South Sudan Asserts its Sovereignty Over its Economic Future

President of South Sudan Salva Kirr

Few outside the Juba government had expected it to start shutting down oil production on 22 January. Warnings from the Government of South Sudan had been widely seen as brinkmanship.

The National Congress Party (NCP), plus African Union, Chinese and Western mediators, had apparently forgotten the capacity for decisiveness of the Sudan People’s Liberation Movement (SPLM), which helped it to win Independence for the South. The talks should resume on 10 February but no one expects speedy agreement. This was clear when the AU representative, South African ex-President Thabo Mbeki, announced on 31 January that they would cover several outstanding issues from the 2005 Comprehensive Peace Agreement since ‘the interim transitional period ends at the end of March’. This broadening of the agenda is a tactical victory for the GOSS, which for the first time has the NCP literally over a barrel.

This is costing Khartoum dear but it also knows that Juba loses 98% of revenue, with no clear alternative. The NCP’s strength is military and it is beating the war drums. Second Vice-President El Haj Adam Yusuf said on 25 January that the army had surrounded SPLM-North rebels in Blue Nile and South Kordofan and ‘Juba is not far’. Until November, he was senior in Hassan Abdullah el Turabi’s Popular Congress Party and the NCP accused him of conspiracy in 2007. His threat has hardened Southern resolve and highlights the chasm between the two governments.

‘This is not about oil, it’s about politics!’ one senior Northern oppositionist told journalists. This goes even beyond the CPA’s ‘unfinished business’ to the heart of North-South relations on one hand and relations between the regime and the Sudanese people, North and South, on the other. ‘They [the NCP] have convinced themselves that the Independence of the South is just a formality,’ the oppositionist said. Khartoum has warned foreign journalists and rabidly anti-Southern propaganda has appeared even in liberal media, such as Al Ayyam.

This all suggests two broad scenarios: the talks focus on technical and financial issues and reach agreement, at least on oil; or they break down and South Sudan seeks new outlets while Sudan’s economy nosedives. Either way, a new Southern pipeline looks likely. The bigger unknown is whether the NCP will apply its theoretical military superiority.

Who will blink first?

It doesn’t look as if the GOSS will blink first and much now depends on how the NCP assesses the economic crisis and its political impact. It was demanding up to US$38 a barrel from Juba in transit fees (the international rate is $0.40-$1.00) and confiscated already loaded ships at Port Sudan. It did not seem to be seeking compromise. President Salva Kiir Mayardit accused it of ‘looting’ $815 mn. in Southern oil, some through a new, secret, spur pipeline, and of underreporting output for years. As the talks ended, Juba had offered $1.7 billion to Khartoum and transit fees of $0.63-0.69 a barrel. Khartoum demanded $5.4 bn. cash and $3 a barrel.

What has really upset Southerners is that Khartoum has dealt with Juba in the traditional way. President Omer Hassan Ahmed el Beshir called it ‘naive’ and Foreign Minister Ali Ahmed Kurti, ‘childish’. This is seen as a calculated insult to the new sovereignty for which Southerners have paid so dearly. ‘It’s OUR oil’, said one Southern analyst, ‘and it’s a separate country. They can’t demand things.’

Interested governments follow the oil crisis and the war in Blue Nile and Kordofan with anxiety and a steadfast public even-handedness which dismays Southerners and also Northerners, who regularly ask why Libyans rebelling against a brutal dictatorship get Western and Arab military support while their Sudanese counterparts receive only criticism.

On the oil issue, the West is privately more sympathetic to the South, says an SPLM source. However, this may not extend to bailing out a government which has stopped pumping approximately 315,000 barrels per day. ‘Resolution is imperative if the GOSS is to have the wherewithal to be a development partner for the international community,’ warned a senior British official this week.

Chinese puzzle

China, the biggest producer and purchaser of Sudanese oil, is also worried and dispatched the head of the Communist Party Central Committee’s International Department, Wang Jiarui, to Juba and Khartoum. ‘The shutdown raises the political instability of an already challenging operating environment, pushing Chinese and other Asian national oil companies [Malaysian and Indian] to reconsider the importance of the two Sudans in their expanding international portfolios,’ Luke Patey, co-editor of a new book, Sudan Looks East, said. China gets only 5-6% of its oil from the Sudans but fears sanctions on major supplier Iran.

The kidnapping of 25 Chinese workers in Egypt (now released) and the capture of 29 others by the SPLM-N during fighting with Sudan’s army in South Kordofan have triggered a public debate in China on workers’ protection, at least abroad. The 25 were building a road near Talodi (to facilitate gold mining by French interests, say Nubian sources). Beijing even deployed Vice-Foreign Minister Xie Hangsheng on 31 January to reprimand Sudanese Chargé Omer Eissa Ahmed. Meanwhile, though, China was trying to negotiate the workers’ safe passage with the SPLM-N, thereby opening relations with the opposition. The whole situation challenges Beijing’s huge new investment in unstable countries and its policy of ‘non-interference’. China analyst Daniel Large said: ‘It’s a very elastic policy – very hard to break.’ Beijing will not abandon Khartoum (it’s just promised a $200 million loan) or Juba. Its biggest decision may be whether to help build a Southern pipeline.

General Salva Kiir’s team knows that challenging Khartoum is the most popular move it can make. People came out on the streets nationwide to support the oil shutdown but there is also concern about what comes next. Hopes of health and education remain high.

This was no knee-jerk shutdown, say insiders, and the GOSS has long planned for the worst. Cabinet Affairs Minister Deng Alor Kuol spoke of a five-year cushion and other sources talk of a sovereign wealth fund banked in Kenya and Uganda. One key man in the Ethiopia talks has been Sayed Mohamed el Hassan el Khatib, an NCP trusty, ex-London diplomat and CPA negotiator. He also heads the NCP’s Centre for Strategic Studies: some rethinking may be required there as it seems Khartoum underestimated GOSS strategising. As both parties prepare for the next bout of talks, Juba faces the tough task of wresting substantive concessions from Khartoum’s veteran tacticians. There may be a messy compromise but that’s far from guaranteed.