In August 2023, only months after the military coup in Niger, another coup d’état shook West Africa. This time it was in the tiny oil producing nation of Gabon, where a military junta led by officers from the presidential guard arrested Ali Bongo and his family shortly after he won the election for his third term as president. This marks the eighth successful coup since 2020 in West and Central Africa. However, unlike in the cases of Mali, Guinea, Burkina Faso or Niger, behind this overthrow wasn’t the need to stop the violence in the country, violence caused by the rise in Islamic extremism, but rather the failure and dysfunctionality of public institutions.

With a population of 2.4 million, Gabon borders the Atlantic and boasts oil reserves of at least 3.1 billion barrels. Daily output amounts to 200,000 barrels, making Gabon the second-smallest OPEC producer, and oil income makes up the lion’s share of the country’s budget. After the coup, among the first measures announced by the new administration led by General Brice Clotaire Oligui Nguema was the use of the state’s preemption right to acquire the oil company Assala Energy. The decision was presented as an act of economic sovereignty that will drive additional revenue to the national budget.

Assala Energy is responsible for almost one fifth of Gabon’s oil production and is owned by the US-based Carlyle Group who bought Shell’s onshore oil-producing assets in 2017. In August 2023 the Carlyle Group announced it has finalized an agreement to sell Assala Energy to France’s Maurel & Prom (M&P) for $1.3 billion, out of which $730 million in equity value and the rest representing the assumption of a $600 million credit facility. M&P already operates inside Gabon and the takeover of Assala Energy would turn the French company into the second-biggest oil producer in the country, after Perenco Oil.

The buyout seemed a done deal until the palace revolution in Libreville threw a spanner in the works. After the national company, Gabon Oil Company (GOC), invoked preemption to stop the sale of Assala Energy to M&P, the French press started clamoring that a takeover by GOC would constitute a nationalization of foreign-owned assets. The claim is dubious at face value, but it is true that in large part the decision stems from the need of the transitional government to bolster popular support. The ruling military junta promised that, once a new constitution is adopted, it will organize general elections, and the current administration obviously aims to keep the power.

There exists in most African countries a common public perception that foreign companies belonging to their former colonial masters extract resources on the basis of inequitable concession contracts and at the prejudice of the African people. In this sense, mineral resources, particularly hydrocarbons, are a development paradox. They can raise the standard of living and fund the development of a nation, but they also act as enablers for authoritarianism, corruption and violence.

A wealth of natural resources means the government can forgo taxes from regular people, and the link between the citizen and the state weakens. As long as public institutions deliver adequate services, citizens are likely to remain depoliticized ‘consumers’ of governance, and this will inhibit the development of a strong civil society that can place checks on the autocratic inclinations of policymakers. Examples for this abound: Gaddafi’s Libya, the UAE, Saudi Arabia, Saddam Hussein’s Iraq, Yemen, Hugo Chavez’ Venezuela or Suharto’s Indonesia.

Nationalizing foreign assets is most attractive for countries with weak institutions where power is concentrated in the hands of a few individuals, and in periods when the price of the extracted commodity happens to be at record levels. Oil is often the winning ticket for dictators, as it seems to be the case with Gabon. However, nationalistic speeches may raise one’s approval rating but they don’t translate into hard currency.

GOC is a fairly small company, with an output of less than 1,000 barrels/day, and it will be hard-pressed to come up with the $1.3 billion it needs to match the offer from the France-backed firm. Additionally, coups d’état and military juntas don’t exactly generate investor confidence, so it’s hard to imagine who would lend GOC the funding needed for the purchase. There exists a legitimate concern that if the capital cannot be raised then the current government will proceed to an outright expropriation in order to keep public support. This would be an ugly situation for all involved, and would likely result in commercial and financial sanctions being placed on the country, and an embargo on Gabonese oil and related products.

On the other hand, a successful takeover of Assala Energy, whether by buyout or confiscation, will have positive political and economic results for Gabon’s ruling junta, if only on the short and medium terms. It will bring an immediate increase in the state’s income, and it will also serve to curry favor with the population that a neocolonial injustice has been redressed. However, the government’s management of the newly acquired assets will almost certainly be inefficient, opaque, politicized and corrupt. On the long term it will bring to a standstill investment in new oilfields, generate a decline in production, and eventually result in the collapse of the entire company.

It’s also possible that the endgame envisioned by the ruling officers may be more complex and, being aware of the unlikelihood of raising funds for the acquisition, they are using GOC’s preemption right as a bargaining chip with M&P in order to increase Gabon’s stake in the venture. The only thing that is certain is that General Brice Oligui Nguema, like any military man, needs a victory. A complete takeover of Assala Energy by GOC would be a pyrrhic one at best, so striking a deal with M&P or their mother company, the Indonesian state-owned Pertamina, could well be the outcome the general is aiming for.

The epilogue will have to be written soon because GOC’s preemption right expires in a few weeks, and then M&P is free to seal the deal with the Carlyle Group. That is, unless the Libreville junta changes the rules once again.