South African national oil company PetroSA has chosen Russia’s Gazprombank as its preferred investment partner to revive a gas-to-liquid (GTL) fuel refinery in the southern town of Mossel Bay.
The move, announced on Monday, has been approved by South Africa’s cabinet despite the threat of Western sanctions, according to officials. A final investment decision is expected in April of next year.
The US and its Western allies have imposed sanctions on Gazprombank, Russia’s third-largest lender by assets and a key channel for Moscow’s energy trade, in response to the Ukraine conflict.
A member of the BRICS group alongside Russia, South Africa has insisted on a non-aligned stance and has resisted external pressure to distance itself from Moscow. That includes calls from the US, where a group of lawmakers has demanded that Pretoria be removed from the African Growth and Opportunity Act (AGOA). South Africa currently has beneficiary status under the program, which allows eligible Sub-Saharan African countries duty-free exports to the American market.
Khumbudzo Ntshavheni, a minister in the South African presidency, told reporters in Pretoria on Monday that the country’s relations with Russia are driven by partnerships within the BRICS group.
“We are aware there are countries that are not happy with our participation in the BRICS. There is no point in South Africa being in BRICS and not wanting to partner with BRICS countries in trade and investment,” Ntshavheni said.
“It is part of us making sure we can build a resilient economy that is not only susceptible to one side of the global balance of powers,” she added.
On Monday, PetroSA officials said the company had sought legal advice before deciding to partner with the sanctioned Russian institution, downplaying the risk of being subjected to secondary sanctions if the deal goes through.
“These sanctions are not applicable to South Africa,” Sesakho Magadla, PetroSA’s acting chief operations officer, said at a media briefing.
Additionally, Presidency Minister Ntshavheni said that while South Africa wouldn’t be the first country to do business with Gazprombank and other Russian firms, “there have been exemptions from US sanctions.”
“India procures oil from Russia, the EU has ties with Russia, and even the US has ties with Russia. What Cabinet considered fundamental was the investment in the country and the benefits of lowering the fuel price,” the official stated.
The Mossel Bay plant, a 45,000 barrel-per-day (bpd) GTL facility, suspended production in 2020 due to depleted domestic offshore gas reserves, and has since been under maintenance. PetroSA has been seeking investment to restart operations at the plant following the closure of the country’s two largest refineries, Sapref and Enref, due to various accidents.