South Sudan on the brink after oil exports derailed by Sudan’s civil war

Features

Aljazeera

Edited: By Moses Muli

Published: 26 March 2024 6:19 PM

Experts say that a halt in oil production could escalate already acute levels of violence and insecurity in South Sudan.

Violence and insecurity could worsen in South Sudan after one of its key oil pipelines to international markets, which passes through neighboring Sudan, was damaged last month, according to experts.

The incident occurred in early February in Sudan’s White Nile state, prompting the Dar Petroleum Oil Company to suspend loadings.

The rupture happened in an area controlled by Sudan’s paramilitary Rapid Support Forces, which is fighting the Sudanese army for power in the country.

A team of technical experts has been unable to fix the pipeline due to ongoing fighting, raising fears that South Sudan’s political economy could collapse.

“The pipeline accounts for two-thirds or three-quarters of oil revenues. Unless [South Sudan] is able to get the pipeline working again, it will be a massive pull-on South Sudan’s budget,” said Alan Boswell, an expert on South Sudan for International Crisis Group, a non-profit dedicated to conflict resolution.

Overall, oil is responsible for about 90 percent of the country’s revenue, according to a 2022 World Bank report.

Little to none of the oil proceeds go towards the national budget, the International Crisis Group says, with some 60 percent of production diverted by the oil companies as their share, and most of the rest paid to Sudan as part of the settlement reached upon independence, settling old debts, or into “special projects” overseen by the office of President Salva Kiir, which has been accused of corruption and diverting these funds.

A disruption to this payment structure could cause a great deal of upset and accelerate the depreciation of the local currency, leading to more poverty, violence and lawlessness, experts told Al Jazeera.

‘The grassroots weren’t benefitting.’

Daniel Akech Thiong, a South Sudanese political economist and the author of The Politics of Fear in South Sudan, said most of the people of South Sudan would not feel the impact right away of the stoppage or a delay in finding a bailout.

People are already barely scraping by due to soaring inflation, he said, and the government’s failure to pay civil servants for the past six months.

“If you were to speak with the common person on the street, they would say they’re very happy that the oil is shut down. This is a sentiment that is very powerful on the grassroots level because they were not benefitting from [the oil] to begin with,” said Thiong.

In 2023, about 7.7 million people – or two-thirds of the population – were coping with extreme levels of hunger.

Even Kiir’s inner circle would not rise up against him if the privileges and gifts they received from oil revenue were interrupted, according to Joshua Craze, a researcher and political analyst on South Sudan, who does not believe any of Kiir’s inner circle have a large enough constituency to sustain a rebellion against him.

“The oil money goes to a narrow elite in Juba and not military men. If there is disorder, then it would come from this clique,” he told Al Jazeera.

“One of the geniuses of Kiir’s reign is that he has surrounded himself with useful hatchet men that don’t really have a constituency to challenge him.”

While a collapse into full-blown civil war is unlikely in the short-term, state collapse is a possibility in the future, warn experts.

Kiir is preparing for an election at the end of December, even as the international community has expressed fears that South Sudan is nowhere near ready to hold a credible process unless “urgent steps” are taken.

Thiong believes that even a sham election can be expensive.

“If the government takes a drastic measure – as a form of panic – because it can no longer hold elections because there is no money, then that could trigger disappointment and lead people to pick up guns,” he told Al Jazeera.

“These are the sort of things that could happen. There could be indirect – not direct – consequences from [a halt in oil revenues].”

Yakani, the peace activist, added that the lack of oil revenue will also accelerate the depreciation of South Sudan’s currency.

He noted that South Sudan already has pockets of armed violence, which could be exacerbated if economic conditions worsen for local communities. That could force more people to pick up weapons and participate in a war economy.

“If the economy worsens, then that means political instability and the collapse of the rule of law. That could lead to a spike in crimes and human rights violations,” he told Al Jazeera. “Oil means a lot to South Sudan.”

A history of bailouts

In 2012, South Sudan had another halt in oil production after accusing Sudan of theft in a dispute over export fees.

South Sudan compensated by taking out loans to ostensibly pay for fuel, medicine and food imports, often promising to pay lenders back with future oil proceeds, debts it is still paying off today.

But Kiir siphoned off the loan money to his loyalists, effectively indebting the country and impoverishing his people for generations, according to a three-year investigation by The Sentry, a policy organization tracing corruption in Africa.

With oil exports now considerably affected once more, experts believe Kiir may chase new loans to keep his inner circle happy.

Some point to the UAE as a party that may help South Sudan to expand its influence in the region.

“There have been long-standing talks between South Sudan and the UAE [United Arab Emirates] for a big loan, but obviously circumstances have changed given the pipeline picture,” said Boswell. “I think most [South Sudanese] officials will typically look at the UAE as the first candidate to bail South Sudan out.”

Boswell added that the IMF could be another option, even though South Sudan struggles to repay loans it took out during oil production stoppages. Oil stoppages also hamper its ability to raise money, while the alleged corruption and mismanagement disperse what money it does have.

Edmund Yakani, a South Sudanese expert and peace activist, believes the UAE “may use a loan to buy South Sudan’s acceptance of its interests and agenda in Sudan”.

According to a UN Panel of Experts report, the UAE provides direct military support to the RSF via Amdjarass in northern Chad.

The UAE denies these reports and claims it is sending humanitarian supplies.