The Economic Crisis in Sudan and Revolution

This week, Sudan offered to admit humanitarian aid into South Kordofan and Blue Nile under certain (unacceptable) conditions, including only allowing organizations approved by the regime to distribute the aid. The conditions for the admittance of aid offered by the Sudanese are clearly both a delaying tactic and a barely veiled attempt to weaken the position of the SPLM-North and the Sudan Revolutionary Front (SRF) which have been able not only to hold off the Sudanese Armed Forces (SAF) but to soundly defeat them on the field of battle.

The Khartoum Regime is facing a slew of crises that are building upon one another.

First, the independence of South Sudan took with it the vast majority of the oil resources.

Second, the battle of Heglig resulted in two major losses for Sudan, even after South Sudan returned control of Heglig to Sudan. The flow of oil out of Heglig from Sudanese sources was greatly reduced due to damage to the installation there and the flow of oil through the pipeline from South Sudan was completely shut off, virtually eliminating the two primary sources of income for Sudan. This has led directly to an even bigger problem.

Third, the resulting economic crisis is forcing changes that do significant damage to the ability of the Khartoum regime to maintain power.

  • It can no longer provide subsidies for gasoline and food that keep the populace happy. It has already eliminated the gasoline subsidy and may be forced to lessen or eliminate food subsidies as well as a result of pressure on the prices due to hyper inflation. It is one thing to offer $2 worth of bread for $1 and something entirely other to offer $10 worth of bread for $1. As the real price increases, the subsidy becomes untenable.
  • It can no longer borrow large sums of money even from China because the fear of hyper inflation is so great that nations are concerned that the loans would not be repaid at all or would be paid back at pennies on the dollar. Without oil flowing through the pipeline, Sudan can’t borrow money.
  • It can no longer support the bureaucracy necessary to maintain a police state. The cost of maintaining a fighting force substantial enough to hold off rebel groups on multiple fronts, maintain a deterring presence on the South Sudanese border in disputed territories, and maintain control in the streets in the center of the country is immense. As the need for police support in the interior of the nation increases, the Khartoum Regime will have no choice but to abandon the periphery or offer significant compromises to the internal opposition groups.

The implications of this choice are profound. The regime has a choice of how to weaken, but not to avoid weakening. It can try to maintain some control by ceding some power to the internal opposition, hoping to quell rioting, or it can risk a complete collapse by defending the periphery while continuing to fight in the center as well. The choice would appear obvious except for one problem.

No matter who will run the country in the near future, there will be overriding economic problems. Let us imagine for a moment that the regime would collapse and the SRF would take over the entire country after a major fight. The nation, emerging from this conflict, would have extremely limited financial resources and millions of people facing food insecurity. The oil industry would take time to build up. The new government would need to devote substantial resources to maintaining security and much of the Arab wealth would flee the country in fear of the new regime. Sudan could become a failed state in rapid fashion with a resulting humanitarian crisis dwarfing the current problems facing the nation.

While there is hope for positive change in Sudan and the revolts occurring right now are a good sign that it might happen. Things could easily take a turn for the worse. This is a regime that has committed genocide already. To imagine that it could not use extreme violence against protesters would be delusional.

The best case scenario at this point would be for the Khartoum regime to willingly go into exile while a regime that includes the SRF, if not one led by the SRF, would work with willing parties in Khartoum to create a peaceful transition of power that allows for immediate and  massive international investment in Sudan and in the border region of South Sudan, enabling the rapid growth of oil related income for the two nations.

Let us hope for a peaceful transition of power that leads to rapid economic growth. Anything else may not be enough for hundreds of thousands of people in Sudan and South Sudan who are already struggling to survive.

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