Sudan and South Sudan: Oil and the Recent Border Clashes

Any new deal must address the pervasive mistrust around the oil sector by guaranteeing transparency and independent verification in its implementation.
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In what is being described as the "worst direct confrontation since southern secession," Sudan and South Sudan's national armies have resumed fighting across their shared border. Though this is not the first time these two forces have clashed, what is striking about the events of the last few days is that strategically vital oil fields and facilities -- upon which both countries rely -- were the main targets.

After more than 22 years of civil war, north and south Sudan were able to negotiate an end to the conflict in 2005 and an independent South Sudan was established on July 9, 2011. Prior to the south's secession, the government in Khartoum was heavily dependent on revenues from the sale of southern oil which were split 50:50 between the northern and the southern capitals. More than three-quarters of the oil reserves are now within the territory of the independent South Sudan, and the financial impact of this loss (estimated at more than $7.7 billion over the next four years) is already being felt in Sudan. Khartoum does have an ace up its sleeve, however: its processing facilities, pipelines, and port are currently the only route through which South Sudan's oil can be exported.

Last year, oil revenues accounted for 98% of South Sudan's annual budget, but in January the government enforced a complete shut down of its oil production. This controversial but locally popular decision was taken following Sudan's confiscation of more than two million barrels of South Sudanese oil in lieu of fees for use of its facilities.

The timing of these latest border clashes could hardly be worse. In talks which have been going on for more than a year and a half, the two countries are attempting to negotiate a financial arrangement which would both ensure the smooth transit of South Sudan's oil to international markets and prevent Sudan's economy from collapsing.

Though publicly the two countries are still far apart on what the details of what this deal will be, recent progress in wider negotiations has provided some grounds for optimism. Two weeks ago, Sudan and South Sudan signed framework agreements on nationality rights and border security. These agreements were welcomed by the diplomatic community as a signal that a peaceful resolution to all the outstanding issues, including oil, could be in sight. A presidential summit meant to capitalize on this momentum and goodwill was scheduled for April 3rd. This much-anticipated meeting of Presidents Salva Kiir and Omar al-Bashir has now been cancelled as a result of this weeks border clashes, and the two governments have resumed exchanging threats and pulling back on previous commitments.

So what actually happened? The sequence and exact details of Sunday's events and the catalyst for the clashes remain uncertain. But on Monday President Kiir announced that, in chasing Sudanese forces back across the border, the South Sudanese army had temporarily taken the town of Heglig in Sudan's South Kordofan state. Heglig is a very strategically significant location. Not only is it surrounded by oil wells now pumping roughly half of Sudan's total production, it is also the site of a central processing facility, where net oil production is separated and measured before it enters the pipeline for refining or export.

Monday's clashes also saw the aerial bombardment of oil wells in South Sudan's Unity state; wells which happen to be part of one of the country's most profitable oil blocks. This is the second time this month that this area has been targeted by Sudanese planes crossing the border, giving South Sudan serious cause for concern regarding the security of their oil facilities if the situation escalates.

Almost all of the producing oil blocks in Sudan and South Sudan lie on or near their shared border. Neither side can afford to lose access to oil revenues long-term; however, it is clear that this reality alone will not prevent these facilities from being an attractive military target. The only way to defuse the situation and bring sustained stability is for the two governments to return to the negotiating table and agree on a comprehensive oil deal which is mutually beneficial and transparently implemented.

Pre-scheduled talks in Addis Ababa, a continuation of the negotiation process, began this morning. This round of talks is likely to focus on de-escalating tensions and returning to the non-aggression treaties which have already been signed. Whether officials from Sudan and South Sudan will take this opportunity to recover the progress that had been made is yet to be seen. What is absolutely clear from the recent border clashes is that a comprehensive oil deal is desperately needed to help prevent further escalation. But in order to succeed long-term -- and ultimately benefit and protect the wider populations of Sudan and South Sudan -- any new deal must address the pervasive mistrust around the oil sector by guaranteeing transparency and independent verification in its implementation.

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