Tensions between Sudan and South Sudan have escalated after South Sudanese troops last month invaded the Heglig oil field in Sudan, which was subsequently recaptured by Sudanese forces. This prompted the Sudanese parliament to declare its southern neighbour an “enemy state” and the Sudanese President Bashir to use increasing bellicose rhetoric against the country. Both countries accuse each other of supporting opposing rebel groups and have been reported to build up military capacity in the border region. Meanwhile, Sudan has declared a state of emergency in some border areas.

Impact on country risk

As long as military action and belligerent rhetoric between both countries continue, negotiations over important issues relating to the secession of South Sudan in July last year, notably regarding border demarcation, the allocation of oil revenues and citizenship issues, are expected to be delayed. Given both parties’ high dependency on oil (most of which is located in the South) and because South Sudan’s oil exports currently need to pass through Sudan, both countries have an interest in cooperating with each other. However, the current escalation will further impede such cooperation. Hence, even if an open war can be avoided, both countries’ economies can be expected to suffer greatly by the current developments.

Analyst: The Risk Management Team, l.vancauwenbergh@credendogroup.com