Monday, 12 December 2011

Revealed: Why the frequent spats among the Sudans?


Omar El-Bashir: Sudanese President

 Tension between South Sudan and the Northern Sudan is unlikely to be resolved anytime soon, South Sudanese government sources say. There may be temporary truces, but the tensions will remain and could sometimes explode into full scale military combats, said the source.

The bone of contention is the $20 billion a - year-oil wealth. Before South Sudan seceded from the then Republic of Sudan in July this year, the country was producing some 0.5 million barrels of crude every day. That earned the country an estimated US$ 54 million per day at the price of US$108 per barrel or $1.62 billion a month. Shared equally between the North and the South that meant a whopping $810 million in its coffers a month or $9.72 billion a year. Before the 2005 CPA, Khartoum used to pocket the whole lot, the equivalent of US$19.44 billion at current prices.
Hugging or Back stabbing: with Salva Kiir
President of South Sudan

The secession of South Sudan, which controls 75 per cent of the crude output, changed that equation. It meant that North Sudan had to make do with 125,000 barrels of crude. This is just $13.5 million a day or $405 million a month, an equivalent of US$4.86 billion a year.  South Sudan on the other hand pockets the rest, that is US$1.215 billion a month or $14.58 billion a year.

 Sudan, that is Khartoum, is in a severe economic crisis. The sharp fall in oil revenues has resulted in a sharp decline in Forex reserves in Khartoum. Sources say that Khartoum’s import Bill is US$2.5 billion a month. Previously, oil revenue could finance up to 35 per cent of her imports. That figure has now been reduced to 16.2 per cent. This resulted in the weakening of the Sudanese currency, the Pound, and the resulting increase in domestic inflation that sparked riots in Khartoum in September. Consequently, to build a forex reserves, Khartoum has increased the exports of gold, reported Bloomberg news service on December 6, 2011. Even then, there are fears that soon El-Bashir could face kind of unrest that toppled presidents in Tunisia, Egypt, and Libya this year.
Not taking Chances: South Sudan Army guard a Refinery
 Starved of forex and with no significant oil revenue of its own, Khartoum hiked the crude transportation fee for Juba. Khartoum, our sources say, charged US$50 per barrel. Juba objected since the standard transportation fee is far less. Nigeria for instance charges her landlocked neighbour, Gambia US$1.00 per barrel. To charge US$50 per barrel was extortionist and a ploy to continue sharing of oil revenue through the back door. Juba offered to negotiate the transportation fee around one dollar per barrel meaning that South Sudan is ready to pay $375,000 per day or US$135 million a year as transportation fee. Hence the on-going dispute over fees.

To make matters worse for Khartoum, the oil Pipeline’s minimum capacity is 200,000 barrels a day, the source said. This means that Khartoum cannot even export her own output without support from her neighbour. What’s the point here? That Khartoum is at the mercy of Juba now and in the future. That is why the North is aggressively pushing south in the hopes of finding some more oil deposits or even acquiring some by force, our source said. It also using this aggression in the South to divert attention from the storm building at home, said the source.

This is where China comes in. Being a huge buyer of the Sudanese Oil, China is aware that if the South turned off the tap, the North will not export her crude regularly.  Although quite civil on the surface, China is said to be using the Carrot and stick diplomacy to get especially the North to relent.

It is considering building a new refinery in the South thus completely eliminating her dependency on the North. Should this come to pass, the North’s Pipeline will have been rendered worthless since it cannot transport less than 200,000 barrels a day.

Khartoum aware of this as The South is considering building a pipeline through Kenya into the Port of Lamu. Kenya is looking for investors to sink some US$8 billion  into the development of the port in Lamu together with the construction of a Road and a railway line linking Kenya and South Sudan. That, say sources, is the reason why Khartoum is still clinging to some parts of the South especially Abyei, since there are suspected oil deposits.

 Given the economic stakes, it seems that a truce, if any, will be temporary and that the former components of the Sudan will quarrel frequently over who’s stealing from who. Whether these spats will develop into gunfights remains to be seen.


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