Niger bet on a China-backed oil pipeline. Now, the project is stalled.

An internal security crisis and a diplomatic dispute threaten a China-backed pipeline in Niger. Observers worry that the stalled pipeline operation could halt the country's economic growth.

First Look

A China-backed pipeline that would make Niger an oil-exporting country is being threatened by an internal security crisis and a diplomatic dispute with neighboring Benin, both as a result of last year’s coup that toppled the West African nation’s democratic government.

The 1,930-kilometer (1,200-mile) pipeline runs from Niger’s Chinese-built Agadem oil field to the port of Cotonou in Benin. It was designed to help the oil-rich but landlocked Niger achieve an almost fivefold increase in oil production through a $400 million deal signed in April with China’s state-run national petroleum company.

But it has been stalled by several challenges, including the diplomatic disagreement with Benin that led to the pipeline’s closure last week. There also has been an attack this week by the local Patriotic Liberation Front rebel group, which claimed to have disabled a part of the pipeline and is threatening more attacks if the $400 million deal with China isn't canceled.

The group, led by Salah Mahmoud, a former rebel leader, took up arms after Niger's junta came to power, posing further security threats to the country, which is already struggling with a deadly security crisis.

Analysts say the crises could further hurt Niger, one of the world’s poorest countries which funds most of its budget with now-withheld external support in the aftermath of the coup.

Niger currently has a local refining capacity of only 20,000 barrels per day (bpd) for local demands while the pipeline is to export up to 90,000 barrels daily – a feat officials and analysts have said would help the country shore up its revenue and emerge from the coup sanctions that had isolated it from regional neighbors and hurt its economy and people.

“It is a completely messy situation and the only way for a resolution is if both administrations directly engage and resolve issues,” said Ryan Cummings, director of Africa-focused security consulting company Signal Risk.

One major concern is how the stalled pipeline operation might impact Niger’s overall economic growth. The World Bank had projected that the West African nation’s economy would rebound and grow the fastest in Africa this year at a rate of 6.9%, with oil exports as a key boost.

The diplomatic tensions with Benin date back to July when Niger’s president, Mohamed Bazoum, was deposed in a coup, resulting in West African neighbors closing their borders with Niger, and in the formation of the so-called local liberation group now threatening more attacks on the oil project.

Benin, alongside other neighbors, has reopened its border with Niger, but Nigerien officials have refused to open theirs, accusing Benin of hosting French troops that pose a threat to the country after Niger severed military ties with France. That has led Benin’s president, Patrice Talon, to make the oil exportation through its port conditional on the reopening of the border.

Both countries are losing out economically, with Benin also being deprived of millions of dollars in transit fees. Observers say the impasse is worsening regional tensions since the coup, which came after a string of other military takeovers. It has pitched Niger against the Economic Community of West African States, or ECOWAS, which usually mediates on such issues.

With Niger tilting towards Russia in its diplomatic shift and Benin aligned with France and the West African bloc, China has tried to step in and resolve the impasse and benefit from its investment in the project.

But even Beijing’s efforts, which resulted in the first lifting of oil from the Agadem field in May, collapsed as the diplomatic spat escalated further.

Benin this week convicted and imprisoned three of five Nigerien oil workers it recently arrested at the Beninise port after they crossed from the border and were accused of “use of falsified computer data.” Their arrests prompted Niger to shut the pipeline last week, with a senior government official alleging that their oil is being “stolen by other people.”

A big concern for Niger’s military government at this stage is “whether they have the requisite fiscal capacity to keep paying for public services” following the coup, which has made it unable to meet some of its financial obligations such as debt repayment and infrastructural funding, Mr. Cummings said.

The junta in Niger "definitely have to be more cautious in handling the financial position of the country” amid the ongoing crises, he said.

This story was reported by The Associated Press. Virgile Ahissou contributed to this report from Cotonou, Benin.