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Southern Sudan: oil boom to bust-up?

 Reuters 14 May 2019

(Originally published: 04/2010) With southern Sudan stumbling towards independence next year, the Chinese oil workers in Africa's biggest country are bracing themselves for trouble. Elections this month and a secession referendum in January were meant to secure a stable future for the south after 22 years of civil war and the loss of two million lives. Instead, age-old rivalries between the south's dozens of different tribes are resurfacing, and the future of Africa’s largest country looks uncertain. Ed Cropley takes a look at what Sudan’s impending independence means for the rest of the world, particularly the oil industry.  - By Ed Cropley

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TEREKEKA, Sudan - With southern Sudan stumbling towards independence next year, the Chinese oil workers in Africa's biggest country are bracing themselves for trouble. For southern villagers like Maria Jande, trouble is already here.

Dinka tribesmen briefly abducted Jande, her family and more than a dozen other women and children in a raid last month that destroyed crops and food stores and killed five men from her Mundari tribe.

It's a far cry from the hopes that sprung up in southern Sudan five years ago, when a peace deal with the Arab-dominated government in Khartoum in Sudan's north promised to end a generation of conflict.

Elections this month and a secession referendum in January were meant to secure a stable future for the south after 22 years of civil war and the loss of two million lives.

Instead, age-old rivalries between the south's dozens of different tribes are resurfacing.

"If we stay here, we'll die of hunger. There's no food," Jande said, standing beside a pot of rancid goat meat cooking beneath a mango tree in Terekeka, a tiny town 100 km (60 miles) north of southern Sudan's capital, Juba.

As she spoke, her five-year-old twins hid in the folds of her tattered brown skirt, which would be scant protection from the annual rains and malaria-carrying mosquitoes due in force within days.

A host of foreign governments including the United States, Kenya, Uganda and Britain backed Sudan's 2005 Comprehensive Peace Agreement (CPA) which gave the south autonomy, a 50-50 share of oil revenues from wells within its borders and a route to independence via referendum by January 2011.

Mutual distrust and vitriol between Khartoum and Juba in the run-up to the April 11-15 elections meant that the plebiscite was not assured. The south is almost sure to split and declare itself an independent state within six months following the result.

So the deeply impoverished region's outlook is far from clear.

In the worst-case scenario, the hostility between north and south that has driven Sudan since before its independence from Britain in 1956 will boil over once again, rekindling a civil war that would destabilise east Africa and halt oil output from the sub-Saharan region's third-biggest producer.

Or the south could negotiate - as the United States is hoping - a "civil divorce, not a civil war" with Khartoum, securing billions of dollars in oil revenues that it can use to drag itself out of its war-induced time-warp.

Under this view, a flood of foreign investment should ensue, developing hoped-for oil reserves across the region and giving birth to state-of-the-art farms and fisheries fed by the waters of the upper Nile and its tributaries.

In their more fanciful moments, southern ministers even talk of droves of foreign tourists flying in to witness wild animal migrations said to rival those in Kenya's Masai Mara.


ARMS FLOWS

History suggests optimists in southern Sudan, a region nearly as big as Texas and with a population estimated at anywhere between 8 and 13 million people, are more likely to be wrong than right. A return to war is not out of the question.

In the five years since the peace accord, the bulk of oil money accruing to the south - more than $2 billion a year - has gone on pay for civil servants and the Sudan People's Liberation Army (SPLA), the southern rebel movement that has morphed into its government.

But the SPLA, whose soldiers rescued Jande and her family from her Dinka captors, has also spent at least some of the cash re-arming, according to the Small Arms Survey, a global arms trade watchdog.

Citing satellite images and reports of arms shipments from Ukraine via Kenya, the Survey estimates the south bought more than 100 Soviet-era battle tanks, anti-aircraft guns, rocket launchers and 10,000 AK-47 assault rifles from 2007 to 2009.

Not only do such flows break an agreed weapons embargo, they also ensure that any conflict would have implications beyond southern Sudan's borders.

"The southern Sudanese arms acquisitions are rooted in civil war-era political alliances, with regional allies, including Ethiopia and Kenya, acting as conduits for arms supplies from their own stocks or acquired on the international market," the Survey said.

Alongside reported arms purchases by the north from China, Iran and Belarus, this has set nerves jangling at the Chinese, Indian and Malaysian oil firms running the south's oil fields, which all lie close to the unofficial border.

In the event of conflict, they would have little option but to halt production from a country that was China's fourth or fifth largest supplier of crude oil for much of 2009.

State-owned China National Petroleum Corporation (CNPC), the largest foreign player with a roughly 40 percent stake in Sudan's oil industry, is "hoping for the best but preparing for the worst", according to an industry source familiar with Chinese operations in Sudan.

"An independence vote for the south is likely to lead to clashes between the north and south, a worst-case scenario that we do not wish to see," said the source, speaking on condition of anonymity.

CNPC would have no option but to "halt production and evacuate our 2,000 people in Khartoum and the oil-fields," the source added.


WANING APPETITE FOR WAR

However, analysts say neither north nor south have much to gain from a resumption of hostilities: the disruption of oil exports would cut a cash lifeline that both governments need, now and in the foreseeable future.

"As much as oil has been a major source of conflict in the past, it also potentially represents the single greatest disincentive to renewed conflict if the parties can agree on wealth-sharing," said Zachary Vertin, a Sudan analyst for the International Crisis Group in Nairobi.

Southern oil accounts for the lion's share of Sudan's total output, although the precise proportion depends on the final demarcation of a north-south border in areas such as Abyei, which was too sensitive to be included in the 2005 pact.

However, more importantly for the south, all its oil goes by pipeline through the north to Port Sudan on the Red Sea. This means that if it wants to, Khartoum can cut off a revenue stream that accounts for 98 percent of Juba's budget.

In that event SPLA soldiers would quickly find themselves without pay, suggesting the south's generals would struggle to mobilise large numbers of troops.

For the north, the prospect of disrupted or no production is almost as alarming, given that oil currently accounts for 45 percent of Sudan's national budget.

As southern Presidential Affairs Minister Luka Biong Deng put it, both sides know what they stand to lose.

"Peace is our common objective because nobody will benefit from going back to war or seeing either party collapsing," he told Reuters.

The United States has broadly backed the south, mainly due to its dislike for Sudanese President Omar Hassan al-Bashir, wanted by the International Criminal Court for crimes against humanity allegedly committed in the western region of Darfur.

But analysts say Washington will be loathe to take sides in a fiendishly complex conflict in the heart of Africa, and is more likely to focus on avoiding a new north-south war and keeping an independent south in one piece and on its feet.

"I would guess that the preference for the U.S. government all along is the unity of Sudan," former U.S. ambassador to Ethiopia David Shinn told Reuters.

"But you have to make plans for a divided Sudan -- and then just hope that it doesn't divide into more than two parts."

Copyright 2010 Thomson Reuters. Click For Restrictions

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