The country, which has been suffering to meet its domestic supplies, was about to stop functioning as a state because oil import bills used to consume most of its hard currency earnings that was not always enough to cover its needs.
When US major Chevron struck oil deposits in 1980 in commercial quantities, the news was seen as a positive development that would have its impact all over. But three years later a new rebellion erupted in Southern Sudan led this time by Sudan People's Liberation Movement/Army (SPLM/A). And one of its first moves was to strike a Chevron camp killing three workers, a development that led Chevron to suspend its operation and eventually left the country.
The new regime led by President Omar Hassan Al-Bashir put high on its agenda utilizing oil, which it managed to accomplish back in August 1999 against all odds given the American sanctions that were imposed on the country two years earlier. However, after pumping oil for two years, its impact started to be felt in the battlefield providing government troops with better equipments and hardware.
That became a factor in the political strife that has been engulfing the country. The rebels, SPLM/A were advised to get into serious peace talks and share oil income instead of trying to block its production and export. They did and that was one of the cornerstones of the Comprehensive Peace Agreements (CPA) that was signed in 2005 with wealth sharing deal one of its basic elements.
However, oil proved to be crucial for the post conflict era in Sudan as well. Despite the international community's pledge to provide $4.6 billion to support Sudan peace deal, but in effect and as is the norm for such pledges, money received amounted to some 30 percent of what has been pledged, while actual disbursement was much lower. On the other hand the South Sudan alone received during the six years interim period before it separated into an independent state a total of $12 billion of oil money.
That oil money provided the state to be born in South Sudan with much needed resources to start building an infrastructure and more important oil made it possible to look at South Sudan as a potentially viable state.
However, during the rush to separation the two countries failed to sort out host of hanging issues including oil. Since South Sudan is a landlocked country, it needs Sudan's pipelines and other downstream facilities to ship its oil to world markets. But how to calculate transit/transportation fees became one of sticking points.
Separation for Sudan brought with it not only loss of 25 percent of the country's area and one-third of its population, but also an immediate economic shock especially in the area of hard currency, that was provided by sales from oil output that was no longer there.
To help meet this economic shock the idea was for both South Sudan and the international community to contribute to close the gap over some time, but nothing happened in effect. That led Sudan to press ahead asking for $36 to ship a barrel from South Sudan oil to work markets. It argued that the amount covered the costs of central processing facilities that prepare oil for export, transit, transportation and handling fees at the Red Sea terminal.
South Sudan called that 'day-light' robbery and last January shut down oil production to deny Sudan the transit and transportation fees. Some commentators described the move as an 'Economic Doomsday' given the fact that oil income accounts for 98 percent of the country's budget.
Since oil played a role in pushing for peace and gave the regime of Al-Bashir a lease of time and with oil out of the equation there is a tendency to renew the old SPLM/A goal of regime change in Sudan. By shutting down oil production in South Sudan, it is hoped that the move will deny Sudan much needed revenue and add pressure to already difficult economic situation and push Sudan to join the Arab Spring and topple the regime.
But more than two months have passed and the shutdown in fact started to hit South Sudan more than Sudan. Moreover, at the time South Sudan oil production dropped to zero, that in Sudan hovered around 115,000 bpd. That is why Juba moved to occupy Heglig, which hosts the central processing facility and start up of the pipeline that transports oil with the aim of denying Sudan having any oil output as long as South Sudan does not have one.
Again oil is back fueling what is originally a political strife that was inside one country, now moved to a tug of war between two independent states because of failure to move away from the bitterness of the past and look to the future with the aim of making interdependence in oil industry a tool for better relations between the two.
— Alsir Sidahmed ([email protected]) is media consultant, trainer and freelance journalist.
