Was It a Wise Decision for South Sudan Government to Order the Closure of South Sudan Oilfields?
Dear Esteemed Readers,
Here are two opposing views on South Sudan current decision to shut down oil production in response to Khartoum illegal confiscation of South Sudan oil.
The first article by Steve Paterno, a US-based South Sudanese and the author of “The Rev. Fr. Saturnino Lohure, A Romain Catholic Priest Turned Rebel” argues that the decision by South Sudanese government to react to Khartoum’s action by threatening to shut down oil production in the South Sudan is not wise for various reasons outlined in the article.
The second article by Makwei Mabioor Deng from the SPLM-Diaspora Forum is essentially a counter-response to Paterno’s argument. It maintains that Juba response is appropriate and warranted given the circumstances.
Enjoy!!
PaanLuel Wel.
South Sudan shutdown of oil production not wise
By Steve Paterno
January 22, 2012 — South Sudanese leaders are always accustomed to blaming the Northern Sudanese rulers and in the process forgetting their own responsibilities and faults. However, they will not continue to shift the blames as they will be demanded to own up to their responsibilities. For the last six years, South Sudan has been relying entirely on oil revenue for its budgetary needs. Nonetheless, no one South Sudanese leader bothered to push for investment in the oil industry, which is actually the only source of revenue. Instead, much of this oil money is squandered through rampant corruption, shady contract deals, and gross mismanagement.
When South Sudan obtained its independence last July, the new state found itself with only oil wells, but nothing else. The oil refineries are laying in the North. The pipelines for transporting the oil to the world market cross through the North. Oil workers with the most expertise who are Northerners, decamped. The few South Sudanese workers who are left behind can hardly cope up with the workload. Even their basic necessity such as food rations, which were supplied to them from the North are now dwindling. This resulted into a drastic reduction of South Sudanese oil output for the last several months.
Knowing too well that South Sudan is facing such serious dilemma, Sudan government and oil companies resorted into blackmailing and extorting South Sudan to paying huge and unreasonable charged fees for facilities and land usage. Since then, both South Sudan and Sudan could not agree on the amount. Faced with the standoff, Sudan unilaterally enacted a legislation, legally empowering its ministry of energy to confiscate South Sudanese oil as it deems necessary so as to compensate for what Sudan considers to be the charges.
This unilateral move compels South Sudan to plan for the shutdown of all its oil production, while it seeks alternative transportation routes. Even though the shutdown will deny Sudan certain percentage of revenues, it actually adversely affects South Sudan more. For Sudan, South Sudan is calling a bluff, since it has no alternatives, at least in the foreseeable future. So, Khartoum lies and wait for South Sudan to come running back. The compounding challenges facing South Sudan are quite enormous.
First, South Sudan is depending almost a hundred percent on oil revenue. The country cannot afford to survive without the oil revenue. To make matters worse, a bulk of South Sudanese budget is spent on salaries. This will mean even a minor halt or adjustment in oil revenue generation can negatively reflects on the employees who expect their salaries on monthly basis.
Second, South Sudan can never be able to switch quickly from an oil revenue base economy into another source of revenue generating economy. The taxation system which is supposed to be an alternative and is estimated in billions is in state of disarray. Few well placed individuals are actually pocketing the collected tax revenues, while the other potentially taxable sources are untouched. Agriculture, which is a quintessential for South Sudanese livelihood and would have been great source of revenue is left in waste. South Sudanese import their food from their neighboring countries, including from the Sudan. Very soon, with the lost of oil revenue, many people, especially the salaried employees will have no more money to purchase those expensive imported food. With the world financial crunch, international donations are hardly coming in.
Besides, those international aids come with strings attached, the conditions that South Sudan can barely meet, since it has no system for accountability. The only readily available option for South Sudan for a financial rescued package are loans. But why spend and even squander the money you don’t have, which will create huge burden to the South Sudanese posterity and hinder the potential for future growth.
Third, for South Sudan to seek alternative routes for transporting its oil for sale, it is rather a long term plan, not a quick fix to the current crisis the country is facing. First of all, if there is such a plan of constructing a pipeline or building a railroad, it must address the current issues as well as considering all the future implications of such a plan. Secondly, the plan will require enormous amount of time from the day it is envisioned to the day it is finalized and ready to be operational. Thirdly, this plan will cost a substantial amount of money—the money South Sudan is losing currently through lost of oil revenue, corruption, and mismanagement.
Let the South Sudanese leaders be realistic on handling this crisis by embarking on practical solutions than trying to be sentimental. Just last December South Sudanese Vice President Riek Machar announced a grandiose plan of making South Sudan the ’hub’ of seaports shipments in Africa, connected by highways, railroads, airports and the likes. This fantasized plan, which sounds more like a joke, is coming from a leader of a country that cannot even transport its own oil—the oil that the country feeds on—a clear indication that some of these South Sudanese leaders are totally out of sync with the reality. In this case, the notion of prioritization is replaced with romanticized ideas.
What South Sudan needs now is not some absurd and baloney plans, but rather a political will and negotiating skills to strike a quick deal with Sudan on an interim basis. Such an agreement should not be permanent. It must be subject to renewal within a given short period of time, while the negotiations between the two countries continue until a permanent agreeable solution is found. This is the only viable alternative that can guarantee South Sudan continuous flow of revenue as oppose to the total shutdown of the only source of revenue. As South Sudan is pursuing alternative routes for transporting its oil, it must ensure proper management of its finances by clambering down on corruption and making sound investments along the way. The country must then simultaneously seek ways to diversify its economy so as to avoid over reliance on oil as the only source of revenue. After all, the oil is not going to be there forever. With that said, South Sudan has more to lose under the current prevailing situation.
Steve Paterno is the author of The Rev. Fr. Saturnino Lohure, A Romain Catholic Priest Turned Rebel. He can be reached at stevepaterno@yahoo.com
http://www.sudantribune.com/South-Sudan-shutdown-of-oil,41369
South Sudan Shutdown of Oil Production is the Wise Decision.
By Makwei Mabioor Deng
January 22, 2012
Dear Steve Paterno,
Any other GOSS’ ineptness aside, I don’t believe that the call by Juba government to have the oil production shut down is entirely based on sheer “appeal to the general public on emotions than reasons.”
State-to-state negotiation, your point of contention as per your article on Sudan Tribune and an earlier response to Mary Lodira, is what the two parties have been engaging in all these years to no avail.
As you very well know, the absent of any breakthrough in the talks is due mainly to Khartoum’s insistence on asking for $36 a barrel for the usage of their oil facilities while the GROSS team is only willing to consider 70 cent dollars per barrel, something closer to the international charges of about 40 cent dollars per barrel as reported by the media.
Negotiation between the two parties was to continue till Khartoum government took a unilateral decision to secretly confiscate South Sudan’s oil in collusion with some certain foreign companies. It were the same foreign companies, out of shame and guilt to their conscience, who ended up blowing the lid over the dark deal.
In the face of this blatant and unprovoked unilateral decision, and with Khartoum having no economic and political incentives left to agree to any possible settlement from Addis Ababa as they are already getting more than they could get under mutual certified agreement, how do you expect President Kiir and VP Machar to react given Khartoum previous dishonest dealings with South Sudanese?
A concrete, reasonable response was inevitable given the high stake of the situation and what the GROSS did, in my opinion, is appropriate and called for under the circumstances. How could anyone expect the Khartoum government to agree and sign up to anything when they are freely siphoning off South Sudan’s oil? They have no incentive whatsoever to agree to anything proposed by Juba government.
Conceivably, just in case no action was taken by Juba, Khartoum may have even decided to rachet up matters by rescinding on their earlier request of $36 a barrel just to delay and frustrate the negotiation while they would continue to confiscate South Sudan’s oil in the name of unpaid fees. It would drag on forever, just like the Abyei case and South Sudan oil would practically belong to the North.
If anything, Khartoum government has already indicated that any agreement on oil is contingent on border issues and the question of alleged Juba support for SPLM-North and Darfur rebels, something that Juba has been vehemently denying for a long time. Who knows, it may even get tied to the resolution of Abyei dispute, and God knows, anything else that may crop up along the way (say Arab Spring in Khartoum blamable on Juba).
I can’t quite figure it out why you would chose to validate Khartoum line of argument that they had formally informed Juba about their decision to forcefully confiscate the oil. There is a difference between threats issued calculatively to put the other negotiating party under duress to make them feel the pressure and buckle and an official statement conveying the intention of the party in question. Khartoum’s threats are parts of their broader official fire barrages to gain mileage either against Juba, SPLM-North or Darfur rebels.
Of course, Juba action carries risks. It would be hard to run the government in the short term, not all South Sudanese oilfields will get shutdown as some fall within the disputed borderlines, and above all, unilateralism from both sides will definitely preclude any successful conclusion of the negotiation process between the two parties.
Still, Khartoum introduced unilateralism when no one denied ever compensating them for their reportedly unpaid fees. Or if you believe Juba account of event, then they have already been re-imbursed and therefore whatever that they are presently engaging in is their old dirty game against Junub Sudan.
Thus, notwithstandings the risks entail in the action, Juba government’s decision to take Khartoum by their threat and shutdown the oilfields is the best decision that has ever come out of Juba since the formation of GOSS in 2005.
Illegality and broad-daylight robbery cannot be rewarded with inaction and silence lest it would defeat logic to continue to proclaim the independence and sovereignty of the republic of South Sudan.
Surely, It will go all the way to serve as a precendential warning against any East African nation that might be tempted to take up Khartoum dirty games of economic sabotage and political blackmailing!!
Thanks,
Makwei.
Source: SPLM/NEW-Sudan Forum
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