What Sudan’s referendum may mean for oil and the world

Marketplace Staff Jan 7, 2011

What Sudan’s referendum may mean for oil and the world

Marketplace Staff Jan 7, 2011


Kai Ryssdal: Unrest and violence are two words that come to mind when a lot of people think of Sudan. Here’s another one: Oil. Crude has turned Sudan into a major global supplier, which is part of why a referendum on independence for southern Sudan beginning this weekend is getting some attention.

Jon Temin is the director of the Sudan program for the United States Institute of Peace. When we spoke, I asked him first for a historical snapshot.

Jon Temin: The north and south in Sudan have been at war with each other almost since independence in the 1950s. And that war has stopped and started until 2005, when a comprehensive peace agreement between the north and south ended the wars and part of that comprehensive peace agreement was the provision that the south would have the right to vote on whether to remain part of the united Sudan or secede and become its own country.

Ryssdal: What does the Sudanese economy run on right now?

Temin: Oil, primarily. The government in southern Sudan, there’s a semi-autonomous government of southern Sudan, it gets about 98 percent of its revenue from oil. In the north, probably something like 60 percent or so comes from oil.

Ryssdal: Geography here is important. The north has the hardware, the refineries, the pipelines. The south has the actual oil, but the south is landlocked.

Temin: That’s correct. About 75 percent or so of the oil is found in the south, but all the refineries are in the north, and the pipelines largely go through the north to the port at the Red Sea and they realize that at least in the short term, they need to cooperate with the north in order to profit from it at all.

Ryssdal: So what happens if over the next week, southern Sudan, as is widely expected, does vote for independence?

Temin: Currently, they split the profits from oil found in the south, 50-50. Certainly the south is looking to gain a larger part of those profits, and particularly, if there were more finds. There are a lot of parts of the south that are currently unexplored and there’s speculation that there may be significant sums of new oil to be found as well.

Ryssdal: This is not an election that affects just east Africa. I’m thinking now of the larger global oil market and specifically the Chinese. They get a not-insignificant portion of their oil from Sudan, don’t they?

Temin: Absolutely. The Chinese get something like 5 to 7 percent of their oil imports from Sudan. They are heavily invested in the Sudanese oil industry. So this matters very much to them. Recently, they’ve given indications that they’re willing to accept southern secession, as long as they can continue to have access to the oil in both north and south.

Ryssdal: Yeah. You were there last month in advance of this referendum that’s coming up this weekend. What’s your sense of what’s going to happen and whether or not it’s not going to be a peaceful election and then a follow-up?

Temin: I am cautiously optimistic that it will be peaceful. I think the north generally recognizes that the vote will be overwhelmingly for secession, and that they need to accept that outcome. And in the south, there are very high expectations amongst the population about how their lives are going to improve and tangible benefits, in terms of schools and roads, that they’re going to see if they become independent. But it’s up to the government of southern Sudan to deliver those things and it’s going to cost a lot of money.

Ryssdal: Jon Temin is the director of the Sudan program at the United States Institute of Peace. Jon, thanks a lot.

Temin: Thanks for having me.

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