Some of the thousands of children are seen demonstrating against homosexuality in Uganda's capital city Kampala, Friday, Jan. 22, 2010. The UN Special Rapporteur on health, Anand Grover, warned Friday that the Anti-Homosexuality Bill being considered by the Ugandan Parliament is "not only a violation of the fundamental human rights of Ugandans, but will also undermine efforts to achieve universal access to HIV prevention, treatment, care and support." Homosexuality is already criminalized through Uganda

Last week's passage into law of the controversial anti-gay bill in Uganda puts the country among an elite club of nations noteworthy for their backpedaling on human and civil rights. Kampala has experienced widespread condemnation for its action, and funding from the World Bank and two European governments has already been suspended. President Obama and the U.S. Congress must now decide whether to restrict aid to the country, but geopolitical considerations may ultimately determine the extent to which Kampala will be penalized by Washington.

As a host of a U.S. military presence and a major contributor to the African Union Mission in Somalia, Washington has long viewed Kampala as a strategic ally in Central and East Africa. Given Uganda's geographic proximity to a range of conflicts where Western interests are at stake -- such as the Central African Republic, Democratic Republic of the Congo, Somalia and South Sudan -- a sophisticated military partnership with Uganda serves several of Washington's strategic interests in the region. The $1 billion in aid that Washington has provided to Uganda since Obama took office underscores the value of this alliance from Washington's perspective.

Since major oil fields have been discovered in portions of Uganda in recent years, the country will likely remain under the West's radar for the foreseeable future. Moreover, as Libya and Iraq remain destabilized, Western energy firms will likely look to Uganda as a new location for business, particularly given that the Lord's Resistance Army (LRA) has been weakened in northern Uganda and constitutes less of a risk for foreign investors compared to several years ago.

The West's punishment of other African countries for human rights violations (such as Nigeria, Sudan and Zimbabwe) pushed these governments closer to China during the 20th century -- for that reason it is sensitive to the notion that any move to isolate Uganda in response to human rights violations could push President Museveni closer to China. If history serves as any guide, China will not issue any criticism of Uganda's anti-gay legislation. On the contrary, business between the two countries should continue as usual, if not grow. As Washington has been cautious about taking concrete moves to punish Uganda's government, the China factor is surely a consideration in the minds of U.S. policymakers.

In recent years, China's economic footprint in Uganda has rapidly expanded. In 2011, Uganda's trade with China overtook Uganda's trade with the United Kingdom, its former colonial ruler. Chinese-Ugandan bilateral trade increased 35 percent between 2012 and 2013, reaching $538 million last year. Last September, China's state-owned oil company won a $2 billion contract in Uganda to develop the Kingfisher oil field, which holds an estimated 635 million barrels of oil and will have an initial production capacity of 30,000 to 40,000 barrels of oil per day, according to Uganda's Ministry of Energy. In 2012, China's Ambassador to Uganda estimated that nearly 200 Uganda-based Chinese firms employ 30,000 Ugandan workers.

Since the 1990s, China's government has invested heavily in Uganda, mainly in the form of infrastructure, education/technical assistance, interest-free/soft loans and debt relief. In 2012, a ceremony was held for the 22-mile long Kampala-Entebbe Expressway, Uganda's first expressway, which links Uganda's capital to the country's international airport and is financed with $350 million in soft loans from China's Export Import Bank. Chinese engineers have played a crucial role in developing railways and hydroelectric dams across Uganda, providing the country with much needed funds and expertise. In 2007, China and Uganda signed a debt cancellation protocol forgiving Uganda for all debt to China from prior to 2005.

While China's aid comes with no strings attached, Western aid often requires that Kampala modify domestic policy in order to receive assistance. In a show of defiance against the West, a spokesperson for the Ugandan government stated that his country "can't force the West to give it their money, and they shouldn't force homosexuality on Uganda." He specifically referred to the World Bank's decision to withhold aid as a "decadence trap." The reality, however, is that as one of the world's poorest countries, Uganda remains dependent on foreign aid to finance 20 percent of its annual budget. Speculation that Western nations would withhold aid has already shaken the Ugandan economy, but Mr. Museveni was well aware of the political and economic risks associated with enacting the legislation.

Across Africa, China's "soft-power" appears to have largely benefited from Beijing's tendency toward non-interventionist foreign policy. Whereas Western outrage over the anti-gay bill was dismissed by officials in Kampala as "arrogant" "social imperialism," China's neutral stance toward such domestic affairs is interpreted by Museveni and other African leaders as respect for African states' sovereignty. This, combined with China's growing economic reach in Africa and globally, implies that Uganda is no longer solely allied with the West. Although most of Uganda's aid continues to come from the West, a pivot toward China appears to be taking place.

For now, Uganda's government remains defiant of Western governments and the international human rights organizations that pleaded with Museveni to reject the law. There is no indication that any pressure from the West will prompt Kampala to rescind the legislation. The truth is that the anti-gay law received widespread support from a society that maintains ultra-conservative and intolerant views on homosexuality. If the White House determines that reducing foreign aid to Uganda will do nothing to improve the plight of Uganda's oppressed gay community, but will only serve to push Uganda closer to China while risking the loss of a strategic military partner, there is good reason to believe that the law will remain on the books and American taxpayer dollars will continue to flow into Kampala. Museveni may very well have his cake and eat it too.

--

Daniel Wagner is CEO of Country Risk Solutions, Senior Advisor with Gnarus Advisors, and author of the book "Managing Country Risk". Giorgio Cafiero is a research analyst with CRS based in Washington.