The Fight for Oil Continues

[caption id="attachment_55229564" align="aligncenter" width="620" caption="An oil refinery in South Sudan"][/caption]

The lingering tension between Sudan, and the newest state in Africa, South Sudan has escalated in recent days. Oil-rich South Sudan has shut down its production of crude oil, and is unlikely to resume production for months, as a result of the stalemate reached by the two countries over how to share the oil proceeds.

South Sudan became independent in 2011, until which point the region was producing 260,000 barrels of oil per day. When the country achieved independence, one of the main points of contention over whether the region would be allowed to secede related to whether Sudan would be able to profit from the South’s oil production after independence.

Months later no agreement has been reached, and instead the government of Juba has stopped oil production following Khartoum’s demands that South Sudan pay $36 per barrel for transporting the crude through its country. Meanwhile, the South Sudanese have offered to pay 63 cents and 69 cents per barrel for the use of two different pipelines, in addition to third party fees amounting to a little over $7 per barrel.

According to a recent report by The Financial Times, South Sudan has also accused Khartoum of having stolen 6 million barrels of oil worth about 650 million USD.

And while energy experts, including analysts from oil watchdog the IEA, have warned that the dispute over oil may last months, both countries are incredibly dependent on its revenue. Demonstrative of the pressure both countries are under, South Sudan has been forced to cut non-salary government spending by half. The finance minister has also announced that income taxes will be tripled within the next 6 months.

South Sudan has instead begun to look to its neighbors for alternative oil routes. However, the tension with Sudan that is simmering beneath the surface cannot be ignored. Even if the oil issue is resolved quickly, which seems unlikely, South Sudan must also deal with the drastic increase in ethnic violence on the border with Sudan. It appears that Khartoum is employing violence as a means to punish those who have supported the South Sudanese government.

A recent column by New York Times reporter Nicolas Kristof has warned that the dispute between Sudan and South Sudan is leading to a humanitarian crisis in the border areas, in a region known as the Nuba mountains. The Sudanese have blocked food aid from entering this region, and the population is at risk of mass starvation. Moreover, there have been reports that the Sudanese government is bombing this area, including refugee camps, in tactics reminiscent of the Darfur crisis.