China's Sudanese Dilemma: Secure Oil Whatever the Cost

News broke in late March that South Sudan ordered its oil companies to start production again. The fledgling Sub-Saharan nation stopped oil exports in January 2012 amid failed negotiations with Sudan over oil transmission prices. Not that this is anything new. The two Sudans reached an agreement last September but it was never implemented due to disagreement over border security issues.

South Sudan broke away from Sudan a little over one-and-a half years ago after decades of civil war. However it's not what you would exactly call a clean-break. While South Sudan holds approximately 75 per cent of the oil reserves between the two nations, it is landlocked and has to export its oil through Sudan to Port Sudan on the Red Sea.

Before the oil production shutdown, South Sudan produced 350,000 barrels a day (bbl/d), which provided 98 per cent of the government's revenue. Sudan for its part lost around 75 percent of its oil production when South Sudan seceded in 2011.

Eric Reeves, Professor at Smith College in the US and author of Compromising With Evil: An archival history of greater Sudan, 2007–2012 told me that the agreement will not likely be implemented.

"The only question is how long it will be expedient for this regime, if it survives, to keep to the terms of the agreement. The border regions, virtually the entirety of the oil reserves area except for the more southerly Total Fina concession, have been extremely hotly contested since 2005 and have seen a continuing stream of military actions, including cross-border bombings by Khartoum's SAF [Sudanese Armed Forces]," Reeves said.

Reeves added that signing also takes diplomatic pressure off the regime [Sudan] in its conduct of two other brutal conflicts: in Darfur and in the Blue Nile and Nuba Mountains areas.

"Past diplomatic failures have made the celebration of this oil transit agreement excessive, and work to give the regime some breathing space. A hideous trade-off," Reeves said.

He said the only interest that Khartoum has in the south is the oil regions.

Enter mainland China. Not much happens these days in Africa where China is not involved in some way and that includes Sudan. In fact, in the last 10 years China's presence in Africa went from being a topic of debate to a central theme in international relations. First, China overtook France as Africa's largest trading partner, then overtook the US in 2009.

China's African investments have grown so much that the West criticizes it of colonization, something it was guilty of as well. Criticism was so loud that last May Chinese officials said at a three-week development conference in Tianjin, attended by 27 delegates from English speaking African countries, that China was not planning to colonize Africa economically and industrially through its investments.

At the conference, Wu Xiaxong, the Divisional Chief, National Development and Reform Commission of China, defended his country's increased investment in Africa, stating that China had a foreign external reserve of $3.18 trillion by 2011 from $167 billion in 1978 through a holistic implementation of reforms. He added that the total import and export growth of China had increased from $20.6 billion in 1978 to $3.64 trillion in 2011.

Albeit, Beijing's response makes for good PR. China's investment in Africa may rise by 70 per cent to $50 billion by 2015 from 2009, as it seeks to acquire resources, Standard Bank Group Ltd. (Africa's largest lender) said in 2011. Bilateral trade between China and Africa will reach $300 billion by 2015, double the 2010 level.

Last April Bloomberg reported that China's Export-Import Bank lent $67.2 billion to sub-Saharan Africa between 2001 and 2010, overtaking World Bank lending of $54.7 billion. The numbers are staggering, adding fuel to those that condemn China's African ambitions as colonization.

Back to Sudan. While the two Sudans were trying to hammer out a deal for oil to flow again, many experts including Reeves claim that Beijing was in the background quietly exerting its influence. And, why not? China imports roughly 70 per cent of Sudan's oil and has massive oil investment and infrastructure to protect. That could explain why Beijing was, and still, is an ardent supporter of Sudanese president Omar al-Bashir (who was charged by the International Criminal Court with genocide and other crimes during the conflict in Darfur).

But China is not only placating a convicted war criminal it also woos South Sudan as well. News broke in the Sudan Tribune that a Chinese diplomat had denied that China ever promised South Sudan around ￡5.3 billion in development funds after South Sudanese President Salva Kiir visited Beijing last April.

In fact, Beijing gives aid to both Sudans, playing both sides against an end game strategy. However, it may backfire. If the newest oil agreement between the two Sudans fails, then what? Suffice it to say, Sudan has a history of failed agreements, bloodshed, mistrust and misery.

Likely, Beijing will continue to appease both sides, in spite of what transpires on the ground.

The strategy for China is simple: Secure oil whatever the cost.