South Sudan can survive on credit, using its oil as collateral, if the north goes ahead with its threat to block pipelines after the south secedes on Saturday or if war between them breaks out again, officials said.
Such economic independence may give the new state an edge in tortured negotiations over oil rights with its old civil war foe, which has received 50 percent of the revenues from southern oil for six years and wants pipeline fees after secession.
“In case the south is forced not to export its own oil through the existing pipeline infrastructure through the north, we will use our resources to continue to live ... The south can still survive without a problem,” the south’s Director- General of Energy Arkangelo Okwang said.
Photo: Reuters
“If we are forced not to export our crude, we will definitely use some of our [oil] blocks to ensure we have roots,” he said, roots meaning money for the government.
The south produces about three-quarters of Sudan’s roughly 500,000 barrels of oil output and depends on oil for 98 percent of its revenue. The south funnels its oil through northern pipelines to Sudan’s only commercial port on the Red Sea coast.
Diplomats and southern officials have said it is unlikely the north’s President Omar Hassan al-Bashir will shut down those pipelines as the country is so dependent on oil revenues and already faces debts of about US$38 billion.
The south is due to split away today, a separation it won in a 2005 peace deal that ended decades of civil war with the north.
The territories are yet to agree on how they will handle oil revenues and payments, among other disputes — a situation that has unnerved diplomats who fear a return to war.
The conflict fought over ideology, ethnicity, resources and religion killed an estimated 2 million people and left a legacy of deep mistrust between the two sides.
Senior officials said a number of institutions had approached the south offering it credit in exchange for oil.
“A resource is a resource, and we have the resources. We have the petroleum resources ... They are there. They are like financial guarantors for a country like south Sudan,” Okwang said.
Such deals would allow the south the time to build a link southwards to an existing pipeline through Kenya, bypassing north Sudan altogether.
One Western diplomat said he knew that “there have been approaches” from parties to set up agreements that would allow the south to use future oil sales as collateral if the exports were shut down, but he did not name the groups.
“We are a sovereign state. We will borrow money. We have oil in the ground. We have a lot of friends who are prepared to offer us money,” Information Minister Barnaba Marial Benjamin said.
Southern officials say they would be willing to pay a transit fee to use the north’s pipeline, but insist that they will stop “sharing” oil revenues from the moment they secede. They have also said accepting credit offers would be a last resort, a contingency plan, if the north shuts its pipeline.
Asked what fee might be acceptable, Okwang declined to name a specific limit, but said it must fall within international standards, as with other landlocked countries like Chad that must export oil through their neighbors.
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