World's Newest Country: South Sudan's Oil Remains a Sticking Point

Article excerpt

As its independence draws near, South Sudan has yet to agree how to divide oil revenues with its northern neighbor, which has the infrastructure to export the oil the south needs to sell to survive.

- World's newest country is a three-part series on the challenges facing South Sudan.Part 1: Can South Sudan limit internal strife?Part 2: South Sudan's oil remains a sticking point

When Africa's largest country splits in two on Saturday, the two new states would prefer to go their separate ways - if it wasn't for their pesky oil problem.

As much as the governments of Sudan and the Republic of South Sudan would like to bid adieu for good on July 9, in the immediate future their oil industries will remain inextricably linked, and the hope of security and working relations between the two states will rest largely on how the two governments manage their interactions over the resource that is currently the lifeblood of both of their economies.

The basic calculus is simple. For the solely oil-driven southern economy to survive, the region's significant oil largesse must continue to find a way out of its soil. For the moment, the only option is through pipelines controlled by the northern government that lead to refineries in the northern city of Port Sudan, on the Red Sea.

Insiders to the north-south talks over the past five months say that negotiating the future of the north's and south's shared oil industries has been one of the most contentious aspects of the African Union-mediated and US-supported talks.

Cutting a new deal

This comes as no surprise given the stakes of the talks. They were intended to result in a "deal" for wealth-sharing beyond July 9, a replacement for the current 50-50 split which has evenly divided Sudan's oil revenues between the northern and southern governments for the past six years of fragile peace.

A sticking point for the southern government is that the majority of the revenues that both sides current accrue comes from oil drilled in the south - oil that Juba feels it should be able to exploit exclusively after independence. For its part, Khartoum has the "hardware" needed to extract southern oil, and given its own economic challenges, needs to use its advantage to keep its oil revenues as high as possible in the months and years to come, if only through expensive pipeline fees charged to the southern government.

After months of tense negotiations and reportedly numerous attempts by oil experts from the Norwegian government and elsewhere to provide viable proposals for the two sides, it is now certain that there will be no deal on oil before the north and south become separate states on Saturday. But not reaching a deal soon could be dangerous, warns US Ambassador Princeton Lyman, President Barack Obama's Special Envoy to Sudan.

"By the end of July they are going to have to decide how to manage the oil sector," Mr. Lyman says. "They can't just let it slide because that could lead to a conflict by the end of the month."

Although it appears that both sides want to keep the oil flowing after July 9 under the current arrangement, the resource watchdog group Global Witness has expressed its concern that the north-south relationship could be too fragile and mistrusting for the two sides to reach a deal. …