August 24, 2011

Bashir looking for economic renewal

Since the Republic of South Sudan [RoSS] has declared it's independence, the leader of north Sudan has awoken to a new financial reality. The oil money is going, and soon will be gone.

For generations the revenue for the country of Sudan has come from the sale of agricultural products like cotton, sugar and gum arabic. When oil was discovered by Chevron in 1980, new possiblities opened up. An 1600 km oil pipeline was constructed from the oil fields across the country to Port Sudan. It opened in 1999.

The first eleven years of the 21st century belonged to Sudan. With new wealth that came from selling oil, Sudan aggressively pursued a building construction program for Khartoum, and the purchasing of military tools. The plan for Arabizing the country continued, with civil wars in the east, the south and the west, as minority groups resisted the marginalization, Islamization and destruction of their tribes and cultures.

In Sudan as a whole, oil sales revenue provided over 90% of the country's income during the first decade of the 21st century. This means that oil income was 10 times more than all the agricultural sales, which provided most of the income in previous years.

Sales of oil to China and other Asian countries provide $300-400 million US per month. After the Comprehensive Peace Agreement was signed, the income was split, about 2/3 to the north, and 1/3 to the south. In the south, of total revenue, new oil money provided 99% of income in 2006.

Most of the oil is in RoSS ground, and so sales of the oil will now all belong to the south. The north must seek to replace the oil revenues, or else return to the meagre income that agricultural sales brings.

How will the south spend their oil money?
The government of the republic of South Sudan has an agressive plan for creating a modern nation state. They are building a new national capital. Government services have to be put in place. Security services and military forces have to be established and maintained. They are creating a banking system, roads are being paved, a pipeline to Kenya's coast is being planned.

The government hopes to eradicate extreme poverty and hunger, and provide universal primary education. They have plans to combat HIV/AIDS, malaria and other diseases, and they want to ensure environmental sustainability by providing clean water and sanitation.

What is Bashir doing to replace oil revenue?
A plan was announced in February, 2011, just after the referendum, to spend 3 years creating a detailed map of north Sudan. The country is attempting to take an inventory of their physical resources. In the process of making the map, the government hopes to discover new mineral resources.

Gold mining is currently the only active high value resource extraction in the country. In the spring of 2011, various north Sudanese officials boldly proclaimed that gold mining would expand, thus making Sudan rich.

The government is more receptive to foreign companies who want to come in and look for gold, iron, etc. In addition, the government is interested in processing minerals. This added value work will provide employment for Sudanese. The export of raw iron has been outlawed.

For the oil in the ground, some of it actually is within northern boundaries. Sudan plans to double the production, which will draw down the overall amount more quickly, but it will smooth out the declining revenue of the country.

Sudan is planning to charge a fee to RoSS for every barrel of oil shipped through the pipeline. South Sudan wants to pay a fee of 41 cents per barrel. North Sudan wants to charge a fee of $21 per barrel. Actual costs of shipping the oil run about $3-4 barrel.

UPDATE: Sept 2. Reports of ongoing negotiation say that north Sudan wants to charge $32 barrel, while South Sudan has moved up from the minimal opening bid to a more realistic $4-7/barrel. Read the complete article at

Thousands of acres of new land will be planted, to increase agricultural production. Certain lands have been subject to exclusive deals to provide crops to Saudi Arabia and Egypt. The Kenana sugar production factory has been expanded. In December 2010, they expected to plant 500,000 feddans of cotton in 2011-12. In July 2011, that estimate had risen to 640,000 feddans.

In addition to increasing production in the country, President Bashir is looking for money from friendly countries. Sudan has asked all its ambassadors to seek out connections with possible foreign investors.

Sudan is also looking for millions of dollars worth of debt forgiveness.

For east Sudan, the Kuwait Donor and Investment Conference was held in December 2010. Over $3 billion was pledged. About $700 million was pledged by Sudan itself, yet we believe this is the same money that was previously pledged at the signing of the East Sudan Peace Agreement in 2006. Still, other countries have stepped up to help by offering millions of dollars for investment projects like cement plants, roads, water and electrical improvements, and colleges.

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