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Sudan-South Sudan: Watch Now as the Oil Flows

I’ve been skeptical about investing in either of the two Sudans without an oil and border security deal in place. That said, recent developments remove a lot of the political risk, so now might be the time.

Earlier this month, Sudan and South Sudan reached an agreement for the resumption of South Sudanese oil exports through Sudanese infrastructure. There have been oil deals before and they were dead in the water because they didn’t come along with border security agreements. This time we’ve got the full package. The deal calls for a withdrawal of troops from both Sudan and South Sudan and the creation of a demilitarized zone to facilitate the flow of oil. Oil hasn’t flowed for about a year after South Sudan blocked exports via Sudan over a tariff dispute.

It’s been a bit of a tricky situation. South Sudan seceded from Sudan in July 2011. Along with this South Sudanese independence came 75% of Sudan’s oil resources—minus the infrastructure (pipelines and ports) which remains in Sudan. So South Sudan is now rich in oil, but it’s land-locked.

The climax came in December 2011, just a few months after South Sudan seceded, when Sudan started diverting South Sudanese oil to its own refineries and selling it illegally on international markets. South Sudan lashed back by shutting off the pumps in January 2012. Neither could maintain this absence of oil revenues for much longer. (About 98% of South Sudan’s state…

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