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South Sudan: No Sanctions without a Strategy
South Sudan: No Sanctions without a Strategy
South Sudan’s oil sector needs to become more transparent
South Sudan’s oil sector needs to become more transparent
Statement / Africa

South Sudan: No Sanctions without a Strategy

As South Sudan’s civil war continues unabated and multiple peace processes and initiatives create little tangible progress, members of the UN Security Council are seeking to adopt sanctions against six generals, three each from the government and the opposition sides. This would in effect punish past wrongdoing and risk compromising ongoing peace efforts. It would also undermine the renewed impetus for a coordinated international approach to peacemaking in South Sudan. That process remains under the auspices of the regional body, the Intergovernmental Authority on Development (IGAD), which has recently been augmented by a wider grouping, known as “IGAD-PLUS”. Imposing sanctions on these generals at this time would also turn individuals and communities in South Sudan who currently favour a peace agreement against the international community. The Security Council should hold off on this sanctions package and reframe its South Sudan sanctions strategy.

None of the six named generals are responsible for the failure to reach a viable agreement. They are not key political decision makers and do not play major roles in shaping positions at the Addis Ababa negotiations. Most favour a negotiated settlement and their support will be crucial for successful implementation of any peace agreement that is achieved.

The failure of the IGAD-sponsored talks to date has created frustration, but IGAD-PLUS, launched in South Africa earlier this month, seeks to coordinate a more effective and broadly-supported international strategy by bringing in additional important players, including the African Union (AU), the U.S., UK, European Union, Norway and China, among others. IGAD-PLUS can only succeed with coordinated and effective support from its members and the Council. While IGAD, the AU and UN agree that the road to peace undoubtedly requires a combination of pressure and incentives, these proposed sanctions would likely weaken, not reinforce a more strategic approach. A unity of approach is required, not uncoordinated, independent actions that may produce long-term negative consequences for peace prospects.

Sanctions as a means of pressure should:

  • be imposed only when clearly supporting a revitalised peace process;
  • make clear to those targeted what they would need to do to avoid the sanction or have it removed; and
  • provide clear timeframes and benchmarks for such action to be taken.

The sanctions that are being considered meet none of these tests. In seeking to demonstrate the credibility of the Council’s threats, the Council risks achieving the reverse with ill-timed and ill-conceived sanctions. They will not build greater support for an improved peace process, which is the present imperative, and should not be pursued.

Addis/Brussels

Op-Ed / Africa

South Sudan’s oil sector needs to become more transparent

Originally published in The African Report.

South Sudan’s fortunes have always been tied to its oil. The discovery of oil in the late 1970s deepened tensions between the South Sudanese and the regime in Khartoum and fueled violence after the outbreak of Africa’s longest-running civil war as both sides vied to control the region’s oil fields.

Oil then laid the groundwork for South Sudan’s secession. A landmark 2005 peace deal granted Juba half of the South’s oil revenues, pumping billions into the new semi-autonomous government.

But the sudden wealth gravely compromised the country’s stability. By 2013, only two years after independence, the elite scramble for South Sudan’s oil riches helped trigger a fresh war that may have killed 400,000 people while displacing millions.

Nowadays, despite a 2018 peace agreement and a government of national unity, Juba’s monopoly on oil revenue obstructs a broader political settlement the country desperately needs.

South Sudan’s leaders siphon off the bulk of the petrodollars, leaving much of the population starved of basic services and, in some parts of the country, on the brink of famine.

Pervasive corruption has become a huge source of frustration for donors, including the US, which allocates a billion dollars a year primarily to sustain humanitarian relief. South Sudan produces roughly 150,000 to 170,000 barrels a day. But because of the share owed to oil companies and fees paid to Sudan, it earns income from 45,000 barrels at most, according to the best estimates available. Little of that income reaches the national budget due to off-budget expenditures, undisclosed debt payments, and allocations to its opaque state oil company Nile Petroleum.

Those who still support South Sudan cannot ignore its rotten finances. Since oil underwrites the entire South Sudanese state, addressing the country’s deep troubles is impossible without a focus on its vanishing petrodollars. A first step in this direction is making the oil economy more transparent, not only in South Sudan, but also in Europe, host to many of the country’s commercial financiers.

Oil fuels tensions

Despite staggering poverty and underdevelopment, South Sudan qualified as a middle-income country at its birth thanks to its oil wealth. But instead of serving as a foundation for state-building, oil poisoned South Sudan’s politics. Before independence, rebel commanders enriched themselves through a mix of taxation, aid diversion, artisanal gold mining, deforestation, and outright looting. This culture of illicit self-dealing quickly came to resemble a free-for-all when the 2005 peace agreement unlocked billions of petrodollars.

After independence, oil money papered over the South’s ethno-political divisions until President Salva Kiir moved to consolidate power, tightening his grip on oil funds in the process. Only two years after secession, a leadership struggle between Kiir and internal challengers, led by his main opponent Riek Machar, burst into a civil war that drained state coffers, with oil production decreasing because of the conflict.

To stay afloat, South Sudan turned to a handful of commodity traders to purchase future deliveries of oil, including Swiss-Singaporean Trafigura, which bought South Sudan’s oil through secretive pre-payment arrangements. These high-interest cash advances worked like the petrostate equivalent of a payday loan scheme, piling up debt while hiding South Sudan’s finances ever further from sight.

Back to the books

South Sudan’s future would appear less bleak if the countries that foot the bill to alleviate the country’s humanitarian disaster focused on making sure Juba accounts for its oil revenue.

Donors should make a concerted effort to push Juba to comply with existing laws and provisions in the 2018 peace agreement to ensure that oil proceeds are paid into a single public oil revenue account. One source of leverage is through the IMF, which has given South Sudan $550m in the past year but with few strings attached. The IMF should condition future disbursements on the exclusive use of the public oil account.

Outside pressure on Juba should be supplemented with pressure on South Sudan’s financiers. European governments should urge trading companies with a strong corporate presence in Europe to disclose their payments to South Sudan and demand the funds be deposited into the official oil account.

They should also consider drafting regulations requiring commodity firms under their jurisdiction to certify compliance with South Sudan’s law. This could work. Following engagement by the UN Panel of Experts on South Sudan, Glencore has disclosed purchasing $950m of South Sudanese oil since 2018. Additional leverage could come from widening the regulatory net to the commodity firms’ insurers and bankers, many of which are also in Europe.

Declining output and global decarbonisation mean that South Sudan will not be in the oil business forever, and given the trouble it has caused there, the transition may provide as much opportunity as risk. Still, bringing the oil money back onto the books of the national budget could at least give the South Sudanese a chance to reset their bloody politics now, not when the oil pumps stop.