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Ethan Belding
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Rather than taking a strictly financial view I focus on political, social, cultural, geographic and historical factors which impact global markets. My intent is to highlight overlooked non-economic factors that influence a variety of industries. Professionally, I teach Sociology, World Regional... More
  • How Exchanging Water for Access to Oil Infrastructure in the Sudans Could Benefit the Nile River Basin 0 comments
    Jul 7, 2011 11:34 AM

    On July 9th South Sudan will become the world’s newest country. As oil provides the majority of Juba’s budget, the ability to sell it is essential to the country’s development. However, disputes between North Sudan and South Sudan over the division of oil revenues has caused Khartoum to publicly threaten to refuse Juba access to Northern Sudanese infrastructure which is currently the most feasible means to get Southern Sudanese oil to the market. Despite this set back Juba has several important factors working in its advantage that could reduce the likelihood of inter state conflict:

    • The other East African States have a vested interest in seeing South Sudan develop.
    • Juba has the ability to reduce the supply of the White Nile’s water to North Sudan.
    • Egypt, who would also be impacted, is going through a period of instability. This unrest weakens Cairo’s capacity to prevent such an action.
    • International agribusiness is buying up large swathes of the Nile River Basin to provide food for much more powerful countries complicating the distribution of water resources.

    Clearly, all the countries in the region have a stake in ensuring that South Sudan develops. Effective diplomacy backed by guaranteed access to resources could result in a beneficial compromise rather than a war. Such an agreement would ideally lead to greater regional cooperation in managing the Nile which would ensure more water for all parties. Though violence is still a possibility and historical animosity in the region could derail negotiations, an agreement can still be reached if the aforementioned factors are addressed.

    Culturally speaking, Southern Sudan is related to East African countries. Development in South Sudan could provide employment for the large pool of unemployed labor in East Africa. This group includes highly skilled professionals such as teachers and civil servants who lack opportunities at home. Therefore, countries such as Uganda and Kenya have an economic interest in seeing South Sudan thrive as remittances would benefit their economy while fewer unemployed people will reduce social instability. The challenge here is that this development needs to be funded by revenue from oil. Since South Sudan is currently dependent on North Sudanese pipelines Khartoum has the power to devastate the South Sudanese economy. Juba has the ability to counter this threat by reducing North Sudan’s water supply from the White Nile, which provides a significant portion of the Nile’s flow during the dry season. Usually, this option would not be feasible as such an action would impact Egypt’s water supply which is a threat to the country’s national security. As Egypt is far and away the most powerful country in the region and Cairo has threatened violence in the past if its access to water is impacted, Egyptian concerns are usually taken quite seriously. This reality has been weakened as the current domestic unrest has limited Cairo’s capacity to respond leading the upstream Nile States (Ethiopia, Eritrea, Kenya, Uganda, Burundi, Tanzania, Rwanda and the DRC) to challenge the 1929 and 1959 Nile Water Agreements. These treaties gave Egypt and Sudan the rights to the vast majority of the Nile’s water. Though there is no guarantee that Egyptian instability has led many of the upstream Nile Basin Counties to sign the Nile Cooperative Framework Agreement (NASDAQ:CFA) which seeks to replace the Nile Water Agreements, the timing is suspect. This action could be perceived as an admission by East African states that they feel that Egypt is too weak to stop them from demanding more water.

    The countries of the Nile River Basin are poor and many have problems ensuring that their populations are fed. Complicating this is the fact that agribusinesses from richer states like Saudi Arabia, South Korea and China are buying land in countries such as Ethiopia and South Sudan. Though the sale of this land provides much needed revenue it also diminishes food supplies for the local, rapidly growing, population of the region. Essentially, what is happening is that economic reality is forcing countries that can barely feed themselves to sell off their capacity to produce food to interests who are too powerful to easily doublecross. If these sales are to stop, countries such as South Sudan must develop to the point where such transactions are no longer necessary. For this reason Egypt and Sudan have an interest in allowing South Sudan to develop. Both of these countries, though poor, are far richer than their southern neighbors and, as they are in a very arid region, need to import a significant portion of their food. It is feasible that Egypt and North Sudan could strike a deal with South Sudan whereby they provide developmental assistance and access to their infrastructure in return for long term guaranteed supplies of food at subsidized prices. After all, water security is linked to food security which is a driving reason why Cairo and Khartoum are so intent on preserving their access to the Nile’s waters. If another country could grow food more effectively and sell it to Egypt and North Sudan at a guaranteed price this could go a long way to appeasing the two countries. Since North Sudan would be a direct beneficiary of such a deal, access to North Sudanese roads and Red Sea ports should be relatively easy to negotiate.

    The Nile River Basin countries face numerous challenges. Formal peace between states does not equate true peace as inter-ethnic violence due to conflicting interests and historical animosity still is possible. The climate of the region means only certain areas have a sufficient amount of arable land. The populations are rising dramatically while standards of living are not. There is a strong probability that the Nuba in Kordofan could face persecution comparable to Darfur. And, social factors can lead nations to act in a manner contrary to their rational political and economic interests. Despite these challenges, finding a deal which guarantees Juba the right to use Northern Sudanese infrastructure in return for food supplies for North Sudan and Egypt could benefit everyone. South Sudan could develop without being sabotaged by its northern neighbors. Egypt and North Sudan’s food concerns would be addressed. And, the East African States would benefit by securing employment for their large pool of unemployed labor and collecting remittances. Such a deal will be difficult to negotiate but when all parties have interests that can be met, an agreement can be reached. After all, a war is far more costly.

     

     

     

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