Oil is central to South Sudan’s conflict. This lucrative industry was believed to be fueling the war.
Once again South Sudan’s warring parties, President Salva Kiir and his former Vice President Riek Machar and other opposition groups, have signed a new peace deal. The signing took place during the Intergovernmental Authority on Development (IGAD) head of states summit in Addis Ababa, September 12. But this time it is different.
Many are skeptical that the deal will hold on the account of past failures of the parties to honor similar agreements, such as the 2015 peace deal that was brokered by the IGAD regional block.
If successfully implemented, this peace agreement will bring to a close five years of conflict that has killed tens of thousands, displaced up to four million and devastated the economy.
Oil is central to South Sudan’s conflict. This lucrative industry was believed to be fuelling the war. To pressure the government, the American administration earlier this year, placed restrictions on 15 of South Sudan’s oil-related companies including the national oil company Nilepet and the Ministry of Petroleum.
“While the lack of reliable information makes it difficult to assess the current state of the economy, GDP is estimated to have contracted by about 11 percent in FY2016/17 due to conflict, oil production disruptions and below-average agriculture production. On the demand side, exports and household consumption declined, while government consumption increased due to spending on defense and security operations”, the World Bank reports.
When South Sudan broke away from Sudan in 2011 and became the third -largest oil producing country in Sub-Saharan Africa, there were great hopes for the youngest country in the world. No sooner had the celebrations died down before civil war erupted in the country in 2013. The subsequent destruction of oil fields and a partial shutdown of oil production began to squeeze the life out of the promising economy. The negative impact trickled into Sudan, which shares the proceeds of the oil with South Sudan by providing the transport and export infrastructure for the oil.
The IGAD- led Revitalisation process of the 2015 peace agreement began late in 2017 and was later moved to Khartoum in June 2018, after an Ethiopian meditated face to face talks between President Kiir and rebel leader Riek Machar in Addis Ababa, had failed.
After the failure of an Ethiopian chaired face to face talks between President Salva Kiir Mayardit and opposition leader Riek Macher, IGAD resolved during its 32 Extraordinary Summit, held in Addis Ababa, on 21 June 2018, to mandate Sudan’s Presidents Omer El-Bashir to facilitate further talks in Khartoum, Sudan. The mandate also recommended that the Khartoum talks explored ways of rehabilitating the economy of South Sudan through bilateral cooperation with Sudan. Implicit here is South Sudan oil and the benefit of the cooperation to Sudan’s own economy.
The relocation of the talks to Khartoum proved to be a turning point, if an unforeseen one, in the HLRF peace process. A series of peace papers were initialed, culminating on September 12, in Addis Ababa, in the signing of the Revitalized Agreement on Resolution of Conflict in the Republic of South Sudan, (RARCSS). In the build-up to this, and in Khartoum, the “Khartoum Declaration” in which the parties agreed to final cease-fire and to the rehabilitation of oil production in South Sudan, was signed on June 26. This was followed by the security Arrangement Agreement on July 6 and the Power Sharing Agreement on August 5.
Sudan is viewed as a historic adversary of South Sudan and both governments have accused the other of funding rebel movements in each other country. The historic relationship between Juba and Khartoum is what gives Sudan unique insight into the conflict in South Sudan.
The disastrous impact the war has had on the South Sudanese economy has placed the country in a vulnerable position. South Sudan is landlocked, and it exports its oil by pumping it through the pre-independence Chinese-built pipelines to the Sudanese port of Port-Sudan. This ties the two economies together.
The Sudanese economy is in a state of crisis, fuelled by the drop in South Sudan’s oil output and the spiraling costs of its military involvement in Yemen.
The two Sudan’s now more than ever need to cooperate to avert economic collapse and oil offers them the means to do so. This marriage of convenience could foster political will between all parties, including the armed opposition groups.
The Khartoum Declaration on oil, states “The government of South Sudan in collaboration with the government of Sudan shall immediately rehabilitate the oilfields identified above, and others as would be agreed upon for the resumption and the restoration of the previous levels of oil production.”
“The resumption of oil production at these licenses marks a historic collaboration between South Sudan and Sudan and will be key in South Sudan’s economic progress” reported in Africa and Power.
At the end of August, South Sudan announced the resumption of oil production from its Unity Oilfields, where work had seized since 2014 due to the conflict. As oil began to flow again at 20,000 barrels per day, South Sudan’s dynamic Minister of Petroleum, Ezekiel Lol Gatkuoth, promised better things to come, saying: ” We commit to building on the achievements at Toma South and bring our petroleum industry to full strength as quickly as possible.”
The new output brings the current rate up to 150,000 bpd, still significantly short of the pre-civil war capacity of 350,000 bpd. As other blocks are brought back into production, South Sudan, working jointly with Sudan, hopes to close that gap or outstrip its previous capacity by the yearend.
South Sudan has now reopened its doors to investment. Looking at new exploration partners as well as service companies to bring new technology to meet environmental, production and community targets. The Minister of Petroleum in South Sudan Amb Ezekiel lol has pledged, “Investors will be protected. We are committed to attracting new investment from global partners and increasing exploration activities.” In addition, the government has established a security force to ensure the protection of the country’s oilfields.
China continues to dominate the oil and gas industry in South Sudan. Last month President Kiir of South Sudan made a deal with his Chinese counterpart President Xi Jinping at the China-Africa Cooperation Conference held in Beijing. The Chinese government has agreed to build roads across the country in exchange for crude oil. Chinese investors either partly or solely own all the major oil service companies and contractors. China is also Sudan’s biggest trade partner, importing oil from Sudan while exporting low-cost items to Sudan. China will continue to enjoy a robust relationship between the two Sudan’s.
As the prospects for economic recovery loom, helped by the resumption of oil production and, reportedly, an increased Chinese investment, Juba might contemplate coiling away further from the West. This would be dire for South Sudan. The West remains the primary provider of aid to the country. Juba needs Western help in implementing the peace process. Beyond these, South Sudan will need Western technology if it is to exploit its significant untapped non-oil resources.
The Asian led oil production has served South Sudan well, but there is growing wariness over alleged inefficiencies and environmental pollution. South Sudan is thus keen to attract Western companies and bemoans its recent failure to strike a deal with Total.
The US, UK, and Norway are partners with IGAD and sponsors of the South Sudan peace process. The troika, as they are known, have welcomed the signing of the agreement but remain skeptical that the warring parties could honor their pledges.
America’s decision to impose trade restrictions on South Sudan while maintaining its peace brokerage role is viewed by Juba as incoherent.
America, however, sees trade restrictions as a means of pressuring Juba to adhere to peace and initiate reforms that the US deems necessary for sustainable peace and development.
Now that the RARCSS peace deal has been signed, the standing US restrictions are deterring, western investors from joining in South Sudan’s growing oil industry. Maybe the time has come for the US to re-evaluate the trade restrictions.
As well as staying the course of peace, South Sudan needs to exert fresh diplomatic effort to win back some of the West’s goodwill it once enjoyed.
The Government of South Sudan desperately seeks to rebuild the country’s economy and restore stability. South Sudan’s economy depends on exports of oil from its 3.5 billion barrels of reserves. According to the Ministry of finance, oil brought in $21 billion in revenue over the seven years before the civil war.
The trials of South Sudan are far greater than oil and need to be resolved over time but the fact still remains that the country has a poverty rate of 80 percent; this should be enough to compel opposition factions to make peace work. A return to war would prevent the government from taking in much-needed revenue. Without the oil, jobs will continue to be scarce and poverty will rise even further.o
Source – The Exchange