Southern Sudan is declaring independence at midnight tonight (5pm EST), but not everyone is ready to celebrate. The new country will either benefit from a boom in commodities, or end up at war with the North yet again, this time over dividing the country’s massive oil wealth. Right now, South Sudan has 80% of Sudan’s estimated 6.8 billion barrels of untapped oil. They produce about 500,000 barrels every day and this is expected to rise to 2 million. Unfortunately for them, the North controls all of the refineries, the only pipelines, and the only seaport.
The North wants to continue to get a 50% cut of all oil revenues and the South doesn’t wish to give them anything except a discount on oil or a reasonable transit fee for using the pipelines. North Sudan’s President Omar Hassan al-Bashir has threatened to block access to the pipeline if the South doesn’t comply. Some diplomats fear another outbreak of war.
Since US sanctions were placed on Sudan, most Western energy companies sold their share of the oil fields to the only players in the oil industry that lacked the scruples of providing a genocidal regime with money. Right now, most of the blocks of oil fields that straddle the border are owned by China National Petroleum Corporation, Petronas, and India’s Oil and Natural Gas Corporation. The lion’s share is owned by the Chinese.
If anyone wants to make sure that the South is open for business and keep the border safe it’s them.
China’s economic counselor in South Sudan, Zhang Jun, told the Financial Times, that China is willing to send “special teams” to negotiate loans to the South to keep the landlocked country afloat while the Chinese build an pipeline to the Kenya coast. Officials in the South told Reuters that they are willing to use their resources in exchange for credit while a pipeline is built
Building an alternate export pipeline might be a pipe dream, but plenty of offers to build export infrastructure, refineries, and other projects in the new country.
South Sudan will not be on the America’s State Sponsors of Terrorism list and they will be technically exempt from the economic sanctions that prohibit Americans from doing any business with the North. However, if the South uses the pipeline through the North and Khartoum gets a cut, then the sanctions still apply. The South is still lobbying for those sanctions to be lifted.
With a mostly illiterate population over eight million people, about one million guns, an uncertain border, two generations raised on civil war and genocide, the newborn nation has plenty to worry about besides. On the bright side, there might be some money to be made in eco-tourism. Companies outside of the energy sector, such as British American Tobacco, are already looking to grow in South Sudan.
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