(JUBA) – A fragile security arrangement around Sudan’s main oil producing area has brought short term relief for South Sudan’s economy, but it has also underlined how deeply Juba’s public finances remain tied to instability north of the border.
Last week, fighters from Sudan’s Rapid Support Forces entered Heglig, a strategic oil hub close to the South Sudan frontier. Units of the Sudanese Armed Forces withdrew without resistance, crossing into South Sudan where they handed over their weapons to local authorities. The movement of forces raised immediate concerns in Juba, given that nearly all South Sudanese crude exports pass through Sudanese territory.
In response, a temporary tripartite understanding was reached between the Sudanese Armed Forces, the Rapid Support Forces and the Government of South Sudan. Under this arrangement, the Heglig area is treated as a neutral zone, with South Sudan People’s Defence Forces providing security for oil installations, while Sudanese rival forces pull back from the immediate production sites.
South Sudan’s Information Minister, Ateny Wek Ateny, confirmed that the oil fields remain operational and that security responsibility has been placed in South Sudanese hands. For Juba, the agreement reflects financial necessity rather than political alignment, as oil revenues continue to fund basic state functions, including salaries and imports.
The arrangement allows South Sudanese troops to operate north of the border to protect infrastructure, while the Rapid Support Forces patrol surrounding areas. Although production continues, industry specialists warn that the physical condition of facilities is highly exposed to attack, sabotage or technical failure.
A former senior planning executive in Sudan’s oil sector, speaking privately, said the infrastructure remains vulnerable and that even a limited strike could force a shutdown with severe economic consequences for both countries. Such an outcome would directly affect South Sudan’s budget, which relies overwhelmingly on crude exports.
These concerns were reinforced when a drone strike reportedly killed South Sudanese soldiers near the oil zone, demonstrating how quickly violence can spill over despite formal understandings. Observers say poor coordination and weak command structures on all sides raise the risk of further incidents.
While the oil sector is being shielded as much as possible, Sudan’s wider economy has suffered a dramatic collapse. According to Ibrahim Elbadawi, Sudan’s former finance minister, the country has lost about half of its gross domestic product within just over two years of conflict. He described official claims of near term reconstruction as unrealistic given ongoing fighting and the absence of investor confidence.
Elbadawi noted that earlier wars in Sudan were largely confined to peripheral areas, while the current conflict has directly struck productive regions and commercial centres. Cities central to exports and manufacturing have become battlefields, disrupting supply chains across the region.
Sudan’s energy infrastructure has also suffered heavy damage. The Khartoum refinery is no longer operational, and sector wide reconstruction costs are estimated at nearly 20 billion US dollars, equivalent to about 142 trillion South Sudanese pounds at current market rates.
| Item | Estimated Cost |
|---|---|
| Sudan oil sector reconstruction | USD 20 billion |
| Equivalent in SSP | SSP 142 trillion |
The situation has been complicated further by the decision of China National Petroleum Corporation to seek termination of contracts in the Balila oil field near Heglig. Although the request is field specific, experts warn that shared logistics and processing systems mean the move could disrupt operations across the wider area, including facilities critical to South Sudanese crude.
Heglig hosts a central processing facility capable of handling more than 100,000 barrels per day of South Sudanese oil. Together with the main pipeline running from Upper Nile through White Nile State to the Red Sea, these routes generate transit fees that remain vital revenue sources for Sudanese authorities and a lifeline for Juba.
For South Sudan, the stakes are severe. Oil exports account for the vast majority of government income, while donor support, which funds more than half of public spending, has been declining. Delays in civil servant salaries and limited fiscal buffers leave the government highly exposed to any interruption in exports.
Recognising these risks, a senior South Sudanese delegation led by presidential security adviser Tut Gatluak travelled to Port Sudan, delivering a message from President Salva Kiir that prompted immediate technical talks on energy and trade.
Despite cooperation on oil, broader peace efforts in Sudan remain stalled. International mediation attempts have failed to secure a ceasefire, while Sudanese civilian political groups remain fragmented and unable to present a unified alternative to military rule.
For South Sudan’s business community and policymakers, the lesson is clear. The country’s economic stability remains closely linked to events beyond its borders. While the current oil arrangement buys time, it does not remove the underlying risk that renewed fighting in Sudan could quickly translate into revenue shocks, currency pressure and deeper fiscal strain in Juba.
