There was no doubt about the firm handshake, but the smile looked a bit forced. The date was 17 November 2011, the place Luanda. Pedro Passos Coelho, the Portuguese premier, had just completed talks with the president of Angola, José Eduardo dos Santos, sealing an agreement that was both a boon for Portugal and deeply humiliating.

Six months earlier, Portugal, verging on bankruptcy, received a €78bn ($100bn) bailout from the European Union and the International Monetary Fund. In exchange Lisbon agreed to radical austerity measures, leaving the population poorer and sapping the welfare state. In a curious reversal of fortunes, the former colonial power was in poor shape, but its ex-colony, finally at peace, was awash with oil dollars.

Angola was a Portuguese colony for more than 400 years. It gained its independence in 1975 after a long struggle, but a devastating civil war ensued, only ending in 2002. Dos Santos has been in power since 1979 and the country now enjoys growth rates of between 5% and 15%. Portugal, heavily in debt and struggling to climb out of recession, finally exited its bailout last month.

"Maybe Angola will colonise us now," says Vasco Lourenço, the head of Associação 25 de Abril, an organisation that is trying to preserve the spirit of the 1974 revolution. Forty years ago he was one of the young army officers who took up arms to end the Salazar dictatorship and colonial wars.

The conflict has moved to another front, all about the economy, and Angola seems to have gained the upper hand. "Angola is looking for recognition and makes it very clear where the money is, sometimes to the point of humiliation," says French historian Yves Léonard. In February, when the cash-strapped government in Lisbon raised the possibility of selling 85 Miró paintings, an Angolan millionaire, Rui Costa Reis, offered to buy them. Well-off Angolan families are now the only people who can afford to shop on the capital's upmarket Avenida da Liberdade. They are investing in luxury apartments at Cascais, a fashionable seaside resort, and buying up companies hastily privatised by the authorities. They – and the Chinese – are the prime beneficiaries of the "golden visas" that the government has promised to anyone investing €500,000 ($650,000) in the country.

In a detailed survey, O Poder Angolano em Portugal (Angolan power in Portugal), Ceslo Filipe, the deputy head of business magazine Jornal de Negócios, has charted the extent of Angolan assets in Portugal. According to his calculations Angola has invested between €10bn and €15bn, with a wide range of interests: in the media (Impresa), energy (Galp), banking (Banco Comercial Português, Banco Português de Investimento), building and agrifood. Dos Santos and his entourage have played a leading role in these investments, according to Filipe. Meanwhile, the president's son, José Filomeno de Sousa dos Santos, now heads Fundo Soberano de Angola, controlling assets worth about $15bn.

A homeless man in Lisbon. Portugal agreed to radical austerity measures, leaving the population poorer and sapping the welfare state. Photograph: Rafael Marchante/Reuters/Corbis

These investments do not always make financial good sense, according to Filipe. He has doubts about the Portuguese press, for example, which is struggling. But for Angolans this is familiar territory and it represents a form of revenge too. Investing in the media and banking brings Luanda greater influence. The Portuguese are unhappy about this situation, even bitter at times. Many wonder whether the papers will still dare criticise Angola.

Portugal is locked in a hypocritical silence, says Pedro Rosa Mendes, a former journalist turned writer. It is hard to disregard the fact that Lisbon welcomes with open arms funds from a country with a shaky record on human rights. "Angola is one of the world's most corrupt countries," says João Paulo Batalha of Transparency International. Last year it put Angola in 153rd position, out of 177, for its lack of transparency. But Angolan money is a boon for the Portuguese economy, in desperate need of liquidity. "The crisis has created a climate of fear," Batalha adds, noting that Portugal is by no means the only European country to turn a blind eye when accepting funds of doubtful origin.

"Portugal is in a tricky situation. It needs Angolan money and must also watch out for Portuguese residents in Angola," Filipe explains. About 100,000 Portuguese nationals currently live in the former colony. Much as with Brazil in the past, many young Portuguese, dogged by unemployment at home, see their future in Angola.

The country's predicament does seem to warrant political pragmatism. "Angolans have purchased a great deal, particularly the media and newspapers; but so have the Chinese. Should we have misgivings? We had to sell and no one in Europe wanted to buy," says Eurico Dias, the national secretary of the Socialist party. "Our two countries are partners," says Miguel Frasquilho, deputy leader of the centre-right Social Democratic party in the Portuguese parliament.

Some would say the word "partner" is a bit feeble for the links between the two countries. Léonard asserts that a special relationship has developed out of "Portugal's extraordinary capacity for mixing and cross-breeding". There are certainly few people who do not have a friend or relation somewhere in Luanda, Cabinda or Benguela. The oil industry in Angola is dominated by US, British or French companies, but many Portuguese work in construction and public works. The respective elites are on good terms too. Coelho spent the early years of his life in Angola and all the way through the civil war prosperous young Angolans studied in Lisbon, Porto or Coimbra. One way or another, there is little likelihood the two countries will go their separate ways just yet.

This article appeared in Guardian Weekly, which incorporates material from Le Monde