Binding pipelines? Oil, armed conflicts, and economic rationales for peace in the two Sudans

Abstract

The independence referendum of South Sudan in 2011 brought about the birth of a new land-locked and oil export-dependent African country. Despite obvious challenges, there was hope that oil could fund South Sudanese development, and that mutual economic dependence on a thriving oil sector would incentivize peaceful bilateral relations between South Sudan and Sudan. Yet, within six months of independence, tensions escalated, Sudan leveraged its control of oil export infrastructure to demand hefty transit payments and an end to South Sudanese support to rebels in the north, with South Sudan responding by shutting down its oil production and seeking alternative pipeline routes. Domestically, the mismanagement of oil revenues and shutdown of oil production also exacerbated tensions within the South Sudanese Government, contributing to its breaking apart and renewed civil war in December 2013. In contrast to optimistic views of oil-fuelled peace incentives, we point at the challenging political geography of oil in the two Sudans and the tensions undermining economic logics of ‘mutual interests’ and ‘peace dividends’ between, and within, these two countries.

Keywords:

• Sudan
• South Sudan
• oil shutdown
• revenue sharing
• peace pipelines

Notes

1. These include two pipelines going to the Bashayer Marine Terminal near Port Sudan: the GNOPC pipeline completed in 1999 brings oil from blocks 1, 2 and 5A; and the PDOC (Petrodar) pipeline completed in 2005 transporting heavy crude oil from blocks 3 and 7 – accounting for about 90% of South Sudanese oil. GNOPC brings oil to Sudan’s two main refineries in Khartoum and El Obied, a third pipeline by CNPC starting from Block 6 fields joins the GNOPC pipeline to also feed these refineries.

2. Chevron’s move was also supported by a US Government-opposing neighboring ‘communist’ Ethiopia.

3. For a discussion and testing of the causes of military alignments and side-switching in the two Sudans, see (Seymour, 2014).

4. Interview, European oil company manager, June 2006.

5. Data collated from GoSS Ministry of Finance and IMF ‘South Sudan’ country reports.

6. Interview, Juba, May 2012.

7. A senior World Bank official commented to other donors that ‘the decision was shocking and that [GoSS] officials … had not internalised nor understood the consequences of the decision’, see: ‘Briefing by Marcelo Guigale, World Bank Director of Economic Policy and Poverty Reduction Programmes in Africa’, 1 March 2012, http://paanluelwel2011.files.wordpress.com/2012/05/world-bank-south-south-economic-analysis.pdf (24 March 2014).

8. Interview, Juba, May 2012.

9. Interview, Juba, May 2012.

10. See, for example, his meeting with President Al-Bashir in Khartoum in September 2013 (Abdelaziz, 2013).

11. Interview, Ministry of Petroleum and Mining official, July 2013.

12. Interview, Juba, May 2012.

13. See Agreement between the Government of the Republic of South Sudan and the Government of the Republic of Sudan on Oil and Related Economic Matters, 27 September 2012. Available from http://www.rssnegotiationteam.org/oil.html

14. Interview, Juba, May 2012.

15. http://www.securitycouncilreport.org/monthly-forecast/2015-02/south_sudan_unmiss.php

16. Uganda’s military involvement in South Sudan reflects not only a historical pattern, but also commercial interests including increasing the likelihood of pipeline construction (see, Kasiaja, 2014).

17. Figures calculated from GoSS Ministry of Finance, IMF and OECD-DAC reports.

18. In a 2008 speech, President Kiir stated, ‘When we formed the GoSS in 2005, we inherited a corrupt system of civil service that was used as part of counterinsurgency warfare to bribe and soothe Southerners not to join the SPLM but to mobilise them against the SPLM.’ 14 January, Wau.

19. A very progressive Petroleum Revenue Management Act surpassing the standards of the Extractive Industries Transparency Initiative was approved by parliament in October 2013, but by December 2014 had still not been signed by President Kiir to become legally effective (IMF, 2014).

20. The UN Mission in Sudan was mandated by UN Security Council resolution 1590 in March 2005, and the UN Mission in South Sudan by resolution 1996 in July 2011.

21. Proven reserves are estimated at 3.5 and 1.5 billion barrels for South Sudan and Sudan, respectively, with 75% of total peak production of 0.49 million barrels per day in 2010 coming from South Sudan, see: Energy Information Agency, ‘Sudan and South Sudan’, 5 September 2013.

22. Interviews, Juba, May 2012.