Russian President Vladimir Putin listens to leaders from the BRICS group of emerging economies at the start of a three-day summit in Johannesburg via videoconference from Moscow on Aug. 23.Mikhail Klimentyev/The Associated Press
As it prepares to take over the leadership of the newly expanded BRICS group of countries, Russia has won a major gas-refinery contract in South Africa, one of its long-standing partners in the geopolitical bloc.
South Africa’s cabinet announced on Monday that it has chosen a state-owned Russian bank, Gazprombank, as the preferred investor to revive a mothballed refinery on its southern coast, in a deal reportedly worth about $265-million. Of the 20 bidders for the deal, 19 were disqualified on technicalities, paving the way for the Russian bank to win easily, according to South African media reports.
The bank has been under U.S. sanctions because of the Russian invasion of Ukraine, but the BRICS partnerships have helped Moscow forge business deals that are beyond the reach of Western sanctions.
The bloc was originally created by Brazil, Russia, India and China, known as the BRIC group. It expanded to include South Africa in 2010, and it expanded again this year by accepting membership requests from Iran, Saudi Arabia, Egypt, Ethiopia, Argentina and the United Arab Emirates. The organization has been united by its opposition to the Western use of sanctions to punish certain countries.
A South African cabinet minister, Khumbudzo Ntshavheni, defended the refinery deal by citing her government’s promise to increase trade and investment within BRICS. Its relationship with Russia is “driven by our partnership in BRICS,” she told journalists on Monday.
“There would be no point being in BRICS if South Africa did not partner with BRICS countries in trade and investment. It’s part of making sure that we build a resilient economy that is not susceptible to only one side of the global balance of powers.”
South Africa held the rotating chair of BRICS this year, but Russia will be the chair next year. At a meeting of the bloc’s officials last week, a South African official handed a wooden gavel, designed in the colours of the Russian flag, to the deputy Russian foreign minister, Sergei Ryabkov, who declared that BRICS has advanced to “a level unseen and unpredicted.”
He used the gavel to bang a traditional African drum, which he called a “symbol of the Global South.”
South Africa has openly opposed Western sanctions on Russia. Late last year, one of its naval bases accepted a visit from a Russian cargo ship that was under U.S. sanctions, after a commercial port had refused to accept the ship.
South Africa’s deputy minister of international relations, Alvin Botes, is visiting Moscow this week, and his agenda will include efforts at “deepening” the ties between the two countries, “especially in the area of economic co-operation,” according to a statement by the South African international relations department.
In another potential windfall for Russia, the South African government is planning to unveil on Tuesday a new plan to purchase 2,500 megawatts of nuclear energy. The contract is widely expected to go to Russia’s nuclear agency, Rosatom, which had been on the verge of securing a major deal with South Africa under its then-president Jacob Zuma, until the deal was halted by a court challenge in 2017.
Under the new refinery deal, Gazprombank will become the investment partner for a 45,000 barrel-a-day gas-to-liquids refinery at Mossel Bay, South Africa. The deal was recommended by South Africa’s state-owned oil company, PetroSA.
The refinery has been closed for the past three years. But it is likely to play a key role in the development of a large South African gas project, following two huge offshore gas discoveries by TotalEnergies in 2019 and 2020.
The refinery was first built in 1989 to help South Africa’s apartheid government bypass a United Nations oil embargo.
A leading South African investigative journalism outlet, amaBhungane, reported last month that 19 of the 20 bidding companies were disqualified from the competition because of unusually strict technical criteria, including penalties for companies that were not majority-owned by an oil- or gas-producing state.
The report said the PetroSA bid evaluation committee had raised concerns about Gazprombank because of the U.S. sanctions and the risk that South Africa could face secondary sanctions from the United States for doing business with a company under sanctions. But PetroSA obtained a second legal opinion, which concluded that the risk of sanctions was low, allowing it to go ahead with the Gazprombank deal.
Kevin Mileham, an MP with the opposition Democratic Alliance, said last month that any deal with Gazprombank would be “a foolish move” that would damage South Africa’s relations with Washington. The deal could provoke U.S. lawmakers into a decision to expel South Africa from a preferential trade access agreement and could lead to sanctions against the country’s financial system, he said.