Overview and Assessment

   For the moment, Jonas Savimbi and his UNITA forces are doing very well in the renewed Angola fighting.  The first round has clearly gone to UNITA.  The government, playing on his past ties to South Africa and the CIA, has tried to paint his progress as the product of foreign connections. In fact, most of Savimbi's weapons were stockpiled or captured before this new round of fighting, and, to the contrary, it is the government with its oil money that is purchasing arms abroad.

   UNITA forces now dominate roughly 70% of Angola's land and about 40% of the population -- a better position than it ever managed to hold during the 1975-1991 war.  However, long-tern prospects appear to favor the government, which slowly is building its troop strength back to the levels it had prior to the demobilization process that followed the 1991 peace agreement.  In any event, the war is unlikely to be won on the battlefield.  That means that, sooner or later, diplomacy will have to end the fighting.  Diplomacy is not, however, working very well at the moment -- UN and U.S. efforts to broker a cease fire have gone nowhere.

   On 28 March, UNITA emerged from a four-day meeting with U.S. Deputy Assistant Secretary of State for African Affairs Jeffrey Davidow saying it was prepared to meet the government on 15 April to talk peace.  However, the following day the government rejected the terms of UNITA's proposal, which included the establishment of a transitional government of national unity and some form of regional autonomy.

   The U.S. has been acutely embarrassed by the actions of its former client, Jonas Savimbi, who took up arms after loosing a fair election for president last September.  After nearly two decades of ingratiating himself in the West as Africa's foremost freedom-fighting, anti-communist democrat, he failed the most basic test of democracy -- willingness to accept defeat at the polls.  In hindsight, the widespread expectation that Savimbi would win the September 1992 election played havoc with lots of diplomatic calculations.

   The State Department is moving toward a policy of recognizing the MPLA government, but before it does, it wants to use whatever leverage it has to explore with both sides a framework for a cease-fire and a new round of elections.  It has warned Savimbi it will recognize the MPLA government if he does not return to the negotiating table.

The Military Situation

   UNITA appears to be trying to control a front across mid-Angola, which could mean eventual attacks on the government-held Atlantic ports of Lobito and Benguela.  The government's capture of Caxito is important to its plan to drive rebel forces from the country's oil-rich northern provinces, but it must be tempered with the fact that UNITA is weak in the north, and had withdrawn many of its troops weeks ago to fight for Huambo.  The rebel movement now appears intent on consolidating its position in the vast southern and central provinces after capturing the strategic town of Huambo on 6 March.

   The rebels are attacking the city of Cuito, 90 miles east of Huambo, and the southern city of Menonque, 170 miles southeast of Huambo.  UNITA also continued to hold the strategic town of Cubal, halfway between Huambo and Benguela.

   Although the government ended two-months of UNITA occupation when it seized Soyo in the north, it failed to secure the surrounding area.  Now, fierce fighting has resumed in the oil-rich northern provinces, including UNITA attacks on oil installations in Soyo itself.  Harsh and virtually uninterrupted clashes have been going on for days, with 153 government soldiers and five white mercenaries killed and so many injured that hospitals were filled beyond capacity.

   In the latest round of fighting around Soyo, UNITA captured several oil workers, including two foreigners, and killed a Briton and South African hired to protect the oil installations.  The two were working for a group called "Executive Outcomes," which was hired by a British oil company in January to provide protection for oil assets in Angola.  Soyo's oil installations remain intact, contrary to many rumors that they were in flames.

   Intense combat continues around Huambo, hampering the delivery of relief supplies.  In the two weeks since Huambo fell, the World Food Program and other relief agencies have been unable to negotiate agreements with the government and UNITA to enter the city to attend to the dead, wounded, diseased and hungry.

   While UNITA presses the offensive in the central highlands, the government is regaining ground in northwestern Angola, and has recaptured Caxito and another town this month.  A third, Ndalatando, capital of Kwanza North province, is expected to fall shortly to the army.  UNITA appears to be offering little resistance to determined government efforts to recapture towns it holds in the north, and is withdrawing toward its traditional strongholds in the interior.  The rebels may be returning to the guerrilla tactic of controlling roads and rural areas while harassing government-held cities.

   The situation in the oil-rich Angolan enclave of Cabinda is another story.  The separatist guerrilla movement FLEC (Front for the Liberation of the Enclave of Cabinda) has been fighting a low-level guerrilla war for the independence of this former Portuguese colony for the past 30 years, and FLEC's rival factions now control much of Cabinda's interior.  However, the government controls Cabinda City and Cabinda's offshore oil industry, which both FLEC and UNITA have refrained from attacking.  Cabinda Gulf Oil Company, which is owned by Chevron, produces 315,000 bpd from offshore wells -- 60% of Angola's entire output.

   Mercenaries are being used in the fighting by both sides.  Fourteen former South African soldiers are being held in isolation in northern Angola after refusing to join government operations against UNITA.  The men were originally hired by Ranger Oil and SONANGOL on six-month contracts to protect oil installations.  Another seven "security consultants" hired in South Africa to guard Angolan oil installations have been wounded and are in hospital.  A former member of Britain's elite Special Air Service (SAS) had also been instrumental in recruiting security guards through a South African company on behalf of British and other oil interests.  Several were wounded in the fighting in Soyo.  Angola was believed to be seeking recruits from South Africa's 32nd Regiment, an Angolan force formed in the 1970's to fight the Luanda government.

The Oil Sector

   Throughout all of the fighting, the strange thing is that Angola still has money.  The one sector that has not collapsed is oil, and production last year exceeded 500,000 bpd, quadruple the output of a decade earlier.  There is also lots more waiting to be discovered in the Atlantic waters just offshore, and because production comes from the ocean, it has been largely unaffected by the fighting.  Oil accounts for more than 90% of the government export revenue.

   The government may control the oil, but UNITA controls the second largest source of money:  diamonds.  UNITA controls the major diamond fields in Luanda Norte Province, and it is said to be using diamonds to finance the purchase of new weapons.

   Chevron said oil production by its Cabinda Gulf Oil Company unit has been unaffected by the fighting in the rest of the country.

   Elf Aquitaine said its production in Angola had suffered little from the renewed fighting, and that it experienced no production losses during UNITA's two-month occupation of Soyo.

   Belgium's Petrofina was forced to close down 25,000 bpd of onshore production, and Texaco had to reduce its offshore production by 10,000 bpd due to the fighting in and around Soyo.

   Soyo's oil installations suffered only slight damage during the two battles for the town.

   SONANGOL predicts that Angola's oil output will rise to more than 600,000 bpd next year as recent offshore discoveries in Cabinda's Block two and three come on stream.  The company signed its first exploration contracts for deep water Blocks 16 and 17 off the coast of Cabinda with Shell and Elf respectively last December.  It is currently negotiating with a consortium led by the Chevron subsidiary Cabinda Gulf Oil Company for Block 14.  Negotiations will be completed by mid-year.  SONANGOL was also defining a consortium to explore deep water Block 15 and expects negotiations to begin very soon.  SONANGOL is also currently negotiating with a consortium led by Texaco for exploration in Block nine, near Sumbe.

   Angola has allocated exploration contracts in all its northern shallow water blocks, where oil companies generally see the greatest potential.  But it is continuing to offer exploration contracts for more southerly areas as well.