Sudan: Clock ticks for Bashir on oil

The Foreign Report
Why Sudan’s economic problems – not its political ones – may pose the greatest threat to al-Bashir’s regime.

For thirty years almost without pause, governments in Khartoum – the capital of Sudan — have fought against their own people. The North-South civil war, which killed an estimated two million people and displaced four million more, ostensibly ended in 2005 with the signing of the Comprehensive Peace Agreement that allowed for the ethnically diverse South to succeed last year from the Arab-controlled North. But even if that conflict reignites as recent fighting indicates it might, the Sudanese government is now facing a new and even harder-to-combat opponent: its own people in the Northern cities which the government has long counted on for support.

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Sudan’s President Omar al-Bashir attends the African Union summit in Addis Ababa, Ethiopia, Sunday, July 15, 2012. Back in Khartoum, a rapidly deteriorating economy is leading to increasing calls for his ouster (AP Photo/Elias Asmare via Columbia University Library)

Residents in Khartoum and other cities demonstrated in the streets in January and again in June to protest government austerity measures that increased taxes, reduced subsidies on gas and laid off civil servants in an attempt to balance the $2.4 billion shortfall in Sudan’s national budget (already, Sudan’s rising national debt nearly equals its GDP). Police arrested as many as one hundred protestors in a single day of demonstrations. In July, eight people were killed and as many as 20 injured in the city of Nyala in Sudan’s western Darfur region during protests against a rise in transport costs. In June and again in August, students from the University of Khartoum demonstrated calling for the ouster of 23-year Arab President Omar al-Bashir, brandishing sticks that were met with tear gas.

The austerity measures have spurred severe inflation that is now approaching 45 percent. For the typical city dweller, this has meant a dramatic increase in the cost of living: Staple food prices throughout the country have risen between 43 and 137 percent in the past year and even educated, middle class citizens seem to be feeling the pressure.

I went to get tomatoes last week, and I went this week and there was a three times price increase,” said Elfadil Ibrahim, a professor at the University of Medical Sciences and Technology in Khartoum. “It’s nearing the impossible.”

Sudan’s economic crisis comes near 18 months after the southern third of it’s territory split off to become an independent nation– taking 75 percent of the region’s oil reserves with it. Because the only port capable of exporting it is in Sudan, Southern officials continued to pump oil northward after the split, sustaining both nations’ economies. But things turned sour when Khartoum began siphoning nearly $1 billion worth of the oil to compensate for what it called unpaid “transit fees” from the South. In January, Southern officials responded by shutting off the pumps altogether, cutting the lifeline that both nations depend on. Under pressure to relieve Sudan’s deteriorating economy, al-Bashir joined South Sudan President Salva Kiir in September to announce they’d finally reached an agreement to resume oil production. But due to logistical reasons it will take months to do so, and in the interim both parties must weather a declining economy.

South Sudan is well accustomed to economic hardship, having endured centuries of neglect by Arab governments that is part of the reason why 99% of southerners voted to secede in 2011. But to residents of Sudan’s cities, the sudden economic crisis that resulted from the loss of oil revenue is a new phenomenon, and a staggering one. Just two years ago, Sudan placed in the top third of all nations for GDP growth, with oil accounting for more than half of its national budget. Now, that economic growth has turned negative, with Sudan posting the sixth largest economic decline in the world last year.

To salvage an economy that’s had it’s revenue cut in half will require al-Bashir to exercise an entirely different set of skills than those needed to put down an armed rebellion and survive international pressure. So far, there’s little evidence that his regime is capable of adapting.

Some point to what stalled oil negotiations in the first place as an example of how little Khartoum’s approach has changed from what kept its economy steady for years: Siphon off resources from the South and offer little or no political autonomy or economic development in return. Khartoum demanded that South Sudan pay upwards of $30 per barrel in transit fees to ship its crude north, despite that the international standard for such agreements hovers around $1.

When South Sudan stopped pumping oil, “The north reacted with outrage but in truth it had employed similar brinkmanship in the past,” Sudan scholar Alex de Waal told the Economist in February. “Both sides fight like alley cats in negotiations. They will risk annihilation to carry a point.”

Or, perhaps not quite — As economic pressure mounts, Sudan and South Sudan announced in September they reached an agreement on border security and trade that includes provisions for resuming oil production.

Neither nation has a track record for respecting such deals. And Ibrahim, the Professor in Khartoum who also holds a degree in oil and gas law from the University of Aberdeen in Scotland, says even if the agreement is respected, it will take at least six to 12 months to clean the pipes and conduct maintenance so that oil can again flow northward.

He says Khartoum may not have that much time: “A government that has no money can’t really last that long. It can’t buy patronage like it used to. It can’t buy the support of the people.”

While al-Bashir has long ignored the interests of rural populations hundreds of miles away, it may prove difficult to do the same within the city where he lives and operates. The hundreds of Sudanese who’ve been arrested and tear gassed during protests aren’t the traditional ethnic minorities, armed rebels or disgruntled politicians one’s come to expect in a country known for its government-induced violence, political exclusion and neglect of most of its territory.

Rather, the recent protests in Khartoum are a clear response to the tumultuous downturn in the nation’s GDP by members of an urban population that remained fairly supportive of al-Bashir but who now see their livelihoods threatened by a deteriorating economy. And it’s a population that’s growing at a tremendous rate, as urban dwellers increased from 20% of Sudan’s population in 1989 to 40 percent just before the split.

Urban populations are very susceptible to inflation,” said Jack Goldstone, Professor of Public Policy at George Mason University, who studies how demographic changes affect politics. Goldstone. “They can’t grow their own food, so they’re at the mercy of what they can pay at the market. Your housing, your fuel, your clothing, everything – inflation undermines your standard of living immediately and drastically.”

Goldstone says many of the trends that fueled revolutions elsewhere in the region are also present in Sudan. Youth unemployment was already at 22 percent in 2009, and experts say it is surely rising as the economic crisis worsens.

Youth unemployment is very high but what’s most disturbing for the people is ‘what’s going to make it better’,” said Goldstone. “You have young people in their twenties wondering, ‘Am I ever going to have the chance to get married and have a family?’ It becomes an existential issue for a lot young people.”

So far, al-Bashir has been able to hold on to power in part because he’s more politically tactical and in tune with his citizenry than were other leaders who fell. When the Southern part of his country voted overwhelmingly to secede in 2011, al-Bashir accepted the vote and even congratulated the new nation. When “Arab Spring” protests emerged in Sudan in January 2011, al-Bashir diffused tension by announcing he would not seek another term after his current one ends in 2015.

The fact that Khartoum has invested in its urban infrastructure, creating new highways between cities, means many urban residents have seen measurable improvements in their standard of living.

Yes there’s corruption, but this government has done more for the people than any other regime,” said Ibrahim.

Perhaps more than anything else, al-Bashir’s tenure is secured by the fragmentation of his opponents among at least a dozen political parties and rebel groups that spend much of their time infighting, leaving no unified opposition to stand behind.

Benaiah Yongo-Bure, who researches Sudanese politics and economics from Kettering University in Flint, Michigan, suggests that many Sudanese who oppose the regime don’t feel as though they have outside support for their cause as did the oppositions in Syria, Egypt and Libya. He points to the UN’s hesitancy to intervene in Darfur as an example.

They don’t like al-Bashir, but they don’t like the alternative from the opposition,” said Yongo-Bure. “If there was a unified group, the possibility of overthrowing al-Bashir would be high.”

After all, it was unity around a common cause—independence– that allowed many Southern Sudanese ethnic groups and rebel movements to shake themselves free of Khartoum’s control. If the recent are any indication, Sudan’s current economic crisis may be opponents’ most useful tool in drumming up resistance against the National Congress Party’s rule.

Economic hardship is what brings people to the streets,” said Yongo-Bure. “So there are political activists who are taking advantage of the economic crisis to oppose the government.”

And the economic crisis,” he says, “could get them that critical mass.”

That, combined with the fact that many Sudanese seem to be developing higher economic expectations of their government than ever.

In countries where people know the government is collecting oil revenues, they expect those to trickle down to them,” said Goldstone. “For the Islamic population of the north, their expectations are in some ways higher in that, having lost part of the country, they’re expecting now some sort of peace dividend. A lot of ordinary Sudanese are saying, ‘Okay, the war is over, now what do we get out of this? Are we better off?’”

But until profits from transit fees arrive in quantities sufficient to fill the 50 percent hole in Sudan’s budget, al-Bashir’s regime must quickly find other sources of revenue to stem rising inflation that has been the driving force behind the demonstrations. In the meantime he must also prevent disillusionment within his own power base, or risk a takeover of the nature that brought al-Bashir himself to power 23 years ago.

The government needs to pay its civil service, its army,” said Yongo-Bure. “[Without that], a military coup could happen.”

Says Goldstone, “If the government starts to run out of money because of the dispute over the oil and some of the soldiers and officers worry that they might not get paid, then they might not defend the regime as fervently as they have.”

In the interim, Sudan will also have to keep foreign investors from being scared away by the economic uncertainty. Already, China canceled a major loan in April that would have improved electricity access in the North but that depended on future oil profits for repayment. One month later, China instead offered South Sudan a loan to improve infrastructure to the tune of $8 billion– more than the new nation’s annual budget.

All this is complicated by the fact that there is little evidence that al-Bashir is more dedicated to ensuring a viable future for his nation than he is to lining his own pockets. A March 2009 diplomatic cable sent to American officials by the chief prosecutor of the International Criminal Court, made public by Wikileaks, suggests al-Bashir may have personally taken as much $9 billion of the nation’s wealth during his tenure.

al-Bashir’s regime is structured much like those in SyrIa and Egypt: He’s got a corruption based regime that’s not necessarily popular or effective,” said Goldstone. What remains to be seen, he says, is whether Khartoum can keep Sudan’s economy from deteriorating further so as to pacify an urban population that seems increasingly willing to oppose their government for economic concerns.

My expectation for al-Bashir is that his time is limited. With the broad political discontent and al-Bashir’s illegitimacy due to the division of the country, I would not bet on him being in office 18 months from now.”

Read the full story as it appeared at the Foreign Report.