July 11, 2012

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TSG IntelBrief: Perpetual Conflict in the Sudans

As of mid-July 2012, the story of a new country — and old disputes — continues. The secession of South Sudan in July 2011 delivered hard-won political freedom and the promise of economic prosperity after decades of stagnation and underdevelopment as the South took 75 percent of Sudan's oil riches when it split off from the North. But there is no oil pipeline in the South, and until one can be built, the capital of South Sudan, Juba, remains dependent on Khartoum's pipelines and refineries. The pipelines entitle Khartoum, the capital of Sudan, to a share of South Sudan's riches in the form of the "oil transit fees" levied on every barrel of exported Southern crude. But negotiations over the amount of these transit fees have consistently floundered: Khartoum has demanded over US $30 per barrel, while Juba has insisted on paying the international norm of less than a dollar. In January 2012, Khartoum seized some US $815 million of Southern crude, arguing that Juba's failure to pay transit fees since July 2011 entitled Sudan to claim payment "in kind." Juba retaliated by halting its oil production, and Khartoum escalated the conflict by closing the North/South border.

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Fighting Over Oil and The Economic Fallout

In Sudan, the loss of most oil income has produced a precipitous drop in the standard of living, with inflation hovering near 30 percent. A desperate new round of austerity measures, including tax increases and fuel subsidy cuts expected to send prices still higher, have sparked an unusually persistent wave of protests against President Omar al-Bashir's regime. Bashir has survived such protests before — student attempts to spark an "Arab Spring" in 2011 were rapidly suppressed — but the combination of high inflation, a shrinking economy, the cascade of rebellions in Darfur, the Nuba Mountains, and Blue Nile State, and genocide charges may be enough to finally bring him down. Even if he falls, however, the political opposition is in disarray and it is almost certain that he would be replaced by another, and probably even more militant, member of his National Congress Party (NCP), a scenario that would no doubt aggravate rather than resolve the conflict.

In the South, the scarcity of peace dividends has produced an increasingly frustrated public. Some have begun to wonder aloud if Juba has a plan for re-opening the border and, if so, when. Juba does have a US$ multi-billion dollar Chinese line of credit for constructing new pipelines to Djibouti and Kenya, but completion of those projects is still years into the future. For now, shutting down the oil pipeline has deprived the fledging regime of 98 percent of its domestic revenues.

So far, Juba has managed to squeak by on its existing foreign currency reserves, and has announced a set of austerity measures that will trim the salaries of government employees and (perhaps worryingly) the army. But the World Bank has warned that Juba could run out of foreign exchange reserves as early as this month — with dire consequences. Adding insult to injury, President Salva Kiir has announced that senior government officials have stolen US $4 billion dollars from the national coffers over the last seven years.  (And given that South Sudan collected $2 billion dollars in oil revenues in each of those years, the real amount is probably far greater.) A serious effort to combat such endemic levels of corruption is likely to consume President Kiir's energy for years, and South Sudan will remain bereft of basic government services in the meantime.

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Humanitarian Disaster

The humanitarian situation has also worsened. In the southern state of Jonglei, scarcity has caused a flare-up in an old cattle-raiding feud between the Lou Nuer and Murle ethnic groups that has left thousands dead and as many as 100,000 people displaced. In the northern states of South Kordofan and Blue Nile, the Sudanese Armed Forces (SAF) are accused of indiscriminate bombings and targeted ethnic killings that are eerily reminiscent of the Darfur genocide. More than 150,000 have fled and are languishing without access to humanitarian relief.

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Hope From Abroad?

A solution to the economic crises in Sudan and South Sudan is within reach in a classic "simple, but not easy" construct. An agreement on transit fees would be enough to get the oil flowing again and to reduce economic tensions between Juba and Khartoum. Efforts to make this happen abound: President Obama has urged both sides to compromise, the United Nations Security Council has unanimously threatened sanctions, and the African Union's Peace and Security Council has issued a seven-point Road Map for Peace. But the spate of international pressure has only worried Khartoum, which is disadvantaged in any externally-brokered talks, and to stiffen Juba's optimism — and the latest round of discussions in Addis Ababa broke up in early June without any visible sign of progress.

The U.S. and U.N. remain hopeful of a Chinese intervention, but have so far been unable to budge Beijing from the sidelines. Meanwhile, there is little expectation of assistance from the celebrity-led pressure groups that have propelled much of the international activism on Sudan. Having spent years extolling the virtues — real and imagined — of  Southern "freedom fighters," they are disinclined to speak out about the corruption and malfeasance in Juba or to pressure Southern leaders into negotiations with Khartoum, especially in light of the government-sponsored brutality playing out in Southern Kordofan and Blue Nile.

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This report was produced in collaboration with the Michael S. Ansari Africa Center at the Atlantic Council.

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