Sudan, South Sudan, and the Oil Revenues Controversy: Khartoum’s Obstructionism Threatens War

Discord over oil revenues could spark a renewed conflict between the two Sudans.

There has been much discussion about the intensifying dispute between Khartoum and Juba over how much in transit fees the Republic of South Sudan (RSS) should pay the northern regime in order to transport its oil to Port Sudan on the Red Sea. This has all been brought into the sharpest possible focus with the January 20 decision by the government of South Sudan to halt shipments to northern Sudan and begin constructing an alternate pipeline route to the Kenyan coast. This should not, however, be viewed as a bad decision that mirrors the Northern capital of Khartoum’s “equally bad” decision to begin a massive sequestration of South Sudanese oil and oil revenues, as some would have it. Alex de Waal, an advisor for the almost inexplicably ineffective African Union mediating team, writes tendentiously:

“When Sudan was still one country, 50% of the revenue from southern oil went to the central treasury, comprising 40% of its budget. After July 9, Khartoum received nothing – not even a transit fee.” (New York Times, January 24, 2012)

What de Waal does not mention here is the expressed, indeed eager willingness of the leadership in South Sudan to arrive at some reasonable agreement on transit fees. But instead of negotiating such a fee, Khartoum has proposed a fee of $36 per barrel, roughly a third the cost of a barrel of Sudanese crude oil. There are only partially relevant precedents for such fees, although Khartoum’s proposal is indeed preposterously out of line with those we do have. For example, Ukraine receives from Russia $7.80 to $9.50 per ton of oil transported through its territory by means of the immense Druzhba pipeline (there are approximately seven barrels in a ton of oil, so the price per barrel in transit fees would be $1.10 – $1.36). In 2009, Cameroon was negotiating an increase in the transit fee for oil from Chad passing through its territory from $0.41 to $1.00 per barrel. Moreover, de Waal’s implicit suggestion that an independent South Sudan should be obliged to replace 40% of Khartoum’s budget revenues is absurd – all the more so since the budget gap is largely a function of profligate military and security expenditures, amounting to roughly half the real budget.  Much of this military force and equipment continues to be directed against the South, as well as the border regions of South Kordofan, Blue Nile, and Darfur.

The South did make an offer of some $5.4bn dollars to assist in Khartoum’s transition from dependence on Southern oil revenues, a figure judged reasonable by economists of the International Monetary Fund (IMF) and the AU.

But instead of taking the offer, Khartoum is demanding $15bn. This is not an economic calculation, but rather a transparent grab, based on nothing but greed and a desire to push negotiations to the brink.  Like the $36 per barrel transit fee, this is simply not a good faith negotiating starting point.  Rather, it is a deliberate obstructionism.

With the sequestration of oil and oil revenues – in an amount that now approaches $1bn  – Khartoum has effectively compelled South Sudan to conclude that the regime has no intention of arriving at a reasonable resolution of these issues. The regime clearly felt that the Southern Juba had no choice except to capitulate. The decision to build to the south, announced and vigorously defended by President Salva Kiir, demonstrates that this calculation by Khartoum was a serious error – if, in fact, Khartoum was simply playing a kind of negotiating brinksmanship.

But the regime’s actions have a larger context. One key part of it is the report from the UN High Commission for Refugees, which states that Khartoum’s military aircraft have again attacked Sudanese civilians in a refugee encampment inside South Sudan’s Upper Nile State, very close to the previous bombing of (New) Guffa on November 8, 2011. This is not new. Khartoum has bombed what is now the sovereign territory South Sudan repeatedly over the past 15 months – in Unity State, Upper Nile state, Western Bahr el Ghazal, and Northern Bahr el Ghazal.

Why these aerial attacks on civilians and humanitarians matter – beyond their brutal human destruction and displacement – is that they demonstrate, yet again, Khartoum’s continuous and flagrant violations of signed agreements. This is the Comprehensive Peace Agreement in this instance, which guaranteed the South the right of self-determination. This self-determination exercise has taken its final form in the creation of the Republic of South Sudan. It is a sovereign nation whose territory cannot be bombed without violating Khartoum’s commitment to uphold the outcome of the Southern self-determination referendum and international law.

All this poses an inescapable question in the mind of Southerners: why should we trust any agreement – whether on transit fees or some other future contractual arrangement – with a regime that, without hesitation, bombs our people on our land? The fate of Abyei – seized militarily by Khartoum on May 21, 2011 – also weighs heavily in the calculations of the Southern leadership. Here again, in conspicuous violation of the Abyei Protocol of the CPA and the decision of the Permanent Court of Arbitration (PCA), Khartoum first denied the promised self-determination for the “residents of Abyei” as that region is defined geographically by the PCA. Then – in the wake of a silent military coup that secured a firm grip on political power in Khartoum – the regime moved into Abyei with its Sudan Armed Forces (SAF) and heavily armed Misseriya militia forces in May. The more than 100,000 indigenous Dinka Ngok displaced from Abyei into South Sudan have no prospect of returning to their homeland as long as Khartoum retains military control of the region, as it clearly intends. This seizure included the Diffra oil site, which although not especially productive, nonetheless generates approximately 2,000 to 2,500 barrels of crude oil per day, or roughly $75m per year. This is not an inconsequential amount of revenue for South Sudan, especially since there is evidence of other potential oil reserves near Diffra.

The dismayingly trivial reaction of the AU to this issue reflects nothing so much as its penchant for “moral equivalence” when attempting to arbitrate between Khartoum and Jubaand frequently siding with Khartoum in ways large and small. The AU mediation team led by former South African president Thabo Mbeki, failed miserably in Darfur, and then moved on to Abyei, where it failed just as miserably. In both cases failure came largely because the AU, and Mbeki in particular, were perceived by both Darfuris and the Dinka Ngok of Abyei as siding with Khartoum.

There is, crucially, another reason that Khartoum may have compelled this decision by Juba concerning the future of Southern oil, for it continues a pattern of sustained, intense, and destructive economic warfare against the South by Khartoum. The purpose of this warfare is not only to destabilize the South, to deny it as much as possible the opportunity for economic development, but to provoke actual military confrontation and to create from this a casus belli for renewed war. In such a war, Khartoum’s generals presume that they would be able to seize at least some of the South’s oil fields by force.

If war comes – and it almost daily appears more likely – it will be a war emerging from the indifference, foolishness, and cowardice of the international community. It refuses to see the Khartoum regime for what it is, or even to speak honestly about what it has done and continues to do to the marginalized peoples of Darfur, Eastern Sudan, Abyei, Blue Nile, South Kordofan, and increasingly the border regions inside South Sudan.  We have reached the “brink of war” that de Waal speaks of not because of what South Sudan has done, but because of what the international community has not done.

The views expressed in this article are the author's own and do not necessarily reflect Fair Observer’s editorial policy.

*[A longer version of this article was originally published by The Sudan Tribune on January 24, 2012]


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