Could oil be the peg on which to hang stability in Sudan?

AFP , Thursday 23 Dec 2010

With south Sudan expected to vote for independence from the north in next month's referendum, peace could lie in the country's southern oilfields

Sudan's road to peace paved with Oil (Reuters)

Sudan's northerners have a pipeline but little petroleum; the southerners are swimming in oil but have no pipeline.

As north and south head for an expected break-up following a vote on independence for the south, oil could guarantee peace for the two new neighbours.

The January 9 referendum, which analysts expect will partition Africa's largest country into a mostly Muslim north and a predominantly Christian and animist south, was a central part of a 2005 deal that ended a two-decade civil war between them.

Oil "can surely be a factor of peace in Sudan because both sides need each other - the north the oil, and the south the pipeline," said Dana Wilkins, a campaigner at Global Witness, a British-based NGO.

The southern oil fields were a major factor in the second civil war, when the Khartoum regime used nomadic Arab militias in the 1980s to secure access. The south insisted on its share of the oil wealth.

The 2005 Comprehensive Peace deal calls for an equitable share of the oil, even though the fields lie in the south.

Since July, the two sides have been discussing the issues of future citizenship arrangements; sharing natural resources, particularly oil; security and compliance with international accords, notably on water allocation from the Nile.

They have yet to agree on key issues like the disputed oil district of Abyei. It was supposed to hold a simultaneous vote on its own future, but that has been delayed by disagreements over who should have a ballot.

"Oil can actually be a driver for peace, but it is very important that the parties understand that they have to accept that the other party will also have a significant share of the oil income," Norway's deputy foreign minister, Espen Barth Eide, told AFP last week in the southern capital of Juba.

"They can only succeed together. So, in a sense, that is a message of peace, because there is only one viable option that would give a real economic income to the two states, which is to cooperate over oil," said Eide, whose country provides expertise to both sides on how to share their oil wealth.

Sudan is endowed with reserves currently estimated at more than six billion barrels. Three-quarters of that lies in south Sudan or its border regions with the north.

The southern oil now flows through a long pipeline across the north to Port Sudan on the Red Sea. A proposed alternative pipeline linking south Sudan to Kenya would take years to build.

The north and south are currently negotiating a formula for sharing the wealth that would be based on the southerners receiving their share from oil pumped from the ground, and the northerners from transport fees for their pipeline.

The fact that Sudan's state company Sudapet holds shares in international consortia pumping oil from the south, which the south's Nilepet does not have, complicates an already complex equation.

Wilkins said it was in both sides' interests to reach a transparent agreement with a verification mechanism that could guarantee a sustainable peace.

Oil is the primary source of foreign exchange for the Sudanese government, which is under US sanctions. The Khartoum authorities are already preparing for secession and an expected fall in oil revenues.

The south's budget, meanwhile, is 98 percent dependent on oil royalties.

"Without a pipeline, the southerners cannot do anything with their oil, except perhaps drink it," quipped a political observer.

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