Since December 2013, South Sudan’s President Kirr is facing a violent ethnic conflict, commanded by former deputy president Machar (Nuer). Northern neighbour Sudan’s President Bashir quickly expressed his support for Kirr in the benefit of protecting oil production, which is thought to be less safe under a take-over by Machar.
After the fragile ceasefire ended this month, Machar’s commanders claimed to be in control of 90% of South Sudan's oil-producing areas, which might trigger a Sudanese intervention should oil assets be damaged and should the Sudanese rebel groups fighting in the Upper Nile State be empowered by Machar’s rebellion.

Impact on country risk

Sudan lost 75% of its oil resources when the South seceded in 2011, skimming large parts of the country’s wealth. In return, Sudan was allowed to charge transfer fees for moving the South Sudanese oil through pipelines to the Red Sea, creating some revenues for Sudan. With the South Sudanese oil flows drying up as a consequence of the conflict, so are Sudan’s scarce revenues. The outlook for Sudan remains bleak with inflation rising (32%), external debt at unsustainable levels and extremely low foreign exchange reserves (one week of import cover). More hardship is to be prompted by the South Sudanese crisis and a possible intervention as Sudan deals with three local conflicts of its own and is currently already ascribing 60% of government spending to defence and security.

Analyst: Louise Van Cauwenbergh, l.vancauwenbergh@credendogroup.com