As fighting in Sudan continues, neighboring South Sudan faces an economic crisis due to the potential threat the conflict poses to its main source of revenue – oil exports. With oil accounting for over 90 percent of the government budget and 70 percent of the GDP, any disruption to oil exports would be catastrophic for the already struggling economy, which is suffering from high inflation and a high risk of debt distress.
The conflict could damage the pipeline that transports crude from the oilfields to Port Sudan in the Red Sea, which is why South Sudanese officials are concerned about the pipeline’s safety. According to Peter Biar Ajak, a South Sudanese scholar in the Belfer Centre’s International Security Programme, the country must seek multiple routes for the export of oil, as there is no guarantee that the Sudan route will continue to be viable.
Moreover, buyers of South Sudan’s oil are taking advantage of the conflict in Sudan to negotiate lower prices. At the same time, oil production has been affected because some contractors have ceased operations and foreign workers are leaving the oilfields due to fears of insecurity.
To mitigate the impact of any disruption, the South Sudanese government is looking at an alternative oil export route through Ethiopia to Djibouti, which would significantly reduce the distance to the seaport, as well as the cost of transporting oil and supplies. The Lamu route is also being considered, as it is shorter and more secure, although there is still no guarantee of security in Djibouti via Ethiopia.
However, bureaucracy at Port Sudan has been a major challenge, as authorities there tend to delay clearing South Sudan-bound supplies, thereby affecting their delivery on time. The war also threatens South Sudan’s food security, as it disrupts the flow of food imports from the North, and could exacerbate the country’s refugee crisis.
To address these challenges, South Sudan must diversify its economy and reduce its dependence on oil, with gold being a potential alternative source of income. The government must also invest in road infrastructure to transport oil and supplies, linking the country to Ethiopia, Central Africa Republic, Sudan, Kenya, and Uganda. Only by doing so can South Sudan mitigate the risks posed by the conflict in Sudan and build a more resilient economy.
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