The South Sudanese Oil Trade

Whitney Gagnon Analysis Leave a Comment

The Republic of South Sudan has been experiencing growing pains since its independence in 2011. This attempt to solve Sudan’s internal issues through independence has instead resulted in a young state that has spent more than half its existence in a series of civil wars.  In addition to causing massive internal strife and internal displacement among civilian populations, these conflicts have contributed significantly to the burden of international refugees on the African continent. In spite of ongoing interventions from UN peacekeepers from the time of independence, there seems to be no fast or painless solution forthcoming; this year the Republic of South Sudan was listed as the world’s most vulnerable in 2017’s Fragile State Index.

The domestic unrest and violent conflicts spawn in large part from a severe shortage of the basics of living – the price of food alone has skyrocketed in recent years as a result of hyperinflation. In spite of efforts from the new government, South Sudan suffers the vulnerability of its location in the centre of the continent. Its landlocked status means that the export of its primary source of income –oil from reserves in the state’s north east– is at the mercy of its neighbours who allow the necessary transport across their territory to reach shipping ports. The existing infrastructure that had been used in the time before independence runs to ports located in Sudan– the use of which come with an extortive mark-up described by the Sudanese government as compensating for lost oil revenues with the reserves now located in the newly independent state. President Salva Kiir initially refused to meet the Sudanese economic demands regarding use of the pipelines, agreeing only recently to meet penalties associated with their use as domestic poverty in South Sudan reached new highs, reactivating the oil export industry within the state.

Although necessary to save the flailing economy, meeting Sudanese demands may not have been in the new state’s long-term interest. As Sudan is also engaged in severe civil conflict, including the ongoing genocide in Darfur, the security of pipelines is not guaranteed in the face of insurgent forces. It faces an additional international threat in the form of sanctions: although sanctions have recently been rolled back in regard to general Sudanese trade, the state is still limited in its international dealing as sanctions regarding the situation in Darfur remain intact.

Beyond this, even if South Sudan is able to export its oil safely as far as the port, access to the Indian Ocean is still limited by a dangerous bottleneck in sea lanes at the Strait of Bab el-Mandeb, a location currently peacefully occupied by the US, China and Saudi Arabia among other major world players. A better option for the young state may be to seek export through Ethiopia and the extensive port systems at Djibouti as part of its dealings with the IGAD (an economic area covering eight states in the Horn of Africa). Negotiations regarding pipelines running to Djibouti were entered into several years ago without producing any supporting infrastructure. It is now estimated that it would take three years and upwards of two billion dollars to begin the project today, making it a pipe-dream for a state whose unrest and fragility demands more immediate answers.

South Sudan is caught in a dangerous corner. The domestic unrest fuelling its needs to recommence oil exports and jump start the economy is the same reason that they are liable to be viewed as an unreliable trading partner by other IGAD states. Access to secure ports that are away from the dangers associated with Sudanese conflict and also bypass the critical vulnerability posed by the Strait of Bab el-Mandeb are at least three years away if an agreement could be reached today – an outcome that seems unlikely. For reasons of ongoing security threats, oil export through Sudan should be seen as only a stopgap measure.

The future of South Sudan’s best possible economic security is with exporting its oil through other IGAD states, moving directly into the Indian Ocean to avoid the role of bystander falling victim in any future international conflicts. In the interim, it must be hoped that the deal reached with the Sudanese government regarding use of existing pipelines will provide the young state with sufficient economic influx to create the stability necessary to embark on more ambitious international trade deals in the future.

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