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Sudanese Oil Deal: Step One

Newly-independent South Sudan and its northern neighbor Sudan finally seem to have agreed on the financial part of a deal to get the precious liquid flowing out of the south again; this is a crucial step for both countries, which rely heavily on oil revenues, the Financial Times reports. Most of the crude in the vicinity is located in South Sudan, but refineries and export pipelines to the Red Sea are in the north, intertwining the economic destinies of the two rivals. Here are the basic terms:

South Sudan will pay fees equivalent to $9.48 per barrel of oil for the use of export infrastructure in Sudan. It has also agreed to transfer $3.028 billion to Khartoum to plug part of the financing gap resulting from its secession from the north last year after decades of civil war.

Khartoum was earlier asking $36 a barrel for transit-rights, a figure that was unacceptable to Juba. However, the agreement requires outsiders to plug still another gap of $3 billion to satisfy the government in Khartoum. The U.S. has said it won’t pay this because of sanctions against Sudan, so it is encouraging China and Arab countries to step in in its place.

This is probably the best news to come out of South Sudan in the first year of its existence, but in context this is a pretty meager victory. The financial disputes may be solved (for now), but the much more serious danger of an imminent border war has yet to be addressed:

“It is a typical Sudanese formula. They fix the money part while the hard political issues get batted down the road,” the official said, alluding to delicate negotiations over disputed border territories and proxy militias still to come.

If this is the best news South Sudan has to offer, it’s off to a pretty sorry start. One year on, statehood hasn’t been the cure-all that do-gooder NGOs promised. Something tells us it will be a while before the Red Sea will again carry South Sudanese crude to distant shores.

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  • Kevin

    I suspect the money is the crucial part – the politics is largely window dressing. As long as the money is flowing both sides can finesse the politics. Both of these regimes are desperate for cash to pay off supporters and keep economic chaos at bay.

  • Jacksonian Libertarian

    South Sudan should cut a pipeline deal with Kenya, and ship out their oil that way. As long as they are dealing with the North, politics is going to be interfering with the business of making money.

  • Kris

    Ah, yes, those crazy Sudanese!

    In the meantime, here is how we civilized people function: “The U.S. has said it won’t pay this because of sanctions against Sudan, so it is encouraging China and Arab countries to step in in its place.”


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