FACTBOX-Key political risks to watch in Sudan and South Sudan
5 min readFACTBOX-Key political risks to watch in Sudan and South Sudan
05 Jan 2012 13:09
Source: Reuters // Reuters
By Ulf Laessing
KHARTOUM, Jan 5 (Reuters) – Sudan and South Sudan face severe disputes over sharing oil revenues and ending fighting in a border region, as both nations seek to overcome enormous economic challenges.
Sudan’s south became independent on July 9 after voting in a referendum agreed under a 2005 peace deal to part from its former civil war foe.
But the two countries have so far failed to sort out major economic issues such as dividing oil revenues and other assets, coordinating the launch of new currencies and resolving disputes over the border or the contested Abyei region.
Assets at stake include billions of dollars of oil revenues, millions of acres of fertile land and substantial mineral resources such as gold and copper.
Following are some factors to watch:
NORTH-SOUTH DISPUTES
South Sudan’s President Salva Kiir visited Khartoum in October in his first visit since southern independence, allaying fears of a return to civil war.
But clashes broke out this month between both armies in a disputed border region, escalating tensions after the South accused Khartoum of having halted oil exports going through the north.
Both sides have failed to reach an agreement over how to divide up oil revenues, the lifeline for their economies. Three quarters of the former united country’s 500,000 barrels a day oil production now come from the South.
The South is seeking to pay less than the transit fee agreed under the 2005 peace deal of 50 percent of total revenues but needs to use the North’s pipeline, refineries and port to sell the oil.
Both sides have also failed to coordinate the launches of their new currencies, which is hampering cross-border trade due to lack of bilateral trade agreements or payment systems.
Politically a main point of contention is the contested Abyei region. The north sent troops and tanks into the region in May, triggering the exodus of tens of thousands of civilians. The U.N. Security Council has deployed Ethiopian peacekeepers to Abyei but the Sudanese army has not withdrawn yet.
Fighting between the northern army and armed opposition in the border area has spread to the northern state of Blue Nile. The joint border needs marking, too.
What to watch:
– Continued meetings. The worst moments of the past years came when the parties stopped talking. A series of high-level meetings would promote confidence.
– Will fighting spread further? Rebels in Sudan’s Darfur, scene of a separate insurgency, and armed groups in Blue Nile and South Kordofan states have formed an alliance to topple veteran Sudanese President Omar Hassan al-Bashir. How effective will such an alliance be?
– Oil revenues. Any details or signs of escalation in the dispute over the transit fee the South will have to pay.
– Abyei. Will both sides agree on a referendum that was originally supposed to happen with the southern independence vote?
– Nile water. Sudan’s split has created a new country in the Nile Basin. There is a bitter dispute between Egypt, which refuses to give up its major share of the Nile waters, and other basin countries that suffer drought and famine. South Sudan is likely to support its East African neighbours.
ECONOMIC CRISIS
After years of relying on oil revenues, which make up more than 90 percent of Sudan’s exports, the growing import bill has caught up with Khartoum. Banks are unable to meet the demand for foreign currency in the country, forcing an effective devaluation of the Sudanese pound and driving up inflation.
Khartoum has avoided an “Arab spring”, but small protests have become more frequent as many Sudanese fret about annual inflation hitting 18.1 percent in December from 15 percent in June. In November 2010, inflation was 9.8 percent.
The Sudanese pound has suffered a slide on the key black market due to a shortage of dollars. With oil revenues expected to fall, it has become tough for the government to get foreign currency needed for food and other imports. Plans to diversify the economy are in an early stage.
The United States just renewed a trade embargo, shutting off the north from international markets, making borrowing to fund its budget deficit difficult.
The central bank has said expenditures will need to be cut by more than a quarter this year but the government has not provided any details how to fund the budget next year.
What to watch:
– Will the Sudanese pound fall further? That would hit Sudan’s ability to buy imports. Will food inflation rise further?
– Any signs of further protests after Khartoum saw several small anti-government demonstrations in recent weeks?
– By how much will Khartoum have to cut spending at a time of grave challenges as oil revenues are expected to fall?
SOUTH SUDAN
South Sudan in 2005 was one of the least developed regions in the world. The ruling Sudan People’s Liberation Movement (SPLM) has struggled to find the calibre of people to run a government and to entice talented members of the southern diaspora back home. So development has been very slow.
Politically and militarily, the south needs to ensure it opens a dialogue with the opposition to build the kind of multi-party democratic state donors will want to see in return for their financial support.
The biggest challenge is to build an economy that now depends 98 percent on oil. Investors have been reluctant to commit money due to a lack of infrastructure, corruption and rampant rebel and tribal violence.
Annual inflation hit 78.8 percent in November, up from 57.1 percent in August.
Rebellions and violence in southern oil areas with fighting at the border with Sudan could create a humanitarian emergency in the region, soaking up aid meant for development.
Up to 50,000 people fled tribal violence in Jonglei state in January, according to the U.N.
What to watch:
– State failure. Some analysts believe the South without its northern enemy will descend into chaos amid ethnic rivalries, political meddling and cattle raiding.
– The South is building from scratch a new nation with a small budget. Help from donors may be less forthcoming following the global financial crisis. (Reporting by Ulf Laessing; Edited by Richard Meares)
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