Why oil is critical in preventing a return to war in Sudan

While there are many outstanding issues in the implementation of the 2005 Sudanese peace deal, the issue of sharing oil revenue stands out as potentially decisive, and could lead to a return to war.

New evidence that shows production figures for 2009 don’t add up has emerged.

The figures, recently published by the China National Petroleum Corporation (CNPC) — the main oil company operating in the country — for the blocks it operates in Sudan’s Upper Nile State, are 12 per cent higher than those published by the Sudanese government.

The difference — 12 million barrels — is significant. The oil, worth $370 million, is enough to power a city in the US the size of San Francisco for an entire year.

When the North-South conflict reignited in 1983, there were already significant amounts of oil deposits in the South, although it was not until 1999 that the commodity was first exported.

The revenues helped the government to fan the conflict.

Indeed, a former finance minister has been quoted as saying that more than 70 per cent of the government’s share of oil profits was spent on “defence.”

The Southern rebels announced that oil infrastructure and personnel would be regarded as legitimate military targets, and the focus of the conflict moved to the oilfields, with hundreds of thousands of civilians being killed or forcibly displaced from their homes by forces allied to the government.

So, oil fuelled the conflict, yet, crucially, helped end it too.

Recognising the importance of sharing the revenues as per the Comprehensive Peace Agreement, signed five years ago, is key to an enduring peace.

The agreement stated that oil revenues would be shared equally between the federal government in Khartoum and the Southern government in Juba.

Since the CPA, Southern Sudan has received more than $7 billion in oil revenues, but the hoped-for development has yet to materialise.

Indeed, the region lays claim to being the poorest place in the world, with 90 per cent of its people living on less than a dollar a day,

Many blame the lack of development in the region on corruption and challenges with administering aid money.

But whatever the reason, the oil has fuelled resentment and threatens the peace process.

It has been tricky managing the arrangement surrounding the oil revenues.

While the South houses most of the oil, the North is in charge of pricing and selling as well as publishing the figures on output.

These in turn determine the revenue transferred to the South.

Given the history of mistrust and resentment between the two sides, the agreement was unlikely to be honoured.

And indeed the deal has been plagued with suspicions that Khartoum has been under-reporting the volume of oil produced and “cheating” the South out of money.

Virtually all Southerners that Global Witness — an organisation that investigates and campaigns to prevent natural resource-related conflict and corruption — has spoken to are convinced that the North is duping them.

Dissension

Until last year, these suspicions were not backed by evidence, until Global Witness analysed the figures published by the Khartoum government and compared them with data published by CNPC.

Our report, Fuelling Mistrust: The Need for Transparency in Sudan’s Oil Industry, published in September last year, revealed that the government’s production figures were below those of CNPC.

This appeared to give grounds for suspicions that the North was under reporting, in order to pay the South less.

While it is difficult to tell which set of figures is correct, clearly one isn’t.

Given that Southern Sudan is one of the world’s poorest places yet oil accounts for 98 per cent of its income, the consequences of underpayment do not need spelling out.

The inability of the South to independently verify the oil figures feeds mistrust between the two sides and adds to the considerable strains on the peace agreement.

The way to build trust is by getting to the bottom of how much oil Sudan really produces and how much it is sold for.

This means that a credible third-party organisation should carry out an independent audit. It would be the first step towards transparency.

When we first published our report, both sides agreed to carry out such an audit, but nothing has happened six months on.

Oil transparency is not only important now, it is also the key to avoiding future conflict.

If the South votes for secession next year, as the polls suggest, it will take more than 80 per cent of the country’s oil with it.

Given that the current revenue sharing agreement ends in January, it is difficult to see how this would not reignite the war.

Yet a newly-created country of Southern Sudan would be landlocked: while the North would want a share of the South’s oil, the latter would require access to the pipelines in the North for exporting the oil.

In other words, without co-operation, the oil will remain in the ground.

The United States, United Kingdom and Norway — the so-called troika that backed the 2005 peace agreement — all state they are working with both sides for a new wealth sharing agreement for 2011 and after.

An effective mechanism for brokering the peaceful division of oil is essential to preserving peace in either a unified or partitioned Sudan.

Sudan’s oil wealth offers the best chance to lift its civilians out of poverty: it also has the potential to drive the country away from a war that has already claimed two million lives.

Despite its problems, the revenue-sharing agreement has been crucial to maintaining peace in the past five years.

It is a concern for the region that five years after signing the historic peace agreement that ended Africa’s longest civil war, Sudan is still at the crossroads.

Signed in Nairobi, Kenya, the delicately balanced CPA offered fresh hope to a country devastated by four decades of bloody conflict.

It was laid out as a six-year roadmap involving power sharing, wealth sharing and democratic elections, which were aimed at rebuilding trust and fostering a desire for unity.

A referendum to determine the South’s independence was scheduled for January 2011, in the (thought to be unlikely) event the country was not united.

Brokering a meaningful agreement in an atmosphere of intense mutual suspicion was a huge achievement.

But since the signing, the Southerners’ confidence in the peace deal has been severely tested by delays and disputes over its implementation, which many perceive as a deliberate tactic of the Northerners.

The demarcation of the North-South border is still unresolved.

Elections originally scheduled for half way through the transitional period are now planned for April, just months before the referendum, and there are fears they may be delayed further.

The violence continues and armies are massing on either side of the border.

A recent report by Oxfam and others noted that last year, 2,500 more people were killed in the South, compared with the troubled Darfur region.

It seems a return to the conflict that claimed two million lives and displaced more than four in five southerners is all too possible.

Dr Rosie Sharpe works for Global Witness. E-mail mail@globalwitness.org