South Sudan: Landlocked, Pumped Up and Over the Oil Barrel
If South Sudan had planned and constructed a pipeline and refinery in Ethiopia, she would have been economically immune from the vagaries of Sudanese conflict and politics. She would not have found herself over the barrel. South Sudan should never have allowed itself to be held on the wrong side of the barrel of the oil gun and become a helpless victim of Horn geopolitics. South Sudan can use Ethiopia’s and Somaliland’s seaports to export its crude oil and refined petroleum products. There is nothing that can stop Ethiopia, Somaliland, and South Sudan from becoming the “Three African Lions” (in much the same way as the “Four Asian Tigers”) building their economies on oil exports, agribusiness, hydropower, ecotourism and mobilization of direct foreign investment. (Read more below…)
On March 16, 2024, Dr. Mohieldin Said, the Minister of Energy and Petroleum of the Government of the Republic of Sudan (GoS) issued a letter/statement “declaring force majeure” to various representatives of oil companies with investments in South Sudan. (“Force majeure” is a legal term describing a party’s inability perform a contract because of an unavoidable catastrophe (“an act of God”).
Dr. Said asserted that because of the civil war in the Sudan and particularly the damage caused to the pipelines and communications networks by the Rapid Support Forces (RSF), the GoS is unable to fulfill its contractual obligations. Dr Said explained the ruptured pipelines were in a “military operation zone” and could not be repaired and made operational because of the lack of diesel fuel necessary to heat the crude oil and the risk of harm to technicians who could do the necessary repairs. He concluded:
As such GoS is declaring a force majeure which disables us from meeting our obligations in delivering Crude Oil in and through the BAPCO Transportation System to the Bashayer 2 Marine Terminal. We remain ceased (sic!) to restore the BABCO Transportation System to operational mode and you will be updated of any developments duly.
The alleged large-scale rupture caused by the RSF to the pipelines apparently occurred in early February 2024 in Sudan’s White Nile state. The Dar Petroleum Oil Company announced it was forced to suspend loadings due to pipeline damage. (DAR Petroleum Operating Company Ltd is a consortium of oil exploration and production companies operating in South Sudan with headquarters in Juba.)
The fallout of civil war in the Sudan has been catastrophic on the peoples of Sudan, South Sudan, and the entire Horn region. It is a needless and tragic war of mindboggling absurdity. The war that began between the Army of GoS and the RSF on April 15, 2023 has so far cost nearly 15 thousand innocent civilians. Over 40 thousand civilians have been injured. Over 6 million Sudanese have been internally displaced. Nearly 2 million have become refugees.
To gain the upper hand, both sides have engaged in massive human rights violations and war crimes. The Sudanese army is accused of indiscriminate bombing of civilian targets from the air and ground. It has reportedly bombed the Al-Jaili Petroleum Refiners, located north of Khartoum, repeatedly to dislodge RSF forces. The RSF is accused of looting markets, homes, warehouses, and vehicles in the capital. Both have engaged in reckless economic sabotage and destruction of roads, bridges, hospitals, schools and public service buildings. Both sides continue to point fingers at each other while innocent Sudanese civilians suffer unspeakable horrors. “The confrontation between the national army and the paramilitary Rapid Support Forces (RSF), has sparked a human catastrophe that has turned this northeastern African nation into the world’s largest internally displaced population crisis and is plunging it into the largest hunger crisis.”
South Sudan “Over the oil barrel”
In the Sudanese Civil war, South Sudan finds itself over the oil barrel, between a rock and hard place and between the devil and the deep blue sea.
How true the African saying, “When two elephants fight, it is the grass that suffers.”
The people of Sudan are suffering because their obstinate military leaders cannot agree to solve their differences at the peace table. Sudanese Army General Abdel Fattah al-Burhan has categorically rejected peace talks with RSF leader General Mohamed Hamdan Dagalo (Hemedti) and has vowed there will be no agreement or reconciliation with the RSF. General Dagalo, much to his credit, has repeatedly expressed willingness to end the war and begin negotiations. Everyone knows there is no military solution and in the end it will all be settled at the peace table. Stuck in the absurd theater of war of two generals, the suffering of the people of Sudan continues.
The people of South Sudan are suffering monumental collateral damage from the Sudan civil war.
The fallout of the civil war continues to have devastating economic consequences in South Sudan. The Sudan civil war has aggravated the devastating impact of the Covid 19 pandemic. Even today, South Sudan continues to suffer climate shocks in the form of droughts and floods. Oil production which has been dwindling since 2013 is currently a trickle. The decline of Red Sea merchant marine traffic due to the war in Gaza has made the situation infinitely worse. The rise in commodity prices resulting from the Russia-Ukraine conflict has fanned the flames of inflation in South Sudan. It is said that there is little money to even pay civil servants and members of the armed forces.
The financing, production, transportation and distribution of South Sudan crude oil in South Sudan is a virtual Rube Goldberg machine. Oil provides over 90 percent of South Sudan’s revenue. In 2013, South Sudan produced 350 thousand barrels a day. By 2022, production was at 160 barrels. By 2023, production had declined to only 140,000 barrels per day. Today, it could be said oil production has virtually ceased. The fact of the matter is that the people of South Sudan are losing hundreds of millions of dollars in production losses every year. According to one report, the situation for South Sudan is shocking and dire:
South Sudan earns income from less than half of the roughly 150,000 to 170,000 barrels a day it produces. The proceeds of around 55 to 60 per cent of total output goes to the three joint venture oil producers in the country, as profit and to cover their costs. According to the UN Panel of Experts, these costs likely include the producers’ contracts with security and other companies working in the oil fields, which are largely controlled by South Sudan’s security elite – one way in which they can likely tap into off-budget funds. South Sudan remains entirely dependent on Sudan to get its oil to international markets, which means that a further 28,000 barrels per day go toward paying Khartoum for the use of its pipelines and paying off a $3 billion compensation settlement South Sudan agreed to after independence. (The government has said it expects to settle its compensation obligations by the end of 2021, though transit-related fees to Sudan will remain.)
Against this background, nearly two-thirds of the population of South Sudan is said to be facing extreme hunger. Simply stated, the multidimensional shocks to South Sudan’s economy and people points in one direction: deepening poverty, massive hunger and privation, political conflict and instability and internal displacement. There is no question South Sudan faces extraordinary social, economic, and political challenges. There are those who argue South Sudan has become a victim of the proverbial oil curse (“black gold (oil) makes countries more authoritarian, corrupt, and violent”). It is said very little of the oil revenue reaches the man/woman in the street.
“One people only living in two countries”: A viable and compelling solution to South Sudan’s oil export challenges
Needless to say, if South Sudan had planned and constructed a pipeline and refinery in Ethiopia, she would have been economically immune from the vagaries of Sudanese conflict and politics. She would not have found herself over the barrel. South Sudan should never have allowed itself to be held on the wrong side of the barrel of the oil gun and become a helpless victim of Horn geopolitics.
It is never too late. South Sudan and Ethiopia have excellent relations and there is great trust between the leaders of the two countries. Indeed, Ethiopians and South Sudanese are “one people living in two countries.”
A week ago, South Sudanese President Salva Kiir Mayardit awarded the highest military medal of his country to Ethiopian Field Marshal Birhanu Jula, the Chief of General Staff of the Ethiopian National Defense Forces (ENDF). The two countries have a strong security agreement enhancing their bilateral capacity to jointly to work on counter-terrorism, cross border crimes, immigration and other matters. A few days ago, it was announced a contingent of Ethiopian police officers will be sent to South Sudan as part of the UN peacekeeping mission to South Sudan.
Just last month, South Sudan’s Foreign Affairs Minister, James Pitia Morgan said:
I would like to assure you that the relationship between South Sudan and Ethiopia does not change. It remains the same bilateral relationship, which is cordial, brotherly, historic, economically and people to people relations… We are one people only living in two countries. I am telling this to our brothers and sisters in Ethiopia that we are here to stay together… Moreover, we are one people united by our history and we will continue to be one people until whatever time.
Mr. Morgan further indicated Ethiopia and South Sudan “are working to further deepen their bilateral relations through infrastructure projects to accelerate the process of economic integration in the region.”
All the necessary ingredients for robust bilateral relations and regional integration are in place for Ethiopia and South Sudan. To use an old Ethiopian expression, “Here is the horse. Here is the field. Here is the rider.” So, what is left for the Ethiopian and South Sudanese riders to do? What’s left is saddling up, building a pipeline and refinery and yelling out, “Giddy up!” galloping into the sunrise of Ethio-South Sudan prosperity, peace, and progress.
Ethiopia will be a great partner for South Sudan in developing and exporting its crude oil. The domestic market for petroleum products in Ethiopia is huge. In 2022, Ethiopia imported refined petroleum from “Kuwait ($310M), Saudi Arabia ($278M), China ($123M), United Arab Emirates ($50.3M), and Brazil ($25.7M). The fastest growing import markets in refined petroleum for Ethiopia between 2021 and 2022 were Saudi Arabia ($231M), China ($82.4M), and Brazil ($25.7M).” With an oil refinery in Ethiopia, South Sudan could generate substantial foreign exchange from Ethiopia and neighboring countries.
In May 2022, Ethiopia agreed to export an initial 100 Megawatts of electricity to South Sudan over the next three years from the Grand Ethiopian Renaissance Dam (GERD). South Sudan has one of the lowest electrification rates in the world. Power outages are common and those who could afford rely on standby generators to meet energy needs. Less than 8 percent of the population of South Sudan has access to electricity. 100MW of electricity could light up tens of thousands of South Sudanese homes and businesses. The GERD with a projected capacity of 5.15 gigawatts when completed, will be the largest hydroelectric power plant in Africa and among the 20 largest in the world. As “one people in two countries,” with the completion of the GERD, South Sudan’s current and future electricity needs could be met by the GERD.
Enter Somaliland.
The great news now is that Ethiopia has its own port in the neighboring country of Somaliland. The naysayer noisemakers and crybabies will moan and groan, and the make-believe big bad wolves will huff and puff and threaten to blow the Ethiopia-Somaliland seaport/base agreement down. But there ain’t a doggone thing they can do to stop it. Ethiopia will never be the object of economic blackmail and extortion because it is landlocked. NEVER! It will freely import and export its goods through its port Somaliland.
There is a lot of noise about Somaliland’s independence. The indisputable fact is that Somaliland will be recognized by all in the foreseeable future.
In 1960, the US had all but recognized Somaliland. The US Senate has pending legislation which is a thinly veiled act of recognition of Somaliland as an independent country. The Somaliland Partnership Act (S 3681) is pending in the US Senate to pave the way for recognition. A Republic of Somaliland (Recognition) Bill has been introduced in the British Parliament. The recognition of an independent Somaliland is a fait accompli, a done deal, a cast-iron certainty.
South Sudan can use Ethiopia’s and Somaliland’s seaports to export its crude oil and refined petroleum products in the Horn and globally. There is nothing that can stop Ethiopia, Somaliland, and South Sudan from becoming the “Three African Lions” (in much the same way as the “Four Asian Tigers”) building their economies on oil exports, agribusiness, hydropower, ecotourism and mobilization of direct foreign investment. The three countries can become the economic engines for an East African Common Market. With a pipeline from South Sudan to a refinery in an Ethiopian town on the border, South Sudan can permanently solve its crude oil export problem and in the process the two countries could strengthen their economic and political relations.
Of course, the 800kg elephant in the room is the civil war in the Sudan.
I worry deeply over the possibility Sudan could become another Libya. It has been said that Libya is one country with three governments. Three competing and warring governments are as good as none. There is no national military force strong enough to assert control over the country. The militias are having a field day, and their warlord commanders line their pockets with smuggled oil and all manner of corrupt practices. Will Sudan become a two- or three-government country? Will tribal militias spread and take over control of local government? Will the US impose its will as it tried to do during the TPLF terrorist war in Ethiopia and force a solution? Will the UN do its usual pussyfooting to forge a government of national unity? Will the powerful Middle eastern backers of Burhan and Hemedti formulate their own solutions? What about the African Union?
Will the Sudan become the proverbial Humpty Dumpty?
Of course, neither the US, EU, UN, AU, IGAD… nor all the king’s men and horses have been able to persuade the parties in Sudan to declare a ceasefire let alone sit down for peace talks. The guiding principle to the civil in the Sudan must always be, “Sudanese solutions to Sudanese problems. African solutions to African problems.”
Time will tell what will eventually happen in the Sudan.
The Good Book teaches, “To everything there is a season, and a time to every purpose under the heaven.”
It is the season, indeed it is high time, for Ethiopia and South Sudan to fully explore their vast and unlimited potentials and jointly develop and share their hydropower and fossil fuel resources.
It is the right time for Ethiopia, South Sudan, and Somaliland to realize the undeniable fact that they are “tied together in a single garment of destiny” and must march together on the road to peace, prosperity, and progress.
(TO BE CONTINUED…)
