The military-backed government of Guinea, one of the poorest states in West Africa, is negotiating with a Chinese fund to bring in billions of dollars of financing for infrastructure and minerals projects – and to prospect for oil.

Talks could be concluded by the end of the year, according to Mohamed Thiam, the country's minister of mines, potentially pitching Chinese interests directly against those of the west at a time of growing competition for African resources.

Human rights groups and United Nations agencies say Guinean soldiers were involved last month in a massacre of opposition demonstrators, in which women were raped openly in the streets and more than 150 people died – prompting renewed international pressure for the junta to relinquish power to elected civilians.

Bernard Kouchner, French foreign minister, has called for international intervention and the African Union has threatened sanctions if Captain Moussa Dadis Camara – who seized power in December after the death of long-term dictator Lansana Conte – insists on standing in January elections.

Deals of the size envisaged – as much as $7bn, according to Mr Thiam – would potentially throw the regime a lifeline, raising fresh questions about the willingness of Chinese groups to prop up rogue African governments.

Guinea's ability to normalise relations with multilateral and western donors would also be at stake due to the extent of the financing.

The country has the world's biggest deposits of bauxite, as well as gold, diamond, uranium and iron ore – resources that enabled Mr Conte to survive periods of global isolation.

Now there is also the prospect of commercially recoverable quantities of oil. A consortium struck oil offshore in neighbouring Sierra Leone last month, strengthening evidence of a new series of fields from Ghana and Ivory Coast to Guinea.

Mr Thiam said the Guinean government, the Hong Kong-based China International Fund and Sonangol, the state oil company in Angola, had signed a memorandum of understanding for an oil prospecting deal.

“We would use both the funding and expertise of Sonangol and the CIF,” said Mr Thiam. The Sierra Leone find “puts us smack in the middle of very hot activity right now”.

A separate joint venture with the Chinese would see billions poured into mines and infrastructure projects.

CIF, which, like Sonangol, did not respond to requests for comment, is best known for its activities in Angola, where it functions as a link between Sonangol and Sinopec, the state-owned Chinese oil group, and has provided multi-billion dollar loans to the government.