Juba is considering the cessation of oil shipments through the conflict-ridden Sudan

South Sudan is facing a worsening economic crisis, as evidenced by recent revelations of a desperate strategy to fully halt its oil shipments through Sudan, which has been ravaged by war.

This exacerbates the strain on the declining foreign exchange reserves, hampering commercial activity and impeding the operations of both domestic and international enterprises.

Following an unrepaired ruptured pipeline, Khartoum is currently dealing with an ongoing confrontation between the army and the paramilitary militia Rapid Support Forces (RSF), which began in April 2023.

According to a report by The Sudan Tribune on July 22, Juba is contemplating halting its oil export through Sudan due to a lack of agreement and diminishing financial resources. This decision comes as state officials in the country have not received their wages for nearly nine months.

The journal, which focuses on Sudan, South Sudan, and nearby nations, also mentioned the absence of agreement among the conflicting parties over the distribution of oil profits. Only a meager amount of 140,000 barrels of oil is being shipped through the pipeline.

Due to ongoing financial constraints, we have been unable to fulfill our obligation of paying salaries to our civil officials for a period of nine months, despite the continuous flow of oil. In fact, the current export volume stands at less than 140,000 barrels.

“Upon subtracting the operating expenses of the oil companies, it is evident that no residual amount remains.” The journal said, citing an anonymous official at the country’s Petroleum ministry, that it does not encompass costs.

There are diverse perspectives. There is a growing movement to completely halt the production and distribution of oil due to its exclusive advantages for the opposing groups involved in the Sudan conflict.

“Some people suggest that we should make do with the small amount of money we still receive from the oil, but it is evident that the current oil revenue is negligible.”

“It incurs liabilities and does not allocate any funds for compensating employees.”

Bank of South Sudan (BoSS) Governor James Alic Garang refuted the possibility of a complete cessation of oil exports through Sudan, without providing further elaboration on the proposed strategy.

Dr. Garang refuted the news of the shutdown, stating that it is not real, in an email answer to The EastAfrican.

Approximately 90 percent of South Sudan’s revenue is derived from oil exports. There is concern that the conflict in the northern regions of the country will hinder the production and export of oil through Sudan, leading to economic instability in terms of public debt sustainability and cross-border trade.

Oxford Economics Africa economists predict that the South Sudanese economy would experience a growth rate of two percent in 2024.

Due to the rise in humanitarian assistance for Sudanese refugees and the high costs of servicing debt, it is projected that the fiscal deficit would expand in 2024.

“The increase in refugees has led to a higher demand for imported products in South Sudan to cater to a larger population of consumers.”

The analysts predict that the trade balance will be negative this year, according to a country economic estimate for South Sudan dated April 17, 2024.

Juba had a decrease in oil production, dropping from an average of 150,000 barrels per day (bpd) in 2023 to 90,000 bpd in March 2024. Additionally, during the same month, a significant pipeline in Sudan suffered a leak.

As a result, South Sudan’s capacity to transport its crude oil to global markets was completely halted, since Sudan is the sole channel for exporting crude oil from the landlocked country of South Sudan.

The research states that the amount of South Sudanese oil exported to international markets in March was just 1.2 million barrels, which is a decrease from 2.2 million barrels in February and 6 million barrels in January. 

The transportation of oil started to decrease in February, following the identification of pipeline damage on February 10th.

The research states that due to oil production contributing to more than 90 percent of overall fiscal revenue, governmental expenditure is expected to face pressure until the pipeline is repaired or an alternate pipeline is utilized.

Juba is currently facing a scarcity of dollars due to a decrease in income from oil production, which is the country’s main source of revenue. This decline is a result of depleted oil wells and ongoing military strife in Sudan, which is Juba’s neighboring country.

Governor Garang of BoSS acknowledged that the oil reserves have reached a “historically low” point due to geopolitical pressures, such as the ongoing crisis in Sudan and the Israel-Hamas war.

He stated that the insufficient reserves have significant ramifications for the country’s balance of payments, resulting in currency devaluation and substantial fluctuations in the prices of goods and services.

Dr. Garang stated that the geopolitical tensions, such as the ongoing war in Sudan, have impacted our pipeline to Port Sudan. Additionally, the conflict between Hamas and Israel has disrupted the main trading route in the Gulf of Eden, where we transport our crude oil. These challenges have had a negative impact on South Sudan’s economic prospects.

Since April 2023, Sudan has been embroiled in a struggle between the army and the RSF, resulting in the deaths of tens of thousands and the displacement of millions, both internally and beyond international borders. 

The violence has inflicted significant harm on the healthcare system and infrastructure, bringing the country perilously close to famine. 

Despite multiple iterations of negotiations in Jeddah, Saudi Arabia, a ceasefire has not yet been attained.

The Sudanese army and the RSF have been invited by Washington to participate in ceasefire talks that will be mediated by the US. These talks are set to take place on August 14 in Switzerland.

US Secretary of State Antony Blinken stated that the discussions will involve regional parties and international organizations with the goal of achieving a comprehensive halt to violence throughout Sudan.

Additionally, they are intended to facilitate the transportation of humanitarian assistance to individuals need it and build a strong system for monitoring and verifying compliance with any agreements that are made.