With the remapping of Sudan’s political coordinates, the issue of sharing oil revenues will play a key role in the country’s long-term political stability and economic development. Oil will compel even a politically independent Southern Sudan to cooperate closely with Khartoum. Transparency in oil production is thus a prerequisite for sustainable peace.

In a referendum held from 9 to 15 January 2011, the population of Southern Sudan voted in favour of secession from the north. The government of Southern Sudan, installed after the official end of the civil war in 2005, finances virtually its entire budget through oil revenues. Even in the capital, Khartoum, the oil fields account for roughly every second Sudanese pound. This fountain of wealth, however, gushes almost entirely in the southern part of the country, where most of the oil reserves are located. Refineries and pipelines, on the other hand, are largely found in the north. Since Southern Sudan has no access to the sea, this dependent relationship is unlikely to change in the short term. Both the north and south will therefore have to continue to cooperate in the future notwithstanding their conflict-ridden past.

This status quo is a prime illustration of the resource curse dilemma. Weak institutions encourage corruption, and the political leadership will have to grapple with the deleterious impacts of the lengthy civil war and extreme widespread poverty for decades. The unresolved issue of border demarcation in the oil-rich Abyei region provides further fuel for conflict. Global Witness recently criticized the continuing discrepancies in oil production figures as well as other irregularities. Maximum transparency in administering oil revenues – and independent monitoring – is therefore essential. Joining the Extractive Industries Transparency Initiative (EITI) could serve as an important signal in this respect.

CNPC, the Chinese oil company operating in Sudan, refers to it as the "land of hope" and "beautiful spirits". These may sound like callous compliments in a country ravaged by war. Yet, if oil is managed intelligently and in a transparent manner, it could, in fact, ensure a better future. Both the north and south would be well advised to adopt a pragmatic approach and leave the past behind. If they do not, sustainable peace will prove elusive - and both sides would be the losers. (Stephan Wolters)

The Study "Crude Calculations" published by Global Witness is accessible here.

You can find more information on EITI here.

Published in: ECC-Newsletter, 1/2011