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Sudan split poses challenges for China

by AFP
14 Jan 2011 at 15:33hrs | Views
Juba - The looming partition of Sudan after this week's independence vote in the south poses challenges for China, which faces dependence for nearly 5% of its oil imports on a new country long suspicious of its ties with Khartoum.
A full 80% of the oilfields in Sudan, which the state-run China National Petroleum Corporation (CNPC) has pumped billions of dollars into developing, lie in the south.
Beijing's arms deals with the Khartoum regime and its dogged defence of it in international forums have resulted in the former rebels who are set to lead the new state having much closer relations with Western countries that provided aid during the 1983-2005 civil war and spearheaded efforts to end the conflict.
China did open a consulate in the southern regional capital Juba in 2008 three years after the peace deal.
But it has only been in the past few months that it has fully woken up to the imminent prospect of independence, sending a delegation of senior Communist Party leaders to the south last October and upgrading its representation to ambassador level the following month.
National oil policy 
"The Chinese, supported by CNPC, have mounted a charm offensive in the south which has consisted of bringing several dozen political leaders... to China to visit CNPC and view the Chinese economic model in general," a Western diplomat in south Sudan told AFP.
"CNPC has also built a computer lab at Juba University which cost several million dollars," the diplomat added.
"That has had some success in changing the atmosphere in the south towards them."
But southern leaders are not without fears of their own. They rely on income from oil output, the lion's share of it by CNPC, for 98% of government income, and desperately need the Chinese production to continue uninterrupted.
In an interview with AFP this week, southern oil minister Garang Diing promised: "We will respect all our contracts signed before the (2005) peace agreement."
Confirmation of CNPC's rights to its concession will not come without a price, though, as south Sudan moves to draw up a national oil policy for the new state.
Long-standing grievances about CNPC's environmental and human rights policies and its lack of financial transparency are likely to lead to the imposition of higher standards for firms operating concessions and to tighter monitoring.
Protection of human rights 
NGOs such as Global Witness have documented contamination of the wetlands of Upper Nile and Unity states, where CNPC operates, with chemicals and untreated water from the oil extraction process, leading to deaths from drinking polluted water.
"In the contracts with China during the war, lots of things were not taken care of, like the protection of human rights and the environment," the southern oil minister said.
"This has left many people displaced that need compensation," he said. "In terms of environment, there is water contamination."
Diing is likely to find support for imposing tighter standards from Western oil majors as he pursues his longer-term ambition of diversifying south Sudan's oil sector and government receipts.
A spokesperson for France's Total, which holds a huge concession in the south that has remained untapped because of the civil war and US sanctions against Khartoum, said the firm would insist on the "enforcement of our standards in environmental matters, ethical behaviour and transparency".
Best technologies 
But in the short term, Western oil firms are likely to continue to be deterred from investment by the sanctions imposed against Khartoum in 1997 four years after its blacklisting as a state sponsor of terrorism.
"We need to diversify the capital from some Asian countries - China, Malaysia and India - especially to get Western experience, the best technologies and the best practices," Diing said.
"The problem with the Western companies is the sanctions."
Washington has indicated that it will begin to ease some of the measures if Khartoum respects the outcome of the independence vote. And it is assumed that the newly independent south Sudan will not itself face sanctions.
But sanctions against the north's state-owned oil company Sudapet, which has an interest in the CNPC-led consortium, will remain in force, preventing any Western firm with a significant US shareholding from taking up an interest in its concession.
The south will also remain dependent on the pipeline to Port Sudan in the north which CNPC helped build to get the oil to market.
Good relations 
And just six months before the date set for southern independence by the 2005 peace deal, there is still no agreement between north and south on what payment for use of the pipeline and refineries will replace the existing 50-50 sharing of receipts.
Alex Vines, director of regional and security studies at Britain's Chatham House think tank, says that the pipeline gives Beijing every incentive to use its ties with Khartoum to ensure that there is a velvet divorce and no disruption to the flow of oil.
"It will try and maintain good relations with both north and south, and will use its good offices behind the scenes to encourage amicable relations," he said.
"The last thing China wants is renewed conflict in Sudan."
He Wenping, a professor at the Institute of West Asian and African Studies at the Chinese Academy of Social Sciences, agreed.
"While the south has more oilfields, it still has to depend on the petroleum pipelines and oil refineries in the north," he told China's Global Times.
"Oil used to be controversial between the two parts, but it may be the glue in the future."

Source - AFP