Oil exports from South Sudan are expected to gain steam in the coming months. The country last week celebrated its second anniversary as an independent country and only recently resumed crude oil exports. A former international banking chief said the international community's newest nation could emerge as a regional economic success story with the right policies in place. For now, however, advocacy groups are warning the South Sudanese administration that it needs to get its house in order or risk complete failure.
South Sudan marked its second Independence Day last week. A peace deal that ended 20 years of civil war helped pave the way to a separation from the government in Khartoum. Independence was backed enthusiastically, though a series of border skirmishes, ethnic fighting and spats over oil revenue with the Sudanese government have threatened the fragile peace deal. Last year, both sides nearly went to war over the disputed Heglig oil field, which straddles the border separating the two Sudans.
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South Sudan resumed oil exports in June, roughly 18 months after disputes over pipeline fees began with the Sudanese government. South Sudan gained control over most of the oil reserves with independence, though Sudan maintained authority over export infrastructure. South Sudan has pursued various pipeline proposals through neighboring countries and just recently called on the United States to start examining the oil potential there.
The South Sudanese oil sector is dominated by Asian companies. Chinese traders may help push exports up to 7 million barrels for August. Last month, the presidents of Uganda, Kenya and Rwanda said they'd help with the construction of new oil pipelines across East Africa. If those plans come to fruition, South Sudan could become one of the bright spots in a region plagued by its bloody past. Former International Monetary Fund chief Dominque Straus Kahn said there was "a lot" of potential in South Sudan if it's able to brand itself correctly.
The IMF said South Sudan will be able to settle its $2 billion tab with the Sudanese government by next year. The debt was incurred during the 18-month spat over pipeline fees that ended in June. By 2017, South Sudan hopes to have an export pipeline of its own, increasing its prospects in the coming years.
U.S. Secretary of State John Kerry said in an Independence Day message that support for independence doesn't translate automatically to good governance. A sustained level of commitment is needed from the international community to help South Sudan build its government, resolve outstanding conflicts and promote economic growth. An advocacy group was less polite, however, in a letter to South Sudanese President Salva Kiir.
"From our various vantages, we have all come to conclude that without significant changes and reform, your country may slide toward instability, conflict and a protracted governance crisis," the letter said.
South Sudan built a very shaky ground beneath its feet since independence. Oil, one way or the other, will determine its fate in the future.
By. Daniel J. Graeber of Oilprice.com