Sudan oil dispute
January 17, 2012
North and South Sudan may be divided over their once joint oil reserves, but they do have a common problem.
"Both Sudans depend heavily on oil revenue," said Wolf-Christian Paes, an expert on South Sudan at the Bonn International Center for Conversion (BICC), "but the south's needs are somewhat greater than those of the north."
Consider the facts.
South Sudan generates 98 percent of its state revenue from oil. In the north, it's between 60 and 80 percent.
But ever since South Sudan's independence from the north in July 2011, the north has faced a significant hole in its national budget because 75 percent of all oil revenue is accrued from land located in the south.
As a result, the International Monetary Fund has warned that (north) Sudan's economy will contract by 0.2 percent in 2012.
The talks so far
North Sudan would like to hold on to as much of its former oil revenue as possible - but then, as Paes puts it, the north is "desperate."
South Sudan has offered to compensate the north with a payment of $5 billion (3.9 million euros). The north wants seven billion.
There's also disagreement about the extent of transport fees for using a pipeline that goes from the south to Port Sudan in the north. It is the south's only transport route for exports. Khartoum wants South Sudan to pay $36 per barrel. The government in Juba, however, is offering a price closer to $0.70 cents.
"There's more at stake than just oil," said Kathelijne Schenkel at the European Coalition on Oil in Sudan (ECOS), a grouping of non-government organizations.
"Resolving the distribution of oil revenue is tied to other disputes," Schenkel said.
Abyei - a special administrative region which lies almost exactly in the middle of the border - is at the center of one such dispute.
The people of Abyei were supposed to vote on where they wanted to belong - to Sudan or South Sudan. But even before the South's independence last year, both sides had laid their claims to the region. The Khartoum military occupied Abyei, forcing a rejection of the move from the South.
"It's possible that the oil dispute could be resolved if one side moves on another issue," said Schenkel.
But neither side has so far appeared willing to agree to such a compromise.
China as deal broker
International observers are following the dispute with keen interest - for one, the US administration in Washington says it is "very concerned."
But according to Wolf-Christian Paes, not every country has "the means to influence the situation."
"The most important player," suggests Kathelijne Schenkel, "is China."
The two largest oilfield operators in Sudan are Chinese and Malaysian firms and both are trying to influence the governments in Khartoum and Juba.
Some countries in the West hope China will become what Paes calls "an honest broker" to help find a solution and allay fears of renewed fighting between the two Sudans. Both need the oil because without it they are both powerless and poor.
Author: Daniel Pelz / za
Editor: Susan Houlton / rm