Sudan election: Is Khartoum stealing South Sudan's oil?
As people vote in the Sudan election, a recent report says that $700 million – perhaps much more – may have been underpaid to South Sudan since a 2005 peace agreement mandated the sharing of oil revenues with Khartoum in the North.
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Oil revenues – which are estimated to be hundreds of millions of dollars every month – should help South Sudan deal with some of these challenges, and the current government of South Sudan derives 98 percent of its budget from oil revenues. But South Sudan is starting from a very low base, with very few trained civil servants, very few schools outside of South Sudan's capital, Juba, and a social service and health-care sector run almost entirely by foreign charities and churches.Skip to next paragraph
Building a country from scratch doesn’t come cheap.
Lion's share of the oil
The good news for South Sudan is that it would end up with the lion’s share of Sudan’s oil after a secession, with 75 percent of the country’s oil reserves within its boundaries, and 10.3 million barrels out of a total 13.3 million barrels nationwide pumped out of oil fields in South Sudan per month, according to Sudanese Ministry of Finance figures for June 2009.
But as a landlocked country, South Sudan has no way to get that oil to market, so it would still need to use piplelines through the north up to Port Sudan, and pay the north royalties for the use of those pipelines.
“When the South secedes they will take most of the oil with them, and the northern economy will collapse,” says Ahmed Sabiel, a risk analyst in Khartoum. “Right now, 92 percent of foreign investment comes to Khartoum, but it will shift to Juba.”
“This is a real problem because the cost of running the government in the North is huge,” Mr. Sabiel says. “We have 250 ministers. We have more than 90 percent of the civil servants in Sudan. And nobody in Khartoum is thinking about it. The north lacks leadership, it lacks vision, and soon, it will lack oil revenues.”
Not everyone shares such a dark view.
One senior foreign diplomat, based in Khartoum, says that the north will still have oil fields well within its boundaries that are not subject to the 2005 peace agreement, and that much of the foreign investment will be reluctant to head to Juba until the southern government can start to prove itself to be capable of governing.
“It will cost $2 billion to $4 billion to build a pipeline to Mombasa [on neighboring Kenya's coast], and it will take four or five years to build it,” says the diplomat, speaking on condition of anonymity. “So for now, they’ll have to ship out their oil through the north, and they’ll have to learn to get along with Khartoum. Would you invest in a country that has no civil service, that has no infrastructure, and where there is a profound problem of corruption?”