The governments of South Sudan and Sudan have some unresolved issues left over from divorce that was finalised in July. From border demarcation to oil resources, one would expect South Sudan and Sudan to be at each others throats by now, but that hasn’t been the case at all. Faced with sudden loss of its hard currency earner – oil – Sudan crafted a budget that was filled with glaring shortfalls. To make up for the loss of its share of oil – about 75% worth – Sudan imposed exorbitant transit fees that would allow it to recoup upward of $2 billion annually.
South Sudan immediately declared this a nonstarter and called it “daylight robbery”. Indeed it was. What the Sudan was doing was something not done in other countries like Cameroon where Chad relies on pipeline running through Cameroon to export its oil to the world markets. Sudan threatened to block South Sudan’s oil if that latter did not yield. So far, we have not seen the government of north Sudan follow through on its threat. It tried stopping the release of tankers but later backed off. This could be a sign that cooler heads prevailed or something more could be at play: China.
China is not known to publicly tell other countries how to run their house. However, behind the scenes, China acts when its strategic interests are at stake. Chinese oil giant China National Petroleum Corporation (CNPC) owns significant (40%) interest in Greater Nile Petroleum Operating Company (GNPOC) that operates the pipeline. Furthermore, oil extracted in South Sudan accounts for 5% of China’s demand. While Sudan is the sovereign authority in areas where the pipeline passes, it does not see any need to antagonise companies by using the pipeline as a weapon. More importantly, China must have intervened on behalf of its companies to protect their investment from political interference. And China could easily prevail. It is the last country the National Congress Party can afford to upset. South is also interested in cultivating relations with China to keep its oil revenues flowing.
More information about China oil, please try to use 『 sz China Refining Monthly 』 - Free Trial So what role can China play in North-South relations? China as a major player in Sudan’s oil industry holds significant sway over North and South. Let’s focus on North for a minute. North or Sudan is one of the most heavily sanctioned countries in Africa today. Those sanctions are likely to stay unless the NCP regime is out of power and a more democratic and moderate regime is in place. A new government would be better positioned to solve Darfur, Kordofan, and Blue Nile’s simmering rebellions. Given that the NCP is likely to run the country for the foreseeable future, one cannot anticipate any substantial changes in sanctions. Those sanctions have narrowed economic options available to the NCP regime and China is the only glimmer of hope. It developed Sudan’s oil fields when no other country could let its companies anger the United States by trading with Sudan. Chinese companies filled the void and built oil infrastructure as well as dams and other economically significant projects. China opened its wallet and Sudan was only willing to indulge.
In addition to economic partnership, the NCP has found an ally in China at the UN Security Council. If China did not block or water down various UN Security Council resolutions on Sudan, the NCP regime would face serious problems. China protects Sudan at the UN in order to protect its economic interest. Now that most of the oil is suddenly in another country called South Sudan, it remains to be seen whether China will continue protecting a diminished asset. China views Sudan through economic lenses and not as a strategic ally like North Korea. So it will not tolerate Sudan biting the hand that feeds it. Sudan is worthless to China without oil and the NCP knows it. Keeping the pipeline open is the strongest link in the relationship.
Sudan and China maintain close military relations and China provides the bulk of Sudan’s armament needs. While other countries such as Russia and Iran supply Sudan, China is powerful source and transactions are less costly. The NCP intends to let this relationship continue to thrive rather than risk it just to rob South of its hard currency.
China’s relationship with South Sudan is beginning to take shape after years of well-founded mistrust. The South’s ruling party – the SPLM – was well aware of China’s role in enabling Sudan to develop its oil resources, which were in turn dedicated to procuring weapons used to wage war in the South. It is a bitter memory but one that can be overcome. China took an unusually short time to recognise the new country and has committed to cooperating with it in various spheres. This was not expected by the South and it was a much-needed confidence builder. China is known to not support secessionist elements in other countries for fear that it would erode its own attempt to stop Taiwan and Tibet from seceding. As long as countries continue to support a One-China policy, China ensures that it does not support elements fighting to break up their own countries.
So why was China quick to recognize South Sudan? It had no choice. South Sudan’s independence was widely expected and many countries were resigned to the idea of a new country emerging on the African continent. Even North Sudan had no choice but to accept the inevitable. Secondly, the SPLM had cultivated some relations with the China during its years in the government during the interim period. The SPLM understand that you needed China in your corner if you are going to outmaneuver the NCP. As long as China sees the new country through nonthreatening a lens, there was little need to rock the boat. South Sudan promised earlier on to protect the assets of Chinese companies and work with them to develop its oil resources. This was a good gesture on the part of South Sudan and it paid off. China is now able to play a true referee and its role as an impartial intermediary is somewhat recognised.
In the future, China is likely to shift its support in South Sudan’s direction because it is the one that has more oil under its control. Should Sudan play politics with the pipeline, China has the resources to build an entirely new pipeline to Lamu Port in Kenya. This will even further weaken Sudan’s negotiating position and the NCP knows it. However, we cannot ignore that fact that China has leverage on South Sudan in some areas. In addition to India and Malaysia, it is the only country with companies operating in South Sudan’s oil industry. China’s interest in South Sudan is now purely economical. South Sudan is interested in developing its economy and broadening it away from oil. South Sudan is hoping to attract loans and funds to finance its development projects and China – with its cash – is the number one address to visit.
China will continue to play an important role behind the scenes. Its influence can even rival that of the United States because it is the only country that can instantly get the attention of the NCP. As long as China plays it cards strategically to protect its economic interest and build goodwill with the people of South, it will be an invaluable ally. Furthermore, it can help bridge the trust gap between South Sudan and Sudan on other important issues such as border and unresolved issues.
(sudantribune.com, Edited by Topco)