Related Articles:
- Maldives can't determine how much money it owes to China (24-Nov-2018)
- China and India compete for influence in Sri Lanka and Maldives constitutional crises (10-Nov-2018)
- Maldives crisis pits India vs China in the Indian Ocean (07-Feb-2018)
- Maldives in crisis as China-backed incumbent president Yameen loses election (24-Sep-2018)
KEYS: Generational Dynamics, Kenya, Standard Gauge Railway, SGR,
China, Belt and Road Initiative, BRI, debt trap diplomacy,
Mombasa port, Sri Lanka, Hambantota port,
Democratic Republic of Congo, DRC, Ghana, Zambia, Pakistan,
China International Economic and Trade Arbitration Commission, Cietac,
China Road and Bridge Corporation, CRBC,
Edward Ouko, Uganda, John Muwanga, Matia Kasaija,
Maldives, Abdulla Yameen Abdul Gayoom, Ibrahim Mohamed Solih,
India, Narendra Modi
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
