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South Sudan’s Peace Needs More than Tents and Generators
South Sudan’s Peace Needs More than Tents and Generators
South Sudan’s oil sector needs to become more transparent
South Sudan’s oil sector needs to become more transparent
SPLM/A-In Opposition at the Permanent Ceasefire and Transitional Security Arrangements Workshop in Addis Ababa on 17 September 2015. CRISIS GROUP
Commentary / Africa

South Sudan’s Peace Needs More than Tents and Generators

In the heat of the dry season, Juba waits, knowing big things are on the horizon. After two years in the bush, a handful of Sudan People’s Liberation Movement/Army-In Opposition (SPLM/A-IO) officials are back in town, though their leader, Riek Machar, and his forces are absent. Economic crisis permeates every facet of daily life, with relief in sight only if Machar returns, and a deal is made with old adversaries in Sudan. War and peace questions mix with daily survival in a capital that has tried hard to return to normal after the targeted ethnic killings of December 2013. At least 27,000 civilians still do not feel safe enough to leave camps the UN protects.

Yet, there are signs of hope. The peace agreement for South Sudan that the regional organisation the Intergovernmental Authority on Development (IGAD) brokered in August 2015 is holding, though its provisions are not implemented. A transitional government and the cantonment of thousands of fighters should be in place and numerous reform processes underway, but they are not. The ceasefire is largely a success in the Greater Upper Nile crucible of the original war but under strain elsewhere, as conflict has expanded to the former Western Equatoria and Western Bahr el Ghazal, and in the wake of violence and attacks on civilians sheltering at a UN base in Malakal on 17-18 February.

Machar, the head of the armed opposition, refuses to return to Juba to help form the government without substantive progress on the transitional security arrangements. While opposition generals negotiate around the clock with the government in Juba to make this happen, Machar is accused of sacrificing the agreement to pursue his wider political ambitions. For its part, the government has embarked on an ambitious process of establishing 28 states from ten – a move that partly drove the violence at the UN base in Malakal – while countering rebellion in the Equatorias and former Western Bahr el Ghazal.

Map of South Sudan in the region. CRISIS GROUP

Mediating without Mediators

The institutions charged with overseeing the agreement, principally the Joint Monitoring and Evaluation Commission (JMEC), which reports to the IGAD Heads of State – in this case the core quartet of Ethiopia, Uganda, Sudan and Kenya – are in equally poor shape. JMEC’s membership is diverse, including, among others, the warring parties, civilian political opposition, IGAD member states, UN, African Union (AU), Troika (U.S., UK and Norway), and China. Its chair is the former Botswanan President Festus Moghae, whose deputy is ex-Guinean Prime Minister François Fall, both deliberately chosen from outside a region whose deep and competing equities in South Sudan continue to generate controversy, even when it comes to JMEC staffing and leadership roles.

IGAD’s failure to meet to decide contentious issues has left JMEC unable to respond when the parties create facts on the ground.

IGAD’s failure to meet to decide contentious issues has left JMEC unable to respond when the parties create facts on the ground. On 24 December, as soon as its chairman was on a flight out of Juba following the first formal JMEC meeting with both government and SPLM/A-IO, South Sudan President Salva Kiir decreed establishment of the 28 states. By the time the IGAD foreign ministers called for the creation of a boundary commission following formation of the transitional government in late January, the 28 states were a reality. New governors, state ministers and county commissioners continue to be appointed and take up their posts, and talk in Juba is more focused on the winners and losers of this process than overall peace implementation. JMEC – never designed to mediate but rather to oversee and report to the Heads of State – almost looks set up to fail.

Money, Money, Money

Even if implementation were to progress, the government’s empty coffers would struggle to meet the most basic existing requirements, let alone the additional structures the peace agreement outlines. Due to inflation, the lowest-level salaries no longer even pay civil servants for their bus fare to work. The August agreement demands creation of more than twenty new institutions, includes provision for the cantonment of tens of thousands of fighters and requires the movement of thousands of government soldiers 25km outside of Juba, among other costly provisions. At least some of the latter are political or technical additions not negotiated by the warring parties, which gives the government further grounds to deny responsibility for their financing.

Western donors – many of whom were both official witnesses to the peace agreement and South Sudan’s original patrons at independence – are reluctant to throw good money after bad.  They say they will not “reward” a government that destroyed its own nascent infrastructure and brought itself to the brink of fiscal ruin through corruption and excessive military spending. China, with less historical hang-ups, is more willing to engage within its own parameters, particularly by giving in-kind support. Its offer of tents, generators and other mobile infrastructure to support the cantonment process helped break the deadlock on transitional security arrangements and removed at least one obstacle to the agreement’s implementation.

Many Western donors feel the government is holding them and the peace deal hostage in the hope of getting cash for implementation.

As temperatures continue to rise in Juba, so do tensions. Many Western donors feel the government is holding them and the peace deal hostage in the hope of getting cash for implementation; there is near-constant brinkmanship between government and donors over small but critical matters such as payment for hotels and flights for opposition figures to return to Juba. The government argues it should not be asked to fund the SPLM/A-IO, whose chair has profited from the war.

But if the donors want peace, they will have to pay. At times their priorities look skewed. The overpriced and underperforming internationally-led Ceasefire and Transitional Security Arrangements Monitoring Mechanism receives millions, while the National Architecture for the Implementation of the Permanent Ceasefire, whose effective functioning is critical to the agreement’s overall success, has no financial provision.

In fact, the government’s fiscal crisis is probably the best lever available to push for implementation, since the possibility of an international economic bail-out is directly tied to formation of the transitional government. The government is seeking to demonstrate progress to the International Monetary Fund by appointing its own members to the transitional government, while pressuring Machar to return to Juba.

The Bigger Picture

The risks facing South Sudan’s peace process are made worse by the danger of losing its regional anchor. The IGAD quartet’s domestic distractions and some minor bilateral spats have caused JMEC to flounder, with large external players  – primarily the Troika and especially the U.S. and China, the latter providing practical incentives – stepping in to keep up the momentum. Though welcome, the backstopping threatens the same fate for this agreement as the 2005 IGAD-brokered Comprehensive Peace Agreement between Sudan and the then Sudan People’s Liberation Movement/Army (SPLM/A), which ultimately lead to South Sudan’s independence. Then the region took a backseat to the Troika and UN for much of the implementation, many of whose provisions fell by the wayside, laying the groundwork for the conflicts in South Kordofan and Blue Nile; the ongoing dispute over Abyei’s status (and a UN peacekeeping mission of its own); and the failure to meaningfully transform the leadership in Khartoum or the SPLM/A.

The current South Sudan peace agreement was a product of careful compromise by the IGAD Heads of State following months of mediation supported by the wider international community. At the outset of the war, Uganda backed Juba, and Sudan provided more muted support to the SPLM/A-IO, with greater regional confrontation a distinct possibility.

Yet, to the surprise of many, Sudanese President Omar Bashir and Ugandan President Yoweri Museveni found common ground in resolution of the war and a springboard for improvement in their bilateral relations. Sudan and South Sudan ties, which deteriorated soon after independence and led to armed confrontation over Heglig, have also improved. The start of negotiations over oil fees and other outstanding issues such as the border, armed groups and Abyei, offers the prospect of stabilising the hard-won regional peace and is welcome.

Reinforcing Peace or Reverting to War

South Sudan is at a critical juncture. Decisions made in the coming weeks will determine whether the country will continue the process of pulling back from further war and economic ruin or falling back into conflict and economic crisis. Peace is required for an international bail-out, and the international community should provide this incentive. At the same time, renegotiation of oil fees with Sudan, which could mitigate some of Juba’s currency crisis, offers the prospect of peace between the two neighbours, as talks expand into major outstanding post-independence issues. With the stakes so high, IGAD needs to continue to step up its role, as more mediation than oversight is required. South Sudan has come so close to implementing the peace deal, but making it a reality requires a unified IGAD and JMEC front in the service of peace.

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.