South Sudan's oil cutoff: brilliant negotiating, or suicide?

Guest blogger Aly-Khan Satchu sees a larger proxy war in the current standoff between Sudan and South Sudan over dividing revenues from South Sudan's oil. 

Isaac Billy/UN/REUTERS
South Sudanese express their support as President Salva Kiir declared a halt on all oil operations in South Sudan, in Juba January 23. The Republic of South Sudan in their sitting on Monday decided unanimously to halt all oil operation in South Sudan immediately.

The current stand off between Sudan and a newly independent South Sudan made me recall an anecdote told by Henry Kissinger, after a series of negotiations with Syrian President Bashar al-Assad's father, the late President Hafez al-Assad.

“Assad never lost his aplomb. He negotiated daringly and tenaciously like a riverboat gambler to make sure that he exacted the last sliver of available concessions. I once told him that I had seen negotiators who deliberately moved themselves to the edge of a precipice to show that they had no further margin of maneuver. I had even known negotiators who put one foot over the edge, in effect threatening their own suicide. He was the only one who would actually jump off the precipice, hoping that on his way down he could break his fall by grabbing a tree he knew to be there. Assad beamed.”

I will leave it to you to calculate who might be Hafez: South Sudan's President Salva Kiir or Sudanese President Omar al-Bashir? Or both?

South Sudan's top negotiator, Pagan Amum told reporters in Addis Ababa Saturday: "Tomorrow the [oil] shutdown will be complete and what will be remaining to be done the day after is finishing the cleaning and flushing of facilities." South Sudan is shutting down its oil production, last put by officials at 350,000 barrels per day in November. Approximately 99 percent of the new state's income is from the sale of oil. 

Earlier in the week, South Sudan's Information Minister Barnaba Marial Benjamin announced that South Sudan and Kenya had signed a memorandum of understanding to build an oil pipeline to the Kenyan port of Lamu. Construction of the pipeline will begin “as soon as sources of funding are made available,” which should take about a month, he said.

Minister Benjamin is reckoning that the pipeline could be completed in 10 months. That's a bullish call. The biggest problem is surely the sky-high risk of asymmetric guerrilla-type sabotage. I would think it's highly likely. Therefore, insurance for the pipeline might well prove punitive. However, the point remains that we in Kenya have an embedded geopolitical advantage in this region, that being the route to the sea. It is like the jugular vein for many of our East African neighbors.

Neither Juba or Khartoum are ranked AAA by credit rating agencies. Khartoum has lost a great chunk of their revenues. The South, meanwhile, can hardly afford to lose the cash flow that comes from the sale of its 350,000 barrels per day. And that's why I started with Henry Kissinger's description, "I had even known negotiators who put one foot over the edge, in effect threatening their own suicide."

Now, there is a back story to this. You see, through 2011, Sudan provided China with 5 percent of its total oil imports. You will recall that 35,000 Chinese workers were evacuated out of Libya in nine days last year and China was rolled back and right out of Libya. Not so long ago, President Obama authorized the deployment to Uganda of approximately 100 combat-equipped US forces to help regional forces ostensibly to “remove from the battlefield” – meaning capture or kill – Lord’s Resistance Army leader Joseph Kony.

Then in January this year, President Barack Obama issued this memorandum.

"By the authority vested in me as President by the Constitution and the laws of the United States, including section 503(a) of the Foreign Assistance Act of 1961, as amended, and section 3(a)(1) of the Arms Export Control Act, as amended, I hereby find that the furnishing of defense articles and defense services to the Republic of South Sudan will strengthen the security of the United States and promote world peace," said the official text of Obama's decision.

It seems to me Sudan has become the epicenter of the US and China's collision in Africa and that we are watching a 21st-century, high-stakes proxy war. I have to surmise that the US is underwriting Salva's overdraft, what with all these demobilized soldiers roaming around Juba, it would be suicide to have them unpaid for any length of time. I wonder who is underwriting Bashir? Maybe, he is calling in favors in Libya?

Aly-Khan Satchu is the CEO of the East African financial portal and can be followed on Twitter @alykhansatchu

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