Home | Comment & Analysis    Monday 27 March 2006

Khartoum and the messy issue of oil

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By Riang Yer Zuor*

Mar 27, 2006 — The wealth-sharing agreement between the SPLM and the Khartoum government led by the National Congress Party made it very clear that the revenues generated from the oil extracted in the South should be divided into two halves, with one half going to the South and the other to the North. Whether this is being followed to the letter is another matter. But the majority of the Southerners believe that Khartoum is not honest. However, there was no way of pinpointing how it carried out its policies of dishonesty regarding the oil until the truth started leaping out of the closet early this year.

On Januarty 28, 2006, Salva Kiir Mayardit, the First-Vice President of the Republic of the Sudan and the President of the Government of South Sudan went on record by announcing at a press conference that the Government of South Sudan (GOSS) had not received its expected share of the oil revenue. This statement got everyone surprised. As the result, the issue of oil became one of the most talked about within and out of the Sudanese circles. Some, even within the government came out to support the Vice-President’s statement. Others came out to deny the accusations.

When Kiir made the statement at the press conference, I believe, he did not intend to provoke anyone. However, as messy as oil issue is, the statement brought to the surface unclean spots. And these unclean spots forced some members of the ruling National Congress Party (NCP), including the President, to take defensive positions and came out with statements ranging from accusing the SPLM of mismanaging money to accusing it of not having any experience in dealing with the accountancy issues. Others reacted by running to the media and giving out contradictory figures and sources regarding the barrels of oil extracted per day so far received by the GOSS.

Among the contradictory reports provided to the public by the members of the NCP include the following:

1- One of the first responses by Khartoum to Kiir’s statement was to order the National Petroleum Commission to meet “to review reports of the Minister of Finance and Energy and Mining on the oil production in the past year and the current year.” This review would, among other things, to look into the real amount of oil that the country had produced between January and December of 2005.

2- On February 1, 2006, The Standard repeated a report by al-Ray al-Aam that a source speaking on condition of anonymity “at the Federal Finance Ministry has said that the government of south Sudan has received $702 million dollars, this being part of its share from the oil revenue for 2005...” The only outstanding amount was $42 million dollars that would be transferred to the South as soon as the oil export for January 2006 was received. The same report contradicted itself by saying that the total share of money for 2005 was $744 million dollars, $544 million of which came from the oil and the other $190 million dollars came from non-oil sources. If you look at it, even this last part does not add up to $744 million dollars. Instead, it amounts only to $734 million dollars.

3- On February 13, 2006, both The Standard and Reuters reported on a forum in Dubai, United Arab Emirates. They quoted Angelina Teny as saying “At present, Sudan is producing 500,000 barrels per day of crude oil and expects to increase output to 650,000 barrels per day very soon this year.” The same source in the same report indicated that an oil ministry official had stated in November 2005 that the oil output would increase “to more than half a million barrels perday by the end of 2005 from about 330,000 barrels per day ...”

4- On February 27, 2006, The Standard reported on statements made by al-Zubair Ahmed al-Hassan, the Federal Minister of Finance. In responding to Salva Kiir’s statement, the Minister stated that the government would adopt “a new method ... for the sharing of oil revenue between north and south.” One of the things that the new method would involve was to prepare monthly reports examinable by international bodies. As far as figures were concerned, the Minister stated that his ministry had transferred to the GOSS its share of oil revenue in the total amount of $800 million.

5- The last of these government responses to this serious accusation came on March 4, 2006 in the form of an update on the oil revenue to the three-member Sudanese presidency that includes Omer al-Bashir, Salva Kiir, and Ali Osman Taha. At the end of the meeting, al-Zubair Ahmed al-Hassan made a press statement to SUNA. The statement included the following:

a- The oil export for 2005 was 100 million barrels, 31 million of which went to the operating companies;

b- Two per cent of the remaining 69 million barrels went to the Unity State;

c- Fifty per cent of the revenue from the remaining part of the 69 million barrels was paid to the GOSS;

d- The figure making up the 50% transferred to the GOSS was $798 million dollars;

e- $718 million dollars of the 798 was actually paid to the GOSS;

f- $80 million is not paid, but the Government of National Unity (GONU) will pay it to the GOSS; and

The amount of money representing the 2% for the Unity State is $32 million dollars, $21 million of which had already been transferred to the state with the remaining $11 million to be paid to the state “in the coming months.”

Analysis

1- The Discrepancies Regarding the Number of Barrels a Day

In his January 28 press statement, Salva Kiir stated that there were differences over the amount of oil that the country produces. The ministry of oil puts the daily production at around 330,000 barrels. The SPLM believes that the daily production could be higher than that, putting it at around 450,000 barrels. To this SPLM estimate was added 50,000 more barrels from the speech in Dubai by Angelina Teny.

Then contrary to what his ministry’s report said was the daily production of 330,000 barrels, the Minister of Finance reported a figure higher than that on March 14, 2006 when he updated the presidency. Even though the whole information made public was ambiguous on some important elements of the report, one could still put the pieces of the puzzle together and come up with one coherent piece. Some of the most important parts missing included the price per barrel, the operating companies that took 31 million of the 100 million barrels, and the companies and the countries that bought the exported oil. All of this missing information is very important if the Sudanese public is to be better educated as to the real figure of their natural resource. It is also important because it would give independent investigators a lead to independently verify the government’s report.

Nevertheless, anyone who wants to know about the building blocks of this sheltered report has a starting point. For example, it is reported that the oil production for the whole year of 2005 was 100 million barrels. If this is the case, then one can find the monthly production by dividing the 100 million by twelve months. The result should be divided by the four weeks of the month to get the weekly production. That weekly production should be divided by six business days a week to get the daily production.

Arithmetically speaking, the report should look like this:

100,000,000 barrels/12 months =8,333,333.33 barrels per month

8,333,333.33/4 weeks = 2,083,333.33 barrels per week

2,083,333.33/6 days per week = 347,222.22 barrels per day.

The arithmetic representation puts the oil production in the Sudan for the year 2005 at 347,222.22 barrels per day. This contradicts the 330,000 barrels per day that has been repeatedly reported by the government. This contradiction makes Khartoum look unclean. It needs to reconcile these differences if it is to convince the Sudanese public that it is a credible government that is honest with the citizens whom it has kept in the dark for far too long regarding this national wealth.

2- Discrepancies Regarding the Amount of Money Generated from Oil

The other important missing information from the Minister’s press statement is the price per barrel. This is extremely important if one is to know the amount of the revenues generated from the oil. However, one has a way to figure out by using the amount that the Minister said had been given to both the GOSS and the government of the Unity State in conjunction with the 69 million barrels from which the shares of both the GOSS and the government of the Unity State were derived.

First of all, take away 2% (1,380,000) of the 69 million barrels that constitutes the share for the Unity State, and you will remain with 67,620,000 barrels. According to the Minister, the GOSS has received $798 million, which constituted 50% of the oil revenue. This means that Khartoum has a similar amount of money, as it takes the other 50%. So, multiply $798 million by two and you will get the total amount realized by the Sudan from the oil. Divide that amount by the number of barrels, you will have the price for barrel.

If you represent this arithmetically, you end up with something like this:

69,000,000 - 1,380,000 (2%) = 67,620,000

67,620,000/(798,000,000 x 2)

67,620,000/1,596,000,000 = $23.60 per barrel.

In the years before 2005, the Sudanese oil sold for a price per barrel with an upward trend almost year after year except for one year: $19.80 for 1999, $27.90 for the years 2000, $21.50 for 2001, $23.20 for 2002, and $24.50 for 2003. This is according to Human Rights Watch, November 25, 2003 Press Release. In the international oil market, the price of crude oil per barrel went as high as $60.00 per barrel in the year 2005 due to the oil shortage that hit the industrialized nations of the world. The question to be asked now is, “How and why did the Sudanese oil sell for so small an amount per barrel in that particular year?” The answer can be found in the files inside of the ministries of Finance and Energy and Mining, the oil operating companies, and the foreign companies and governments that bought the Sudanese oil in 2005.

Khartoum May be Trying to Drive a Wedge Between the GOSS and the People of South Sudan

The exact words attributed to Salva Kiir in his press statement on January 28, 2006 regarding the oil revenues read like this: “We still have not got the real share of the oil revenues.” If one could take time and analyze this short statement, one would find that the statement is as simple as it appears. However, it was enough to ring an alarm bell in a mind filled with conscience of guilt. Members of the NCP took it as a denial of receipt of any money by the GOSS. But the truth is that Salva Kiir was saying that the GOSS had not received the whole of what was supposed to be received for 2005. The words “real share” indicate that Kiir was acknowledging receipt of something, but which fell short of the expected whole. This was confirmed by the revelations made by Khartoum officials in the weeks that followed the January 28 press conference.

Khartoum made noises at the statement because it had something that it was hiding, and it felt bad that it was being exposed. However, instead of coming out with a straightforward explanation, Khartoum chose to walk in a zigzag manner by giving contradictory responses. For example, on February 27, 2006, al-Zubair Ahmed al-Hassan stated that $800 million had been transferred to the account of the GOSS. According to the Minister, $197 million of that was spent on putting into effect the peace agreement before the formation of the GOSS. The latest report by the same minister on March 4 contradicted the transfer of $800 million by saying that the whole share of the GOSS from the oil was $798 million and that only $718 million of it was actually transferred. Khartoum also accused the SPLM of mismanaging money. Accusing the SPLM of mismanaging the money was a blatant attempt on the part of Khartoum to try to drive a wedge between the SPLM and the people. It was intended to turn the people of South Sudan against the GOSS.

With all these discrepancies, one cannot help to think that something fishy is going on in Khartoum concerning the oil revenues. This is because all the reports give you different figures, and one does not know which one to believe. This is especially when two of the reports discussed above came from one person and the other two came from another person and each of the two reports for each of the two officials from the same ministry contradicted each others.

Khartoum’s Hand Is Caught in the Cookie Jar

Even before the January 28 press statement, no one was under any illusion that Khartoum was honest with the oil money. The suspicion started during the formation of the GONU when the NCP would not compromise with the SPLM its position on the issue of ministries of Finance and Energy and Mining. Its strong determination to keep these two ministries was an indication that it had a plan to do something that it would not be able to do were they or even one of them to go to the SPLM. Now that both ministries are headed by members of the NCP, al-Bashir and his cronies can rest assured that they are free to manipulate the oil figures to their satisfaction. This is why the oil production per day is still controversial; it is why the reports regarding the GOSS share from the oil are contradictory. Nevertheless, it is something that the people of South Sudan have to live with, for they have chosen to allow the NCP to get away with those ministries during the formation of the GONU.

The one thing that is not acceptable is that Khartoum has eventually revealed that even the small thing that it has set aside for the GOSS has not been transferred in full. The latest report revealed that $80 million dollars belonging to the GOSS and $11 million dollars belonging to the Unity State had been used up by Khartoum on its own projects. This is a serious violation of the Comprehensive Peace Agreement. Khartoum has no business helping itself to the money set aside for the South.

The 50-50 division of the oil revenue was neither a legislative act nor a presidential decree. Nor was it a budgetary act. It was a result of a very long and serious negotiation that led to the signing of the peace agreement between two enemies. The expectation of everyone is that once the money is divided into two halves, what is the South’s share should go to the account of the South immediately regardless of whether the GOSS needs it or not, and regardless of whether Khartoum is in need of money or not. Who gave Khartoum a right or authority to approve its own loan from the Southern treasury?

The bottom line is that Khartoum was caught with its hand in a cookie jar. It stole that money from the Southern treasury. The South is not financially indebted to Khartoum and the money could not have been a loan. If it were a loan, it would have been approved by the Southern Assembly. And I doubt it that the members of the Southern Assembly or Salva Kiir had any idea of how much and for what reason that money was missing until it was revealed on March 4, 2006. I also doubt it that Salva Kiir could have given Khartoum okay to hold on to what was rightfully South’s. The truth is that Khartoum was trying to manipulate records for the purpose of making the money disappear without a trace. It was just caught in time before it could cover its own tracks.

Conclusion

Oil was not the main issue causing the North-South conflict, for the conflict preceded the discovery of oil in the South. However, it has become an element in the center of the conflict because of the way it has been used by Khartoum and its potential for rectifying the problems that had occupied the center of the Sudanese conflict for to long: absence of social, economic, and infrastructural development in the South. Therefore, any thing that tampers with it gets the blood of Southerners boiled.

Developments since the formation of the GONU have not been positive concerning the oil. Now more than a year has passed since the signing of the peace agreement and no one knows yet exactly how much oil Sudan produces a day. That lack of knowledge of how much oil is produced leads to the lack of knowledge of how much money the oil generates for the country.

The discrepancies between government’s own reports as to the barrels of oil produced a day and the amount of money that has been transferred to the GOSS, coupled with the fact that more than a year has passed without establishing a concrete number or figure is enough to convince anyone that Khartoum will never be a honest partner when it comes to oil. The oil now becomes the one thing that has a potential for sending the Sudanese back to the pre-peace deal era if the NCP does not change its nasty attitude regarding the oil.

* Riang Yer Zuor is a South Sudanese living in the United States of America. He is the author of a book entitled, “Modern Sudan: Its History and the Genesis of the Current Crises”.



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