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Geopolitical Monitor

Geopolitical Monitor

Geopoliticalmonitor.com is a Canadian intelligence publication and consultancy. Our team of experts provide a unique Canadian perspective on situations and events that have a substantive…

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Oil Seen as a Bridge to Peace between Sudan and South Sudan

Amidst the difficulties inherent to any transition of sovereignty involving the relinquishing of economically relevant territory, the leaders of the Republic of Sudan are showing investors and the international community that permanent peace and cooperation between the two Sudans is not only possible, but very much assured, and that it is likely to come about as a result of the two countries’ shared oil interests. In accepting the terms of the Comprehensive Peace Agreement that led to the independence of South Sudan in 2011, the Republic of Sudan was ever eager and willing for cooperation, since it allowed the South to take with it a sizable portion of the country’s oil wealth. In a gesture of goodwill, Sudan has also renounced its claims to compensation over several oil assets that were confiscated by South Sudan, showing a clear intention to calm any fears of instability investors may have.

Sudan is amongst the fastest growing and innovating countries in Africa, boasting an impressive recent growth rate of 5.5%, and proving quite resilient in the face of the worldwide financial crisis. The country ranks second in the Middle East and North Africa in direct foreign investment, and with a burgeoning middle class, peace and stability is naturally in the interests of Sudan’s leaders. Furthermore, as the Republic of Sudan is far more industrialized, better equipped, and better trained than South Sudan, the leadership of Sudan has continued to allow its southern neighbor to use its pipelines, refining infrastructure, and export platform, in a joint cooperative venture that will cement the two kindred nations’ futures together. Sudan currently has three refineries in Khartoum, Port Sudan, and El Obeid, and South Sudan’s continued exportation of its vast oil wealth will be dependent on the continuation of its peaceful relations with Sudan.

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Not only is oil likely to be the grand and peaceful unifier both nations need to secure their respective prosperities, but in the Republic of Sudan oil is widely seen as the factor that will solidify the country’s international standing. The recipe for growth is not limited to economic formulae, but must include elements of continually evolving political practices that make the country more able to adequately gauge, exploit, and defend its interests through transparency and efficiency—and thus create a stable and enduring environment where foreign corporations feel their investments are secure. Sudan is continually improving the political dynamics that facilitate the on-going development of its oil wealth, along with consolidating the international norms that help to smooth out relations with its key oil-producing southern neighbor. Oil—amongst other exports—makes the country of continual interest to foreign governments, ensuring the prevalence of international ties of monumental importance to the progress of the internal politics of the country.

Highlighting Sudan’s maturity in dealing with foreign oil investors is the country’s successful management and political upkeep of the Greater Nile Petroleum Operating Company (GNPOC), which was founded in 1997, and today continues to be the main venue by which the Sudan harvests its oil revenues. It created the Greater Nile Oil Pipeline, which links the country’s oil fields with its refineries in Khartoum and Port Sudan. Of this company, the China National Petroleum Corporation (CNPC) holds a 40% stake, showing the vital role Chinese investors have in developing Sudan’s economy, as well as showing Chinese confidence in Sudan’s government. Chinese investors together with the Sudanese built over 1,500 kilometers of pipelines, and completed several important developments in Port Sudan. Since the beginning of their bilateral relationship in 1959, China and Sudan have enjoyed a lasting and fruitful economic partnership, which in the 1990s turned also into an oil partnership, as China imports 5% of its oil from Sudan, a considerable quantity given the size of the Chinese economy. The country itself has proven quite hospitable to Chinese workers and their families, as approximately 25,000 Chinese citizens live in Sudan.

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The second largest investor in Sudan’s oil sector is Malaysia’s National Oil Corporation—Petronas—which holds 30% of the GNPOC, and has been operating in the country since 1995. In 2008 it was permitted to begin oil exploration in Jonglei state, and though this territory is now in South Sudan, the agreement still holds force. In fact, when the Republic of Sudan granted the concession to the Malaysian company, its intention was that oil exploration and expertise would benefit the local economy of the southern Sudanese, years before independence was agreed upon.

Third in sharing in the GNPOC’s dynamic exploitation of Sudan’s oil is India’s ONGC Videsh Limited, which holds 25% of shares. In 2010, India’s investments in Sudan were valued at USD 3 billion, and 2.4 billion of these were in oil.

Recent news headlines have largely overlooked the very real positive indicators evident in the latest oil debates between Sudan and South Sudan, giving the false impression of instability where gradual stability is actually taking root. Cross-border disagreements over oil are not to be overly countenanced, as this is only natural given the situation between Sudan and South Sudan. What should be highlighted is the positive manner in which the dispute is being resolved, which shows significant goodwill on the part of Khartoum to advance beyond any temporary political friction. On September 3, President Omar Al-Bashir assured the South Sudanese that their oil will pass safely through Sudan’s pipelines and refinery infrastructure, calming international fears after South Sudan was accused of civil disruption in the Republic of Sudan’s southern regions. President al-Bashir, speaking for his government on that day said that, “We want to leave the problems of the past behind us and open a new page for the benefit of the two people.” Al-Bashir and his South Sudan counterpart, President Salva Kiir, have signed an agreement by which both governments seek to boost business cooperation between the two Sudans, assuring investors that both leaders are looking forward to a bright and prosperous future.

By. David Spenser

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