Sudan Violence Returns; Energy Interests Threatened

1 June 2011 FDI Team

Background

Northern Sudanese armed forces recently took over the disputed region of Abyei, which lies on the border between northern and, soon-to-be-independent, southern Sudan. While the recent clashes have so far mainly been confined to Abyei, the potential for an escalation of violence still exists. Should that occur, it would not only negatively affect a state still recovering from civil war, but may also affect the interests of China, India and Brazil, all of which have significant resource interests in the two Sudans.

Comment

South Sudan is on course to become officially independent on 9 July 2011. However, the decision on whether Abyei would be part of northern or southern Sudan was left undecided in the 2005 Comprehensive Peace Agreement, which set the groundwork for South Sudan’s independence. This has placed Abyei at the centre of violent conflict between the two Sudans, whose differences and hostilities remain.

The potential for renewed north-south hostilities as a result of the violence in Abyei is very real, given the imminent independence of the south. This scenario is one that would negatively affect the economies of China, India and Brazil, and, in particular, the energy security of the first two of these nations, should it eventuate.

Oil has been the primary reason for Chinese and Indian involvement in Sudan over the last decade. China has invested over US$20 billion in Sudan, which has funded initiatives such as dams and refineries, as well as a 1,600-kilometre oil pipeline to the Red Sea.[1]  As a result, China now has command of 40 per cent of Sudan’s oil sector and imports 60 per cent of Sudanese oil production.

India has also become a major player in Sudan, which it sees as being beneficial to its energy security and strategic interests in Africa and the Indian Ocean region. Bilateral trade between India and Sudan totalled US$1.0 billion in 2010. New Delhi has also invested US$2.5 billion in the development of the Sudanese hydrocarbon sector, with the aim of helping to address India’s growing energy security requirements.[2]

Energy security has not been the only motivation for increased foreign involvement in Sudan. Brazil’s involvement in recent years has come in the form of investments in Sudan’s agricultural, construction and engineering sectors. This has been largely for the production of ethanol, of which Brazil is a leading global producer. The first ethanol plant in Sudan, which opened in June 2009, was designed and manufactured by Dedini, a Brazilian company. Such involvement has meant that Brazil has been able to become a major competitor to India and China for strategic clout in Sudan, as well as in the wider Central and East African regions.  

Increased tensions and hostilities between northern and southern Sudan would have adverse effects on the interests of all three powers. As many of the oilfields are located in South Sudan, they may be vulnerable to attacks from the north, should all-out conflict resume. This would likely lower, or perhaps halt, the supply of Sudanese oil, thereby affecting the economies of India and China, both of which are dependent on reliable energy supplies to sustain their economic growth. Brazil would also be adversely affected, as a resumption of violence would render Sudan a geostrategic burden and set back Brazil’s ability to achieve greater influence in Africa and the Indian Ocean region.

Bruno de Paiva

Future Directions International Research Intern              

Indian Ocean Research Programme

 

 


[1]Sharife, K. ‘Rules of Engagement: Has China's $20 billion investment in Sudan's oil industry paid off?’,Forbes,4 May 2010.

[2]Commodity Online, 29 April 2011, ‘South Sudan to honour oil contracts with India’.

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