April 18, 2011

The July 9 birth of a new country, the Republic of South Sudan, will change the dynamics of Africa’s Great Lakes region even as the southern Sudanese struggle to build their own nation and government, according to four specialists speaking at the United States Institute of Peace on April 14. With relations between the north and south of Sudan likely to be “strained,” as former U.K. Ambassador to Sudan Alan Goulty said, “South Sudan will increasingly look toward its southern neighbors.”

South Sudan’s relationships with its southern neighbors will be important in terms of trade, technical assistance, entrepreneurial skills and labor, Goulty said. The panel broadly focused on three key issues: water, refugees and oil.

Water.

Independence for the south of Sudan is sparking questions about the new country’s future water use. Under colonial-era treaties, Sudan as a whole is entitled to use 18.5 billion cubic meters of Nile River water per year—about 22 percent. (Egypt, farther downriver, is even more fortunate. It is entitled to use 55.5 billion cubic meters, about 66 percent.) One question is how the north and the south will share Sudan’s current water rights. Negotiations have yet to reach a conclusion, noted Jon Temin, director of the Institute’s Sudan program. “Time is getting short,” he warned. Another question is whether future agricultural and other development in the south will increase demand for water. And intersecting with those issues is a pact negotiated over recent years that would rework the way Nile water is shared and managed. The Cooperative Framework Agreement has been signed by six upriver countries—Burundi, Ethiopia, Kenya, Rwanda, Tanzania and Uganda. They are asking for a more equitable sharing of the Nile. Egypt, Sudan and the Democratic Republic of Congo have not signed. As the regional politics of water change, Egypt is taking a strong interest in the impending arrival of a new player, South Sudan. Egypt’s new foreign minister made his first foreign trip to Khartoum and Juba, the future capital of South Sudan. Says Temin, “Egypt is trying to build a stronger relationship with Juba in anticipation of dealing with the water issue.”

Refugees.

The international community needs to do more to assist the resettlement of southern Sudanese in their new nation, said Andrea Lari, regional director for Refugees International. Nearly 8.3 million people are estimated to reside in South Sudan, he said. Of that number, more than a quarter have recently returned—some half a million who had fled outside of Sudan and 2.2 million who had been displaced into other parts of southern Sudan. Another 400,000-500,000 southern Sudanese currently in the north are expected to return to the south in the coming months. The challenges in accommodating all of those returning to an impoverished country are enormous. “There is a need for the international community to stabilize, as much as possible, South Sudan,” Lari said. Many of those yet to return from the north are skilled workers, and they will want jobs in the south, he said. A lack of opportunity to make a livelihood, he warned, could lead to conflicts and tensions within the south.

Oil.

Though most of Sudan’s oil deposits are located in the south, most of the transportation and refining infrastructure lie in the north. The new petro-state of South Sudan will likely remain dependent on those capabilities controlled by the north for some time. Even the metering capacity that measures oil flows is, for now, also entirely in the north, according to Raymond Gilpin, director of USIP’s Sustainable Economies Center of Innovation. The north and the south are negotiating over control of oil and natural gas assets ahead of the south’s independence on July 9; Sudan as a whole has between five and six billion barrels of proven oil reserves. The government of South Sudan receives nearly all—98 percent—of its revenue from oil operations. In the north, the government in Khartoum takes about 60 percent of its revenue from oil.

Gilpin suggested that the government in Juba will need to focus on infrastructure improvements and management and not merely oil revenue. South Sudan will also need to see that the use of oil revenue does not exacerbate ethnic or regional tensions within the south. Gilpin called the petroleum resources an opportunity “to demonstrate that this is a government for all.” He also cautioned that the south’s oil dependence creates “a lot of opportunity for corruption, unfortunately.” The international community, said Gilpin, should make clear that “the support is there, but the scrutiny is there…as well.” South Sudan may also have opportunities for regional energy partnerships. With other oil deposits in the Great Lakes region coming online, Gilpin said that collaboration between South Sudan and its neighbors on the building of pipelines could benefit all by lowering the cost of carrying oil to market.

South Sudan’s economic prospects will also benefit from the April 12 announcement by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) that current sanctions on the Government of Sudan will not apply to the south. The impact on South Sudan’s oil sector, however, is unclear. OFAC said that if the south and the north arrive at an agreement in which the new southern government makes payments to the north from the sale of southern petroleum, then U.S. companies would need to secure an OFAC license for any transaction they would undertake with the south’s oil sector.