September 1, 2003
Of the many difficult issues that remain outstanding in the Machakos/IGAD peace talks, the question of oil development and oil revenues during the “interim period” has received the least detailed and informed public discussion. This is so even as the corporate shape of oil development in southern Sudan has shifted dramatically in the last year, with the forced exit of Talisman Energy (Canada), OMV (Austria), and Sweden’s Lundin Petroleum (the latter at least from Block 5a, which has seen so much oil-driven human destruction and displacement). These Western corporate entities have been replaced by India’s Oil and Natural Gas Company, and by the expanded presence of Malaysia’s state-owned Petronas and China National Petroleum Corp. This changing shape of foreign participation in Sudan’s oil development deserves closer scrutiny.
In the short-term, it is starkly clear that the Machakos/IGAD peace talks, if they are to have any chance of succeeding, must provide a truly equitable formula for revenue-sharing, and for ownership of the oil fields that are currently supplying over $1 billion/year in revenues to Khartoum—with considerably more on the horizon if exploration and development expands. But the longer-term economics of oil development have not been sufficiently appreciated, and here there are clear imperatives if present levels of oil revenue are to be increased, or even sustained.
The question for the Machakos mediators is whether the Khartoum regime gives any sign of meeting these imperatives by negotiating a just peace—or whether it has decided that the imperatives of further development are best served by military action to secure the oil regions of Western and Eastern Upper Nile. There is very considerable evidence on the ground that the latter is Khartoum’s decision, and this must be confronted realistically by the international community.
(See below for: an overview of the geological, economic, and statistical realities governing oil development and revenues going forward ten years in Sudan; a summary of the military considerations brought into play by these oil development realities; possible international responses to continued oil development in the midst of renewed war.)
 It should be noted first that some have argued that the exit from Sudan of Western oil companies is a bad thing, that this Western presence worked, however modestly, in favor of “human rights”; now the ideals of these companies has been replaced by the morally casual rapacity of state-owned or -controlled Asian companies. This assumes, of course, that companies like Talisman Energy, OMV, and Lundin somehow contributed to an improved human rights situation in southern Sudan, an assumption not supported by one shred of evidence. Indeed, the last time the international community was offered a comparative assessment by the now-terminated UN Special Rapporteur for Human Rights in Sudan, the essential message could not have been more unambiguous. Special Rapporteur Gerhard Baum of Germany declared:
“I conclude therefore that, overall, the human rights situation has not yet changed significantly” [“Statement by the UN Special Rapporteur on the Situation of Human Rights in the Sudan,” November 12, 2002]
Since Baum had emphatically declared in his report for the previous year (2001) that the appalling human rights situation in Sudan had actually deteriorated, this should suggest just how much wishful thinking there has been on the part of those who have seen oil development, and Western oil companies, as an engine for improving human rights or even moderating the obscene abuse of human rights that defines oil development in southern Sudan.
Nor did Special Rapporteur Baum hesitate in drawing attention explicitly to the role of oil development: “[Baum declared] that oil development had led to a worsening of the conflict, which has also turned into a war for oil” (Reuters, October 10, 2001).
In his November 12, 2002 report, Baum also went on record as saying:
“I repeatedly stated that oil is exacerbating the conflict, insofar as the war is the result of a fight for the control of power and resources.” (Section XI in Baum’s November 12, 2002 report to the UN)
These findings are, of course, entirely consistent with, indeed elaborations upon the annual reports of Baum’s two distinguished predecessors, Leonardo Franco of Argentina and Gaspar Biro of Hungary. To be sure, there are those who dismiss Baum’s findings, most prominently Mustafa Ismail, foreign minister in the National Islamic Front junta:
“We consider it [Baum’s report] a bad, biased resolution” (Agence France-Presse, Khartoum, November 21, 2002).
And in the event, the international community seems to have sided with Khartoum’s views: at last April’s Geneva meeting, the UN Human Rights Commission gave the National Islamic Front regime a human-rights “upgrade”; as a result, the position of a special rapporteur for human rights in Sudan was eliminated. But for nearly a decade, the decisive role of oil development in massive human rights abuses has been clearly and authoritatively established, as has the complicity of companies like Talisman Energy with its entry into Sudan in 1998.
Another way of looking at the issue of Western corporate presence is to ask more indirectly if there have been signs of “restraint” on the part of the Khartoum regime because of this Western presence. As some apologists have tried to argue, “perhaps it has been bad, but it would have been worse without the presence of Talisman and others.” Again, there is not a shred of evidence to support this conclusion and a great deal that belies it. There is clear evidence, for example, that Talisman’s airstrips at Heglig and Unity in the oil regions were used by military aircraft of the Khartoum regime to attack civilians. As the Harker Report (commissioned by the Canadian foreign ministry) rather forcefully put the matter:
“Helicopter gunships and Antonov bombers of the Government of Sudan have armed and re-fueled at Heglig, and from there attacked civilians. This is totally incontrovertible.” (Harker Report, Ottawa, January 2000, page 65).
More than a year later these deeply disturbing findings were amplified very considerably in the authoritative report by Georgette Gagnon and John Ryle, based on field research:
“[T]he investigators found that there was an increase in the number of recorded helicopter gunship attacks on settlements in or near [the oil development] area. Some of these gunships have operated from facilities built, maintained and used by the oil consortium [Talisman Energy, China National Petroleum Corp., Malaysia’s Petronas, and Sudan’s Sudapet]. The attacks are part of what appears to be a renewed Government of Sudan strategy to displace indigenous non-Arab inhabitants from specific rural areas of the oil region in order to clear and secure territory for oil development.”
[“Report of an Investigation into Oil Development, Conflict and Displacement in Western Upper Nile, Sudan,” October 2001, by Georgette Gagnon (Canada) and John Ryle (United Kingdom); the report was commissioned by Canadian and British non-governmental organizations, including the Canadian Auto Workers Union, Steelworkers Humanity Fund, The Simons Foundation, United Church of Canada Division of World Outreach, and World Vision Canada.]
There is also evidence now that Talisman’s own aircraft were used for military purposes by Khartoum-allied militia forces (see the amended complaint against Talisman Energy [August 15, 2003] now proceeding in US Federal District Court; available on request).
But the very notion of Khartoum “restraining” itself because of Western corporate presence has been so forcefully rebutted by events that it is difficult to attribute good faith to any making the argument. Consider only one savage example, but one that is entirely representative of Khartoum’s military behavior throughout the oil regions during the time of Western corporate presence. This particular event occurred at the village of Bieh in the very middle of Block 5a (at the time being developed by Lundin and OMV). This is a location south of Bentiu, very near the all-weather oil road essential for Lundin’s operations; the date was February of 2002.
The Los Angeles Reported at the time:
“On Wednesday afternoon, two helicopter gunships hovered above 4,000
people lined up for rations of beans, vegetable oil and corn porridge for their children. As soldiers in one helicopter kept guard, their comrades in the second aircraft fired at least five rockets into the crowd, according to World Food Program spokeswoman Laura Melo. A soldier in the second helicopter reportedly fired his machine gun indiscriminately at women, children and aid workers.” (Los Angeles Times, February 22, 2002)
A further statement came from Catherine Bertini, head of the World Food Program:
“World Food Program chief Catherine Bertini said its aid distribution had been approved by the Sudanese government. She called Wednesday’s attack ‘an intolerable affront to human life and humanitarian work.’ ‘Such attacks, deliberately targeting civilians about to receive humanitarian aid, are absolutely and utterly unacceptable.'” (Los Angeles Times, February 22, 2002)
UN workers were on the ground in Bieh at the time of the food distribution and were eyewitnesses to this thoroughly unrestrained attack. There was no military presence anywhere nearby; this was but another example of the vast scorched-earth campaign designed to give oil companies—Western or Asian—the “security” they require for their operations.
But there is a much larger implication to the forced withdrawal of Western oil companies from Sudan, and it has gone relentlessly unstated by apologists for the oil companies. For there can be no doubt that looking forward, oil companies like Talisman Energy will examine very much more carefully the consequences of militarized commerce—the deliberate intrusion of commercial extraction ventures into the middle of war or situations of extreme human rights abuse.
This will not bring back a single dead child in Sudan, but such painfully enforced calculation on the part of Western companies might very well save a great many other children in war-torn countries that have the great misfortune of offering great wealth to those sufficiently morally callous. If companies know they will be held responsible for their complicity in human destruction and suffering directly related to their operations—and that considerable costs may attend this responsibility—then they will be a great deal more cautious than Talisman management was when it ignored in 1998 the advice of Canadian church and human rights groups prior to entering Sudan (as well as the advice of the foreign ministry).
There are also obviously serious legal liabilities that can be incurred through irresponsible participation in extraction ventures such as oil development in Sudan. The class action lawsuit now proceeding against Talisman Energy, besides costing the company huge monthly legal fees to defend itself, has gained a very considerable profile in the American legal community. An extremely powerful amicus curiae brief has been filed in the case (US Federal Court, Southern District of New York) by some of the leading scholars in the relevant areas of American jurisprudence. The plaintiff class has been vastly and consequentially expanded with the amended complaint. And the suit is now supported by the highly important New Sudan Council of Churches (NSCC). At its 11th General Assembly (Jinja, Uganda; August 18 to 20, 2003) the NSCC declared that it:
“Endorses the action taken by the Presbyterian Church of Sudan and other parties in opening a lawsuit against the Talisman oil company in the USA. The General Assembly reiterates the longstanding church position that all oil exploration and exploitation should cease until there is a comprehensive peace, and notes the atrocities taking place around the Adar Yel oil field as well as western Upper Nile.”
Talisman will likely be forced to settle for an amount greater than $100 million. This, too, suggests something of what Sudan has demonstrated of the costs of corporate moral irresponsibility. On another front, India’s Oil and Natural Gas has already been forced to divest itself of an American holding because it fears a similar lawsuit in connection with its Sudan operations (Indian Express, September 1, 2003)—and the warnings will continue to become more forceful. (Those wishing to register their views concerning India’s entry into Sudan’s oil fields may contact the embassy in Washington at:
 What are the economics of oil development in Sudan? While not simple, there are some clear and compelling conclusions. The best technical account (detailed, rather quantitative, though thoroughly accessible) has been provided by PFC Strategic Studies (“Sudan: Projected Oil Production and Revenues” August 2002; available at: www.csis.org/africa/0208_SudanPFCDetail.pdf)
There are in this authoritative report some stark conclusions, with clear implications for both the Machakos peace process, and for military strategy if the peace talks fail. Perhaps most notable is the following summary point:
“Considering total expected mean production from Blocks 1, 2, and 4 (considered to hold the vast majority of oil potential in areas which are currently considered safe for operations) production levels will fall below 250,000 barrels of oil per day near the end of the decade (2010) and decline rapidly thereafter.”
In other words, though “the profit oil share to the [Khartoum] government of at least $1 to $1.2 billion per years should be sustainable through the end of the decade,” there is a very large qualification going forward:
“Without a dramatic improvement in the field size distribution pattern and success rates, annual oil production and annual net cash flow to the [Khartoum] government will decline at a significant rate after 2008-2010. ”
What does this mean? It means that for all the development efforts, and all the devastation wrought upon civilians in Blocks 1, 2, and 4 by Talisman Energy and its partners in the Greater Nile Petroleum Operating Company, there will be a rapid decline in revenues for the Khartoum regime starting in about seven years. The only way to stabilize or increase production—and thus revenues—is by expanding the areas which are considered “secure.” But if there is no peace agreement, security can come only by means of scorched-earth warfare directed against the civilian populations of Block 5a and more southerly Blocks in Western Upper Nile, and by means of similarly brutally destructive tactics in Eastern Upper Nile and the Adar Yel concession area (see report from this source, August 20, 2003; available upon request).
The economics of oil development in southern Sudan yield a number of other consequential conclusions—all with very different implications depending on whether war or peace is in the offing. None of this is lost on the National Islamic Front regime, and the international community should be fully aware of what governs the regime’s thinking at this climactic moment in the Machakos/IGAD peace process.
The report on oil development by PFC Strategic Studies also speaks to the realities of areas presently not “secured” in Eastern And Western Upper Nile. Though the level of reserves in these concession block may run “to more than 3 billion barrels,” there is a great deal of uncertainty about the actual amount. Moreover, for all their promise, the reserves in these areas are only prospective in revenue impact. As PFC Strategic Studies notes in its report:
“Given the time lag from exploration to appraisal to development, these new reserves won’t contribute significant new production until 2006 to 2010—immediate peace will not result in immediate new production and cash flow.” (PFC Strategic Studies assessment as of August 2002)
Peace of course would make possible accelerated oil exploration, development, and production—and thus ultimately revenues. The potential is huge (the PFC Strategic Studies reports speaks of it being “reasonable to expect that as much as 2.9 billion barrels could be found by the end of the decade” in southern Sudan). But this will take time; moreover, peace requires that the Khartoum regime agree now to give the people of the south a fair share of oil wealth, and forgo its present monopoly on all revenues. Given the way in which oil wealth and power (and self-preservation) have been intertwined in various ways in Khartoum, this will be extremely difficult. The duplicity and self-serving impulses of the powerful minister of energy and mining, Awad Ahmad al-Jaz, stand as a perfect example.
And for the people of south, oil wealth must have its own equitable and transparent sharing should peace come. Though the Machakos process has not been as inclusive of all southerners as it should have been, and though there are some serious shortcomings in the transparency of the process in the minds of many, a peace settlement should provide the occasion for opening a new chapter in governance, democratic participation, and control of revenues, where for so long there has been only human poverty, suffering and destruction. Those who lead the south must insure that oil revenues are used wisely, and they must make a clear commitment to see that substantial civil society development funding is shared broadly among all the peoples of the south.
 Though a fair and equitable distribution of oil wealth is only one of many difficult issues on which no progress has been made in over a year, and though it is only one of the reasons that the Machakos/IGAD peace mediators settled on a diplomatic strategy of arbitration and the creation of a Draft Framework, it is certainly of critical importance. No peace agreement is possible without a fair and just resolution of this issue.
And if there is no peace, if war resumes with its inherent military logic of massive civilian destruction in the oil regions, then there must be no further oil development. The international community should bring all possible pressures to bear on the Asian oil companies that presently seem indifferent to the suffering and death of those who stand as “obstacles” to further oil development. All efforts should be made to bring about a trading, marketing, and refining boycott of Sudanese crude. All oil companies participating in oil development or production should be subject to world-wide capital market sanctions. China National Petroleum Corp.’s US capital market surrogate (PetroChina, traded on the New York Stock Exchange) should be de-listed. There should also be a boycott of the retailing operations of companies like Petronas (Petronas recently opened its first Engen retailing station in Sudan, but has vast numbers of retailing outlets in southern Africa). India should be denied all capital market access for its oil industry.
A UN resolution condemning oil development in Sudan in the midst of renewed war should be brought immediately. The US Congress should consider a variety of punitive measures against the national oil companies operating in Sudan, and the State Department should signal that such oil development will be a serious source of tension in US bilateral relations with each of these countries.
The problem is not a lack of non-military options (and there are certainly non-lethal military operations that should also be entertained). The problem is—as has long been the case—the moral willingness to say and mean that peace in Sudan matters. And that if oil development not only exacerbates conflict, but provides a disincentive for Khartoum to commit to a just peace, then there must be a robust policy for addressing the realities of oil development. In other words, the real question must be posed a bit differently: does peace in Sudan matter enough to provoke a forceful response against those for whom oil wealth means more than the terrible human consequences of war?
Does Sudan matter enough? Do the people of Sudan matter enough? Does their suffering and destruction register fully enough in the moral conscience of the international community? We will soon see, and likely in the most ghastly of contexts.
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