On The Ground: Scenarios For South Sudan Crisis

BMI View : The conflict in neighbouring South Sudan presents a huge economic and military challenge for Sudan over at least the medium term, although it also provides an opportunity to reclaim a degree of influence over oil-rich territories, which it lost when the former gained independence.

BMI visited South Sudan in December 2013. Here, we present our findings and consider the implications for Sudan.

South Sudan's descent into civil war brings huge complications to Sudan, just two and half years since the former gained its independence. The fighting which broke out in South Sudan's capital, Juba, between elements of the presidential guard in mid-December 2013 has quickly spread to affect at least five of the new country's ten states, with conflict particularly intense in oil-rich Unity and Upper Nile, both of which border Sudan. The latter's economy depends heavily on royalties paid by landlocked South Sudan for the use of two pipelines, which carry output to Port Sudan, on the Red Sea.

Oil Economy Disrupted By Political Instability
Sudan/South Sudan Unplanned Supply Outages (b/d)

BMI View : The conflict in neighbouring South Sudan presents a huge economic and military challenge for Sudan over at least the medium term, although it also provides an opportunity to reclaim a degree of influence over oil-rich territories, which it lost when the former gained independence.

BMI visited South Sudan in December 2013. Here, we present our findings and consider the implications for Sudan.

South Sudan's descent into civil war brings huge complications to Sudan, just two and half years since the former gained its independence. The fighting which broke out in South Sudan's capital, Juba, between elements of the presidential guard in mid-December 2013 has quickly spread to affect at least five of the new country's ten states, with conflict particularly intense in oil-rich Unity and Upper Nile, both of which border Sudan. The latter's economy depends heavily on royalties paid by landlocked South Sudan for the use of two pipelines, which carry output to Port Sudan, on the Red Sea.

Oil Economy Disrupted By Political Instability
Sudan/South Sudan Unplanned Supply Outages (b/d)

Oil flows had only been restored in April 2013, after a 15-month hiatus, caused by a messy divorce in July 2012, which saw the two countries fail to draw a common border or agree a deal on oil sharing ahead of secession. The oil started flowing again after the finalisation of a deal between representatives of Sudan's President Omar al-Bashir and South Sudan's President Salva Kiir, which entails the south paying the north US$8.40 per barrel (/bbl) and US$6.50/bbl for the use of two pipelines, together with other fees.

South Sudan had existed as a semi-autonomous entity between 2005 and its independence in July 2011, after a 22-year civil war between the Sudan Armed Forces (SAF) and the rebel Sudan People's Liberation Army (SPLA). The latter now forms South Sudan's military.

Oil At Stake

The fighting in South Sudan pits elements of the SPLA who remain loyal to Kiir, who is an ethnic Dinka, against a loose coalition of renegades and militia forces, led by his former deputy president Riek Machar, a Nuer, who was dismissed in July. At the time of writing on January 6 2014, Machar's forces controlled Bentiu, the capital of Unity, together with large swathes of that state, and parts of Upper Nile state. The rebel forces were also back in control of Bor, the capital of Jonglei state, which has changed hands three times since the fighting began. Jonglei is home to significant (but thus far unexploited) hydrocarbon reserves.

Around 80% of South Sudan's oil output is generated by Upper Nile state, while approximately 20% comes from Unity. South Sudan's government claims that production has thus far fallen by only around 20%, from 250,000b/d to 200,000b/d. Although the government claims that output is running as per usual in Upper Nile, where it retains control of the crucial Paloch oilfields, production appears to have halted in Unity, where the best quality oil is produced. The government's figures cannot be independently verified at this stage, but there is clear potential for a further decline in output, with Upper Nile particularly at risk.

Not only is there the risk that fighting could spread to engulf Upper Nile's oilfields, but the heightened security risk has resulted in crucial foreign expertise being withdrawn from South Sudan, which could result in maintenance complications and further shutdowns. BMI witnessed employees of China National Petroleum Corporation forming large queues at Juba's international airport, in order to depart for Beijing, on December 21 2013. On December 24, a flight scheduled to take oil workers from Juba to Malakal, the capital of Upper Nile state, was cancelled, due to fighting.

Thus far, public comments from Sudan's government about the crisis bedeviling its neighbour have been limited. President Omar al-Bashir expressed general concern about the situation - together with the situations in other conflict-affected countries in the region, including the Central African Republic - on December 23, without going into specifics. Sudan's Information Minister Ahmed Bilal Osman has flagged his government's concern about the oil situation, alongside fears of an influx of refugees and small arms.

Al-Bashir On The Sidelines?

Both the economic and security threats generated by the civil conflict in South Sudan could motivate the SAF to intervene across the border militarily. This threat is enhanced by the history of enmity underlined above, which also brought the two countries close to war in April 2012, when the SAF and SPLA fought over the disputed Heglig oilfields.

However, multiple international sources have told BMI that Kiir and al-Bashir are tentatively standing by the 2013 agreement. Al-Bashir was due to travel to Juba on January 6, ostensibly in order to offer assistance to Kiir, in his attempts to solve the crisis. However, it is unclear how long such an agreement can endure, particularly if South Sudan's oil production falls much further, or if the renegades seize more territory.

The risk of Sudan being dragged into South Sudan's conflict is heightened by the likelihood that a diplomatic solution between the two warring parties appears unlikely, at least for the moment. Direct talks between the two sides were due to get underway in Ethiopia's capital, Addis Ababa, on January 5, but were still to begin, as we went to press. One of the key obstacles to such direct talks has been the rebels' insistence that political prisoners be freed first, but South Sudan's government has been adamant that it will not release individuals that it suspects of being involved in what it calls an attempted coup.

Scenarios For The Evolution Of The Crisis

Below we sketch out three broad scenarios for the evolution of South Sudan's crisis, set within the context of differing roles played by Sudan.

1. South Sudan's civil war is prolonged, dragging the SAF in on the side of Machar: This scenario has a precedent. During the 1983-2005 civil war, there was a split in the SPLA, with Machar in 1991 forming a renegade faction, which endured for many years. The SAF and allied militias backed Machar against the main faction of the SPLA, weakening the overall armed struggle against al-Bashir's regime.

The longer the crisis drags on, the greater the likelihood of this scenario being repeated, particularly if the rebels extend their control of oil territory into Upper Nile. Such an eventuality could involve Machar striking a deal with al-Bashir for the SAF to offer military support against South Sudan's military, in exchange for a separate oil deal, giving Sudan's government larger pipeline fees than it currently receives. This would involve Machar effectively carving out a buffer zone between Sudan and South Sudan, comprising a semi-autonomous, Khartoum-aligned state.

The potential for an alliance between al-Bashir and Machar is also fed by the involvement of Uganda in South Sudan's conflict. Uganda has sent troops and military helicopters, which have been used to bomb rebel positions in Jonglei state, according to multiple international sources, speaking to BMI and other media off-the-record. Concerns about Uganda's military embroilment would be high on the agenda during al-Bashir's meeting with Kiir in Juba. A further increase in Uganda's involvement in the fighting in oil-rich territories would be perceived as a significant threat by Sudan, increasing the chances of al-Bashir turning to Machar as a military counterweight.

Meanwhile, Uganda's involvement risks dragging Ethiopia into the conflict, particularly since the alleged bombing missions carried out by the former's helicopters have been close to the latter's border. This raises the possibility of a regional conflict, involving a scramble for South Sudan's natural resources akin to that seen in neighbouring Democratic Republic of Congo between 1996 and 2003, which has been dubbed 'Africa's first world war'.

2. South Sudan's civil war is prolonged, but Sudan's government remains largely on the sidelines, and aligned with Kiir: Even in the event of a prolonged conflict in South Sudan, there is still a strong chance that al-Bashir will remain largely aligned with Kiir. Despite defections, the SPLA remains stronger than the rebel faction, a large element of which is comprised of untrained militias. The SPLA should retain the capacity to keep control of the bulk of Upper Nile's oilfields, giving it enough revenues to keep on paying its most important troops. Under this scenario, Sudan's economic interests would be best served by continuing to take the pipeline fees it receives from Kiir's government for exports from Upper Nile's oilfields.

However, whilst this scenario involves al-Bashir largely throwing his lot in with Kiir, it by no means precludes the former seeking to extend Sudan's sphere of geographic influence. South Sudan has had to pull troops back from the still un-demarcated border, in order to fight the rebels, while other SPLA elements that had been located on the frontier have obviously defected to the renegades. This provides a clear opportunity for the SAF, in alliance with long-standing proxies, such as the Misseriya, to extend its sphere of geographic influence. Given the current fragmented politico-military situation in South Sudan, Kiir would have little option but to accept such a creep southwards by the SAF as part of the price paid to prevent al-Bashir aligning with the rebels.

3. A diplomatic solution is achieved within a three to six month timeline, allowing a gradual resumption of full oilflows: The gulf between the two warring factions in South Sudan is obviously huge at the moment, with many key would-be rebel representatives remaining imprisoned in Juba. Additionally, there is a significant and highly escalatory ethnic angle to the conflict. International journalists and human rights activists have gathered significant evidence that Dinka elements of South Sudan's security forces have carried out extra-judicial killings in and around Juba. Similarly, it is seemingly clear that Nuer militias aligned to Machar have murdered Dinka men, in non-combat situations.

However, a diplomatic solution over the short term (ie the next three months) cannot be precluded. There is still a degree of Dinka-Nuer cooperation at the top of South Sudan's military. The SPLA's commander-in-chief, President Kiir, is a Dinka, while his chief of staff, James Hoth Mai, is a Nuer. Additionally, the previous reconciliation - ie between Machar and Kiir's predecessor, President John Garang (also a Dinka) - had been preceded by much more prolonged targeted ethnic killings. Additionally, Machar may opt to pursue peace sooner rather than later, given a relative lack of financial liquidity, which will make it difficult to sustain the morale of his troops.

Heavy engagement by the international community is a further factor that may yet pull South Sudan out of civil war. The United States, Norway and Britain - three countries known as the 'troika,' which helped engineer South Sudan's emergence as an independent nation - are all heavily involved in attempting to broker a diplomatic solution. China also has a huge incentive to engineer a peaceful solution, including through influencing al-Bashir to engage proactively on the diplomatic side, given the People's Republic's very significant economic interests in both countries, which include physical assets and purchasing the majority of oil output.

Risks And Opportunities For Sudan

Overall, it is difficult to ascribe probabilities to the three different scenarios sketched above. The situation clearly remains extremely fluid and will likely remain so for some time. What is clear is that South Sudan's descent into conflict brings significant risks to Sudan, particularly economically, with a further decline in oil output very plausible at this stage, in the event of further fighting in and around the oilfields. This also brings domestic risks, given that Sudan's economy is already in a parlous state, with various austerity measures implemented over the past three years. One side effect could be an intensification of domestic political risks, including further destabilising protests against al-Bashir's regime, which have already reached significant and deadly levels, in response to the government cutbacks.

However, there are also clearly opportunities for the SAF to exploit the situation militarily, particularly in terms of pushing troops southwards, to claim territory ahead of an eventual drawing of a common border between the two countries. This is a scenario which is now very likely to occur, providing some breathing space for al-Bashir, in terms of placating military hardliners who viewed South Sudan's secession as a concession too far.

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This article is tagged to:
Sector: Country Risk, Oil & Gas
Geography: Sudan, Ethiopia, South Sudan, Uganda
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