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A few months ago, I blogged about South Sudan’s independence referendum and future implications for the country’s oil reserves. With the vast majority of South Sudan voting for independence from Khartoum, the establishment of South Sudan as an independent country has been slated for July 2011; however, many issues remain unresolved as to how the country will divide in two.

So far, no definitive agreement has been reached between the governments of Sudan and South Sudan on the future division of oil revenues, which could have significant economic implications for both countries. The land-locked south has large oil reserves, but the oil can currently only be exported via the Greater Nile Oil Pipeline, which travels 1,600 km through the north before reaching Port Sudan where it is exported overseas. At present, Sudan and South Sudan split the oil revenues equally (although the South claims Khartoum has been taking more than its fair share), but this agreement will likely change after July when South Sudan becomes formally independent.

Looking forward, options for Sudan and South Sudan include (1) continuing to split oil revenues; (2) South Sudan paying a transportation fee to Sudan for the continued use of the Greater Nile Oil Pipeline; or (3) the construction of a new pipeline from South Sudan through neighboring Kenya. With tensions running high as July draws nearer, both Sudan and South Sudan are aware of the economic implications of such revenue sharing agreements, as is China National Petroleum Corporation, which operates several blocks in South Sudan as well as the Greater Nile Oil Pipeline.

In recent weeks, relations between Sudan and South Sudan have been particularly strained since the north seized the disputed oil-rich region of Abyei, which straddles the border between both countries. The UNHCR estimates that 100,000 people have already been displaced by this latest conflict in Abyei, which is likely to further sour future negotiations between both countries over the partition of oil revenues.

In a recent New York Times article, Zach Vertin of the International Crisis Group argues that “Khartoum’s capture of Abyei and aggressive posturing on the eve of independence are, among other things, attempts to strengthen their negotiating hand and squeeze the South for as much as possible on oil, economic and border arrangements.”

Meanwhile, Andrew Natsios, George W. Bush’s former envoy to Sudan, believes that President Omar al-Bashir’s forceful takeover of Abyei is actually a ploy to avoid a coup d’état because “they want the guns of their own military pointing somewhere else besides Khartoum.”

The Abyei region did not participate in the South Sudan independence referendum in January 2011 because of disagreement over the area’s borders, and a separate Abyei referendum was scheduled to be held later in the year. Since Sudan’s seizure of the Abyei region, the referendum has been cancelled indefinitely, and with an estimated 5,000 northern soldiers now occupying Abyei, the threat of escalating violence continues to loom over the region.

 


Map source: Africa Undisguised