Hydro-diplomacy as a Foreign Policy Tool: The Chinese Case of Sinohydro Corporation

Filippo Verre - February 21, 2022

* L’immagine di copertina di questo report è stata presa dal sito Sunday Observer, consultabile al seguente link: https://www.sundayobserver.lk/2019/02/24/news-features/hydro-diplomacy-sine-qua-non

Hydroelectric power is a form of alternative energy that, quite simply, is obtained through the exploitation of flowing water. The natural motion of watercourses, whether rivers or waterfalls, produces kinetic energy, which, thanks to special turbines and systems, is transformed into electrical energy. The turbines, driven by the moving water, are usually placed at a height difference with respect to the mass of flowing water. When the latter increases, there is an increase in the volume of water, which corresponds to a greater power of the hydraulic system. By virtue of this, it is easy to understand why the largest hydroelectric power plants in the world were built near large waterfalls or near large rivers. To better understand this mechanism, just think of the Chinese Three Gorges Dam. Completed in 2006, it is so called because it actually crosses three gorges: the Qutang Gorge, the Wuxia Gorge and the Xiling Gorge. It is one of the largest hydraulic infrastructures in the world, second only to the Brazilian Itaipù Dam in size but with a significantly higher energy capacity. According to data, the large South American structure is capable of generating 14 GW of hydroelectric energy while the Three Gorges Dam, despite being slightly smaller, has a capacity of about 22.5 GW.

Fig. 1: La Diga delle Tre Gole vista dall’alto

Fig. 2: La Diga delle Tre Gole vista in chiave prospettica

This impressive hydraulic work was built on the banks of a colossal watercourse: the Yangtze River. The river, approximately 6,418 km long, begins its journey in Tibet and heads east through southwest and then eastern China before flowing into the East China Sea in Shanghai. In addition to its length, which makes the Yangtze the third largest watercourse in the world after the Nile and the Amazon, this river has a very significant average annual flow rate. According to the data, we are talking about approximately 30,146 m³/s (cubic meters per second), with peaks of 110,000 m³/s in the rainiest seasons. This makes the Yangtze a true “water highway” that, if wisely exploited, is capable of generating high rates of hydroelectric energy. As mentioned, in fact, the Three Gorges Dam, precisely because of the large volume of water that characterizes the river, is currently the most important hydraulic infrastructure in the world.

The energy produced by falling water, or by flowing and flowing, is a type of energy that humanity has always used and exploited, also in a strategic way for the economic-infrastructural development of peoples. In this regard, historical sources tell us that at least 4,000 years ago, various peoples, from the Sumerians to the Egyptians, had built water wheels to grind cereals and produce food. Before the year zero, in India, China, Greece and even in the Roman Empire, hydraulic energy was in common use, also exploited to forge iron artifacts that were used in daily life or in battle. However, it is only from the nineteenth century onwards, that is, from when a technological level was reached that allowed the power of water to be transformed into electricity, that the many advantages of this form of energy became evident.

Many developing nations require high levels of energy for a variety of purposes. Electricity, in particular, is used to increase industrial production, to heat or cool indoor environments or, much more simply, to light homes. In the West, the use of electricity for everyday use has been widely accepted for many decades now. However, in many areas of the world there are still conditions of great hardship where energy or running water are luxuries that not everyone can afford. Just think of many sub-Saharan countries, where both electricity and running water are missing for many hours a day in some areas. The production of electricity from the exploitation of watercourses can be a very advantageous method for improving the living conditions of many Africans. Hydroelectricity, in fact, is the renewable energy production method par excellence, since it is theoretically inexhaustible at least as long as the water cycle continues to function.

Fig. 3: Immagine di una cascata nei pressi della quale è possibile costruire un impianto idraulico in grado di sfruttare l’energia cinetica dell’acqua che scorre

Fig. 4: La forza cinetica dell’acqua usata per produrre energia elettrica

The positive effects of hydroelectric power plants are many. In addition to encouraging a lower use of fossil fuels, hydroelectric plants often require the construction of dams. The latter, provided that they are not very large in size capable of significantly altering ecosystems and regions, bring significant benefits. Dams, in fact, if used wisely, can help reduce floods in areas subject to strong rainfall pressure. At the same time, dams can also be used to create artificial basins from which to draw in the event of drought or sudden water shortages. All these beneficial effects go beyond the main reason why a reservoir is built: the control of water flow through which to manage the flow of water in view of the production of hydroelectric energy.

The construction of hydraulic infrastructures capable of using the power of water to produce energy will constantly increase in the near future. The main reasons for this trend are essentially two. On the one hand, the growth in the number of inhabitants of the earth, combined with the "hunger for energy" of many developing countries, will favor the use of new plants suitable for producing low-cost energy. Hydroelectric energy, in fact, having as its primary matrix the flow of water, once the initial investment for the construction of power plants and dams has been amortized, does not cost much. If we exclude the ordinary maintenance costs and the cost of the technical personnel responsible for supervising the water structure, the financial resources necessary to run a medium/large-sized power plant are relatively small. A completely different situation occurs in the case of a so-called "mega-dam", whose construction, maintenance and management costs are truly exorbitant. However, on average, hydroelectric power plants have sustainable costs. Secondly, energy deriving from the exploitation of water is one of the cleanest energies known to man. Compared to fossil fuels, nuclear power plants (first and second generation) or, worse, coal-fired power plants, hydroelectric power stands out in terms of environmental sustainability. In this historical phase, characterized by the need to reduce pollution at all levels, hydroelectric power is the most valid method for obtaining high energy rates at relatively low costs and with a low polluting impact.

Engineering know-how at the service of hydro-diplomacy: an “indirect” Italian example

To be able to adequately exploit waterways from an energy point of view, it is necessary to equip oneself with modern and technologically advanced structures. Not infrequently, the richest countries provide precious engineering know-how essential for the construction of dams, turbines and plants that in fact “harness” the kinetic energy produced by the motion of water to transform it into electricity. As far as Italy is concerned, we refer to Webuild S.p.A., a company that has been active for over 50 years in the construction of dams and hydroelectric plants, hydraulic works and civil and industrial construction in general. Starting from 15 May 2020, Webuild is the new corporate name of the original Salini Impregilo S.p.A., a large Italian company that operates in many scenarios and has been a protagonist in the construction of various hydraulic structures in various parts of the world.

Fig. 5: Il nuovo logo dell’azienda

Fig. 6: La vecchia denominazione modificata nel maggio 2020

Among the many “companies” carried out by this great Italian company, some truly significant ones are worth mentioning:

1) The relocation of the archaeological site of Abu Simbel. Following the construction of the Aswan Dam in 1960, the then Impregilo S.P.A. was charged with overseeing the relocation of numerous works built by the Ancient Egyptians, including the temples of Abu Simbel. The Impregilo company gathered a group of expert Italian marble quarrymen from Carrara, Mazzano and Chiampo, who guided the more than 2,000 people involved in the work of moving the temple about 60 meters upstream for the entire duration of the work.

Fig. 7: La Diga di Aswan pochi anni dopo essere stata costruita

Fig. 8: Il Tempio di Abu Simbel

2) Expansion of the Panama Canal. In the second half of 2009, the Panama Canal Authority (PCA) and the international consortium Grupo Unido por el Canal (GUPC), of which Impregilo was a member at the time, signed the contract to award the tender for the construction of a new system of locks as part of the project to expand the Panama Canal. The latter, in reality, consisted of the construction of a new canal, which was added to the first one opened in 1914, to allow the transit of larger ships in order to increase commercial traffic between the two oceans. Before the expansion of the Panama Canal, ships with a maximum length of 294 meters, a width of 32 and a draft of 12 could transit. The new Panama Canal allows the passage of larger tonnage ships, called Post Panamax, with a length of 366 meters, a width of 49 and a draft of 15.

Fig. 9: Progetto dell’ampliamento del Canale di Panama

3) Ulu Jelai Hydroelectric Plant, Malaysia. In 2011, Salini Costruttori, together with the Malaysian company Tindakan Mewah, won the contract of 515 million euros for the construction of a dam in the Ulu Jelai hydroelectric plant. The dam, whose overall height is around 80 meters, has a total volume of around 750,000 cubic meters. In addition to the construction of this important structure, the project included the construction of a cavernous power plant to accommodate two large turbines of 191 MW each and the construction of around 26 km of hydraulic tunnels. At the end of the works, the plant recorded significant energy production rates. With an installed capacity of around 382 MW, the Ulu Jelai hydroelectric plant is still one of the best performing in all of Malaysia.

It should be noted that the then Salini Impregilo S.P.A., now Webuild S.P.A., operated and operates predominantly in a private capacity. It is in fact a multinational that carries out its activities in a market context in which the Italian State plays a supporting role. Therefore, considering Webuild as an instrument of true Italian “hydro-diplomacy”, in addition to being superficial, could be inappropriate. First of all, what is meant by hydro-diplomacy? It is a diplomatic strategy aimed at increasing the presence of a State in the internal affairs of another through the signing of agreements of a “water” nature. By “water character” we mean all those treaties or agreements that have as their primary rationale the construction of infrastructures such as a dam, a hydroelectric plant, a desalination plant, a port or an artificial water basin that positively increase the well-being of the citizens of that country. Given the growing value that “blue gold” will acquire in the coming years in various countries, hydro-diplomacy is a foreign policy strategy that will see significant development in many chancelleries.

It is important to point out that the Italian case of Webuild cannot be considered as an example of “direct” hydro-diplomacy. Certainly, Rome benefits indirectly from the entrepreneurial activities of the former Salini Impregilo S.P.A., since the various engineering operations that have taken place over time have nevertheless allowed a large Italian company to insert itself into the socioeconomic fabric of important countries in various parts of the world. However, this “penetration”, if it can be defined as such, is not the result of a well-defined diplomatic strategy focused ad hoc on hydro-diplomacy. The freedom that permeates our commercial system has meant that one of our multinationals, in full possession of its entrepreneurial faculties, obtained, in the context of the Italian System, rich and important commissions in approximately 70 countries for more than 50 years. At a teleological level, Rome has not specifically tasked Salini Impregilo with increasing Italy’s status in the world through the signing of water agreements. Nonetheless, it is clear how the agreements signed by our multinational over time have indirectly favored Rome’s presence in many strategic areas of the globe, allowing Italy, indirectly, to be one of the main countries to implement a foreign policy connected to hydro-diplomacy.

China and hydro-diplomacy: the case of Sinohydro Corporation

If, as we have just seen, Webuild acts indirectly as a tool for Italian hydro-diplomacy, the opposite is true for Sinohydro Corporation and China. Sinohydro is a large Chinese state-owned company specialized in the construction of hydroelectric power plants. According to many experts[1], it is the largest company for hydroelectric power plants in the world. In addition, the company is engaged in research and development for the design of electrical power plants, architecture and construction with related design and production of construction machinery. Founded in 1950 with registered office in Beijing, Sinohydro is present in all continents at various levels and has operational headquarters in many cities. As for Europe, the operational headquarters chosen by Beijing is Belgrade.

Fig. 10: Logo della Sinohydro Corporation

For several years now, China has adopted a very active foreign policy with the aim of increasing its geopolitical status. Beijing is no longer the “factory of the world” that we Westerners used to turn to just a few decades ago for the low-cost production of many products. Today, China is a nation with strong economic growth that is eager to assert, also from a political point of view, the leadership role that it now plays in various scenarios. One of the means on which the Chinese communist government relies most to expand Beijing’s influence outside its national borders is precisely hydro-diplomacy. As demonstrated by the Three Gorges Dam, the Chinese take into great consideration the role that water plays in the production of electricity. It is therefore no coincidence that one of the most important companies, if not the most important, for what concerns the construction of water plants is Chinese.

Among the areas in which Sinohydro Corporation has worked most assiduously is undoubtedly Africa, the continent to which the Chinese have paid particular attention in recent times. Specifically, Sinohydro has carried out important works in Nigeria and Uganda, two key countries in China's geopolitical strategy in Africa. As far as Nigeria is concerned, the Chinese state-owned company was selected by the government of Abuja for the construction of the Zungeru hydroelectric plant, an important infrastructure not far from the capital. The plant, still under construction, is the result of a 2012 project with a total value of approximately 1.3 billion dollars. This is a considerable amount since, once completed, the Zungeru plant will produce approximately 700 MWs of hydroelectric energy, thus placing it in second place in the ranking of Nigerian hydraulic structures after the Kainji plant, located in the northwest of the country, capable of generating 760 MWs of energy.

Fig. 11: Lavori per la costruzione della centrale di Zungeru

Fig. 12: Geo-localizzazione della centrale di Zungeru

Sinohydro, the project's assignee, will build a large dam that will create a massive artificial water reserve. According to Chinese technicians, it will be quite high (about 101 meters) and will be able to create a reservoir of about 10 million cubic meters of water, from which the Nigerian state will be able to draw in the event of drought. The hydroelectric plant will bring many benefits to the entire region: in addition to energy production and the construction of an artificial reservoir, the dam will allow for more effective control of the water and prevention of possible floods. From an employment perspective, Nigerian authorities estimate that about 2,000 workers have been employed so far, including laborers and specialized technicians. This is not a small number, especially for the Zungeru region, which has historically been less economically developed than other areas of the country.

It is interesting to note that China has taken charge not only of the construction of the plant, through the work carried out by the Sinohydro Corporation, but has also provided a large part of the financing for the project. The Nigerian government has committed to covering approximately 25% of the costs necessary for the construction of the structure; the remaining 75% was provided by Exim Bank of China. Founded in 1994, this banking institution has the function of providing financial and political support to developing countries in order to promote the export of Chinese products and services and to increase Beijing's presence in the local socioeconomic fabric.

Following the start of the work, there was no shortage of protests from many residents of the area. Like all large hydroelectric structures, in fact, the construction of the Zungeru plant has also forced hundreds of residents to relocate. Among the main side effects of large dams is the so-called forced displacement, or the forced relocation of all those families who live in the areas where the works will be carried out or in the areas that will be submerged by the waters of the reservoir. Despite this, the works continued regularly and at a rapid pace. The completion of the hydroelectric plant is scheduled for the first half of 2022.

As for Uganda, the Chinese have been the protagonists of the construction of a project even more significant and expensive than the Zungeru plant. In 2013, the Sinohydro Corporation was chosen by the Ugandan government as the main contractor for the completion of the Karuma hydroelectric plant, an important hydroelectric structure capable of generating approximately 600 MWs of energy at a cost of 2.2 billion dollars. The plant, located near the Karuma Falls on the White Nile, will be the largest hydraulic structure in the country once completed.

Fig. 13: Immagini delle cascate di Karuma

Fig. 14: La centrale idroelettrica di Karuma vista dall’alto

Work on the plant began in the second half of 2013, after the Kampala government awarded the project to Sinohydro. The implementation and financing methods are similar to what happened in Nigeria. In this case too, in addition to providing logistical and technological support through the Sinohydro Corporation, Beijing played a key role from a financial point of view. The Exim Bank of China covered 85% of the costs, while Uganda provided the remaining 15%.

The Karuma plant is extremely important for this African nation. In fact, the Ugandan economy is among the most dynamic of the countries located in East Africa; equipped with great natural resources, including a vast presence of water due to the massive presence of the large Lake Victoria in the southern part, Uganda has great development potential for the coming years. The Karuma power plant, in addition to being a valid and non-polluting method of energy production, will guarantee continuous access to electricity to many Ugandan families located in the hinterland. In Kampala's plans, the power plant built with decisive Chinese support will serve both to produce energy necessary for economic growth and to provide electricity to the population. This will allow many millions of Ugandans to exponentially improve their living conditions.

Conclusion

In light of what has been said so far, it seems clear that among the means with which China aims to expand its presence on various international scenarios there is certainly the so-called hydro-diplomacy. Aware of how important water is from an energy point of view, the Chinese have already been focusing on this diplomatic strategy in foreign policy for some time. On the other hand, as mentioned, it is certainly no coincidence that the most important hydraulic structure in the world - the Three Gorges Dam - is located in China, as well as the most important company specialized in the construction of dams and hydroelectric plants, the Sinohydro Corporation. This report aimed to shed light on Chinese hydro-diplomacy in Africa, a continent in which Beijing has already shown strong interest for some years. The countries chosen by the Chinese state company, namely Nigeria and Uganda, play an important role at the continental level. The Nigerian economy is currently the most solid and dynamic in all of Africa, after having surprisingly surpassed the South African one for the continental primacy; in addition, Abuja is the demographically most populous country not only in sub-Saharan Africa but in all of Africa in general. In short, Nigeria is a true economic-demographic giant to be kept under close observation in the coming years by virtue of the interesting performances achieved recently. Uganda, an equally dynamic African nation although less "explosive" than Nigeria, plays an important hinge role from a geographical point of view. Situated on the border with Congo, another giant on which China intends to increase its influence, and in a position not far from the Horn of Africa, a strategic area par excellence, Kampala plays a significant strategic role from a Chinese perspective. For all these reasons, the interest of the Sinohydro Corporation, and consequently of the Chinese government, in expanding its presence in these countries from a hydro-diplomatic point of view is understandable.

By virtue of what has just been seen, it is evident that China considers hydro-diplomacy as a concrete tool on which to focus to increase its role on the global scene. For some time now, Beijing, through its powerful state-owned company specialized in the construction of dams and hydraulic systems, has played a primary role both in the supply of know-how and in a financial perspective, thanks also to Exim Bank of China. It is important to underline that Italy is also at the forefront in terms of promoting hydro-diplomacy. However, while Rome can boast of so-called “indirect” benefits, that is, the result of the entrepreneurial action of a worthy multinational company not dependent on the Italian State, Beijing plays a leading role in promoting hydro-diplomatic strategies. Given the growing value that water will gain in the near future, especially in developing nations “hungry” for both energy and infrastructure, it is desirable that Italy will take a greater interest in hydro-diplomacy as a tool for establishing profitable relations with growing nations. As demonstrated by the Webuild case, our country certainly does not lack entrepreneurial and engineering skills. However, a more concrete political-diplomatic will aimed at considering water as a valid geopolitical tool would be highly appreciated. Other important countries, such as China, are doing so with excellent results.

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[1] https://damsandalternatives.blogspot.com/2010/09/opportunity-for-global-environmental_21.html