Editorial Board

Oil Is the Key to Peace Between Sudan and South Sudan

What a difference a year doesn’t make. Last July, the birth of the Republic of South Sudan promised an end to a decades-long conflict that had claimed more than 2 million lives.

Yet nine months after South Sudan took its place as the 193rd member of the United Nations, its forces were fighting those of its reluctant parent, the Republic of Sudan, over an unsettled border and control of oil resources.

Today, after a stern diplomatic intervention by the UN Security Council, both sides return to talks in Addis Ababa, Ethiopia. To settle their differences, they will need firm pressure, strong support and creative, high-level diplomacy from China and the U.S., among others.

Here’s the problem: The six-year process that began with a Comprehensive Peace Agreement in 2005 and culminated in the creation of South Sudan failed to resolve issues critical to peaceful coexistence. These include the distribution of income from oil resources (which exist mostly in South Sudan but are refined in and exported through Sudan), demarcation of the border, and the rights of citizens from one country who choose to live in the other.

Tensions over oil came to a head in January. Spats with Sudan over pipeline fees and confiscated shipments prompted South Sudan to shut down oil production (350,000 barrels a day), depriving both countries of needed revenue. This brinkmanship was followed by South Sudan’s move in April to seize an oilfield in Sudan, sparking deadly retaliatory attacks, a breakdown in negotiations and the threat of a wider conflict.

The oil fight is relatively easy to solve, if there is political will. South Sudan now has three-fourths of the old Sudan’s oil resources, but that isn’t much good without a way to get it to market. (A planned pipeline via Kenya is years, and billions of dollars, in the future.) The absurd discrepancy in the value that the two sides on using Sudan’s pipeline ($36 versus $.60 a barrel) can be resolved by invoking global benchmarks. Market prices suggest a rate of $1 to $2

More difficult is the question of settling the border and disputed territories, and the related issue of the rights of citizens who have a foot in each country. Cartographers favor clean lines; tribes that migrate with the grazing season do not. The latter also defy government control, not to mention facile distinctions between a Muslim north and a Christian south. African Union mediators have sensibly suggested a soft border as one solution, which we support; both governments, however, have used hard territorial claims to whip up public support.

Each side deserves a share of blame for the current state of affairs. Sudan has routinely acted in bad faith, and has intensified its repression in Darfur and in its new border areas. South Sudan’s recent belligerence, its support for insurgents within Sudan and its handling of internal ethnic conflicts are also obstacles to peace. Neither government has a strong mechanism for, much less a tradition of, sharing power internally -- something that will take decades to develop under even ideal conditions. We worry that a comprehensive solution is unrealistic and out of reach, and that a more piecemeal approach would be better.

Start with the oil impasse. China gets almost 5 percent of its oil imports from South Sudan, is a major trading partner with Sudan and has growing investments in both countries. With the most leverage and the most to lose, it could speed a breakthrough on oil transit fees by offering Sudan financial assistance to make up for the oil revenue it lost with South Sudan’s creation. Meanwhile, China can help its interests in South Sudan not only through more development loans and aid, but by breaking with past practices and promoting openness and environmental and social considerations in its investments.

The U.S., which has been coordinating its efforts with China and other diplomatic partners, has much more leverage with South Sudan than the north, which feels betrayed by earlier signals that U.S. sanctions would be eased if the referendum for South Sudan was allowed to go forward. Any easing of sanctions on a country run by a president, Umar al-Bashir, indicted by the International Criminal Court must be carefully weighed. Yet such an easing could also yield concrete benefits for South Sudan -- everything from improving investment opportunities in its oil industry by U.S. companies to creating the space for a larger, and enduring, agreement on peace.

    To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at davidshipley@bloomberg.net .

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