Image Source: APA Corporation
Suriname’s prospects of becoming a petrostate improved considerably in September 2023, when France’s TotalEnergies announced that it is commencing studies for developing a USD 9 billion oil and gas project for the Caribbean country’s offshore fields. This project is expected to revitalize the country’s deeply challenged economy and radically reduce poverty. Yet Suriname, like many of its neighbors in the Caribbean and Latin America, faces climate change challenges and is seeking to transition from a dependence on fossil fuels to renewables. Suriname’s policymakers are on a narrow path, hoping to use oil exports to return the country to strong economic expansion and finance the transition to renewable energy and develop greater sustainability. This puts the country at a major crossroads by embracing seemingly contradictory goals and raising its profile as an energy producer in a more tumultuous geopolitical system.
Since 2019, Suriname has been locked in a prolonged structural crisis, a situation compounded by official corruption—especially during the 2010-2020 era under President Desi Bouterse. The current government of President Chan Santokhi, who came to office in 2020, inherited an economy hit by COVID-19, rising inflation, a serious erosion of faith in government institutions, and an empty treasury, which quickly resulted in defaults on the national debt and an unpopular turn to the International Monetary Fund (IMF). In turn, the debt defaults morphed into lengthy restructurings with the country’s creditors and loss of access to international credit markets.
The Santokhi government arrived with high hopes for the economy and better governance. Despite efforts to tackle the country’s problems, progress has been slow, and corruption, albeit reduced, continues. Public dissatisfaction with the lack of visible progress erupted in demonstrations and riots in February 2023.
It is against this backdrop that the Surinamese look at the potential for oil wealth. Four factors are influencing the country’s thinking. First, Suriname’s neighbor Guyana looms large: it is another Caribbean country with a small population, similar colonial economic history of commodity export dependence, and a fragile democratic political system. The major takeaway from Suriname’s neighbor is that oil and natural gas are propelling Guyana, once one of the Western Hemisphere’s poorest countries, into one of the world’s fastest growing economies. The IMF expects Guyana’s real GDP growth in 2023 will be 38.4 percent, following an eye-popping 62.3 percent in 2022.
Guyana is radically changing as billions of petrodollars pour into the country and are being used to upgrade everything from education and housing to transportation and electric power infrastructure. To be certain, Guyana’s transition into a petrostate is hardly perfect amid claims of corruption and poor distribution of wealth, but the fast growth rates have a strong allure.
The second factor is the role played by large multinational energy companies in developing fossil fuel assets. In Guyana, ExxonMobil has been the main engine of growth in this sector, pushing offshore exploration as the major initial risk taker. Other companies playing a major role include Hess and the China National Overseas Oil Company (CNOOC).
In Suriname, TotalEnergies has emerged as the main agent of change, followed by the U.S. firm APA (also known as Apache Corporation). The French and U.S. companies offer both expertise and capital. Although Suriname has its own state-owned oil company Staatsolie and wants to advance more cautiously, the involvement of larger multination firms will bring faster results. Indeed, TotalEnergies and APA have already spent USD 1.3 billion on exploration. Now, TotalEnergies is signaling that it intends to spend an additional USD 9 billion to bring production online in Block 58—an offshore oil area for energy production and exploration—with the first production target in 2028.
For Suriname, TotalEnergies’ investment is a potential economic gamechanger. Considering the number of dysfunctional petrostates in the world and Guyana’s efforts to mark a prudent economic development path, Suriname is aware of the downside risks. In September 2023, Staatsolie’s CEO Annand Jagesar stated: “We have reached a historic moment in our country. The country could earn between USD 16 billion and USD 26 billion and with good policy there can no longer be poverty in Suriname,” adding that it needed to make certain that oil wealth would be re-invested to propel the non-oil sector, instead of artificially expanding the economy, as has occurred in Nigeria and Venezuela.
The third factor is climate change. Although Suriname’s contribution to global warming is relatively small due to its small size, underdeveloped industry, and large forest cover that functions as a net carbon sink, the country is still vulnerable to the effects of climate change. Suriname has been hit by salination of fresh water sources along the coast, intensifying floods, and a significant increase in heat. Moreover, illicit gold mining and logging operations in the interior threaten the country’s forests, which cover around 93 percent of its territory. The changing climate has resulted in damage to homes and businesses (flooding being a major factor) and has seen schools closed at noon to avoid the excessive heat.
To contend with this challenge, Suriname needs to improve climate change measurement and better patrol the country’s sizable interior, two activities that require financing. What this means for the country is using new technology and methods to gauge climate change: seawater encroachment on freshwater sources, flood levels, temperature changes, rain levels, and impact of climate change on animal habits as well as the deforestation levels, mercury levels in rivers and Indigenous people, and numbers of fish offshore. While Suriname is seeking to be the first country to sell carbon credits under a new Paris Agreement scheme, oil money would certainly be in greater abundance once it flows, something that no doubt was part of the government’s internal discussions.
The last factor is geopolitics. Suriname is likely to emerge as a significant oil exporter like Guyana, which, in the first half of 2023, exported 63 percent of its crude to Europe, who is seeking to shift away from its dependence on Russian oil and gas. Suriname will be producing the same sweet crude, which potentially gives it preference over some of the heavy crudes like that of Venezuela. If Suriname maintains its political stability, it can have a role to play in providing oil to European nations.
Another geopolitical factor is that Suriname’s importance has grown due to the New Cold War between China and the United States as well the revitalization of the Global South. Suriname has a voice and a vote in many international forums, including the United Nations, the Organization of American States, and the Small Island Developing States (SIDS), where Beijing and Washington compete with different visions of the global order. The U.S. has been active in promoting a green agenda with Suriname through the U.S.-Caribbean Partnership to Address the Climate Crisis (PACC 2030), as well as support for better governance, and providing a modest degree of healthcare and educational assistance.
China has also been active in Suriname, working on infrastructure projects such as Huawei’s construction of a fiber optic cable linking Suriname to Guyana and Trinidad and Tobago and exploiting its natural resources. At the same time, China has a voice in Suriname’s affairs as it is one of the major creditor countries, having been a ready lender to the center-left Bouterse government. While Suriname’s other creditors agreed to debt reschedulings over the past three years, China has yet to sign off on one. China’s state-owned banks hold USD 545 million in Surinamese debt, equal to around 17 percent of the total. Suriname is also a member of the Belt and Road Initiative (BRI), China’s ambitious project to link global trade, investment, and infrastructure under Beijing’s sway.
Like many nations in the Global South, Suriname is concerned about getting sucked into great power rivalries, such as the New Cold War, the Russia-Ukraine War, and the Israel-Palestine conflict. As the New Cold War intensifies it is likely that closer alignment with the Global South will be more attractive to Suriname, though the benefits in joining the call for such things as de-dollarization (a favorite agenda among BRICS nations) must be carefully weighed according to whom the country sells its oil.
Suriname’s road ahead is complicated. The country has yet to move out of the economic doldrums despite progress on economic reforms. Although the IMF expects to see real GDP growth at 2.1 percent this year and at 3 percent in 2024, inflation is expected to be 53.3 percent and 40 percent for the same two years. Ongoing high inflation is eating into household incomes and feeding public discontent. TotalEnergies’ intention to inject USD 9 billion into developing Suriname’s oil industry is important, but now comes the hard part: getting to the point of exporting the oil, deciding how to spend the revenues, and how to balance financing needs with climate change concerns. The Santokhi government needs to thread the needle, which will require considerable adroitness, an ability to communicate changes as they come, and the development of greater transparency in state financial matters. Suriname will also require support from its friends—backing to which the U.S. should be committed, especially considering the Caribbean’s geopolitical importance in unsettled times.
Scott B. MacDonald is Chief Economist at Smith’s Research & Gradings, Research Fellow at Global Americans, and Founding Member of the Caribbean Policy Consortium. His latest book, The New Cold War, China and the Caribbean, was recently published by Palgrave Macmillan.
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