Saturday, April 28, 2012

The Inter-Sudan War, Part 5

In Part 4 we began an overview of recent events in Sudan. We now go more into depth. In this post, we start by examining some aspects of China's concerns regarding the situation along the inter-Sudan Border. From Sudan tensions imperil China's investments, April 7, 2012, we have a report by Al Jazeera's Nazanine Moshiri:

Mentioned in the report is South Sudan's expulsion of Liu Yingcai, head of South Sudan's biggest oil company, the Chinese and Malaysian-owned Petrodar. Liu was accused of helping the government in Khartoum steal $815 million worth of oil; we examine excerpts of South Sudan expels Chinese oil firm boss from February 22, 2012:

South Sudan has stopped production after Sudan seized oil - Khartoum says this is because of unpaid transit fees.


Oil makes up 98% of Juba's budget - but its only export route is through its northern neighbour.

Before the shutdown, China was the biggest buyer of Sudanese oil, relying on it for nearly 5% of its needs.

It has good relations with the Khartoum government - and was a key player in trying to get the two sides to come to an agreement over the oil crisis.

In Part 4 we heard about this, and we heard, in an interview with South Sudan's Minister of Information Dr. Marial Benjamin, that Khartoum ("North" Sudan) was charging Juba (the Republic of South Sudan) exhorbitant transit fees, until Khartoum just started stealing the oil altogether - allegedly, nearly $1 billion worth. It was at this point that South Sudan cut off the flow of oil through the north.

This situation regarding oil was one of four causes identified by Professor Alex de Wall as combining to generate the current crisis.

From Alex de Waal: Currently, it’s war for North and South Sudan, April 24, 2012:

Economic Factors

Pre-secession oil revenues for North Sudan constituted 55 percent of its national budget. North Sudan has experienced a 40 percent drop in oil revenues since secession, a decrease in budget which would require mitigation either by austerity, international assistance or transitional financial assistance from the South. None of these three has taken place. In December, as a result of the dire economic situation in the North, the Khartoum government started taking oil that rightly belonged to the South. This prompted the South's oil shutdown – de Waal states that the South "didn't really do their sums" with regard to the financial implications of this this decision. At some point, in the near future, the South Sudanese government will simply run out of money. If the government has no money then quite rapidly the South may become ungovernable.

It is with the greatest of hesitation that I dispute the conclusions of Professor de Waal, who is very well-versed on the situation in Sudan.

However, I think that perhaps the South did "do their sums" - at first, they paid exhorbitant transit fees, as indicated by Dr. Benjamin, in order to keep the oil flowing and their own money coming in from the proceeds of its sale.

But, then, when Khartoum just started stealing the South's oil outright, Juba was in a position where, instead of getting an income at an exhorbitant fee, Juba was simply pumping oil and essentially giving it away to Khartoum which, in turn, was using the money not to build agricultural infrastructure, which the North desperately needs, but to prosecute a war against rebels which the North claimed were being supported by the South.

Why give something - oil - and get nothing in return? Worse, why give resources for free to a country which is essentially committing aggression against you, and which is run by internationally-indicted war criminals with a history of committing similar aggressions elsewhere? I think Juba did their sums, and came a conclusion: the loss of revenue for the South, which, as we have seen, is 98% of their income, is painful, but had already occurred. The South merely interdicted the theft and subsequent misuse of Juba's own resources to prosecute war against Juba.

Not only is this both a cause and a result of the ongoing hostilities, but this also ties back in to China. China buys 67% of Sudan's exported oil. From A Q&A on oil in Sudan, March 16, 2012:

Q.Who are currently the largest buyers of Sudanese/South Sudanese oil?

EIU: The major customers of Sudanese and South Sudanese oil is/will be China. In 2010, China acquired 67% of Sudan's oil exports, followed by Malaysia, Japan and India.

In 2010, Sudan produced 470,000 b/d, of which 100,000 b/d was used for domestic consumption, leaving about 370,000 b/d left for export. Of this latter total, about 67% was exported to China.

With Sudan now broken up, South Sudan now produces about 345,000 b/d and Sudan about 150,000 b/d. These ar estimates.

As we saw above, this accounts for 5% of China's oil needs - a volume that could be covered by increases in production by other suppliers. But, the economic impact for Khartoum and Juba is more significant. Skipping down:

Q.Does South Sudan have any other industry aside from oil, or are they wholly dependent on energy exports for their income?

EIU: South Sudan is virtually entirely dependent on oil exports for its national revenue, 98% in fact. Half of Sudan's government revenue and 90% of Sudan's export revenue is dependent on oil sales.

With most oil produced in the South, and with all Southern oil having to transit the North for export, and with both governments heavily reliant on oil revenues, it is not surprising that oil revenues top the list of disputed issues.

(Source for last two images.)

As I have explained in previous posts, International Criminal Court Prosecutor Luis Moreno-Ocampo has stated that (North) Sudan's Bashir invents conflict to create a better negotiating position.

Sudan's President Omar Hassan Ahmad al-Bashir

Given that the North is only heavily reliant on revenues from oil exports, but that the South is almost totally reliant on such revenues, Bashir may have figured he could provoke a fight over this matter, knowing that time is likely on his side - especially if international opinion is divided regarding the war, rather than being firmly against Khartoum.

And, that is exactly what has happened.

South Sudan's armed forces moved into disputed territory - Heglig - generally recognized by the world as belonging to the North, until such time as a settlement is negotiated. But, it is worth recalling South Sudan's Minister of Information Dr. Marial Benjamin's words in an interview, the audio of which was presented in Part 4: that the South's forces moved into Heglig in "hot pursuit" of forces from the North. Under pressure from the international community, President Kiir withdrew these troops, and this move has met with some dissatisfaction among leaders from the South.

I can't help but wonder if Bashir didn't provoke this deliberately, knowing he was in a better position to weather the economic storm that would result from shutting off the flow of the South's oil and heating up the war, and knowing that his opposite number, President Kiir, was perhaps a little more sensitive to the political fallout from any result or response than Bashir himself was?

Stay tuned for more.

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