Conflict in Sudan- impact on critical oil and gold flows
Conflict in Sudan started on April 15 between the country’s army and a paramilitary group called the Rapid Support Forces (RSF). With its strategic location, gold reserves, and access to crude oil, Sudan’s resources have long been desired by its neighbours, Gulf countries, Russia, and Western powers. A previous London Politica article has examined how the conflict can expand and escalate to a civil war or even become the site for international confrontation. There is another side of this conflict that needs to be explored- how the conflict is impacting the commodities Sudan is so reliant upon.
According to The Observatory of Economic Complexity, gold is the most exported product in Sudan, accounting for $2.85B and 52.3% of total traded value. Crude oil is the 4th in the category of exports, with a total value of $395M in 2021.
The RSF claims to have seized a major oil refinery, which supplies around 70 per cent of the country’s fuel. In the official twitter account of the RSF, the paramilitary group posted a video of men standing close to a billboard of “Garri Refinery”. As for now, the crude exports from Port Sudan, which also account for South Sudan’s exports, of around 100,000 b/d have not been impacted. The country’s army has stated the RSF is trying to create a fuel crisis to promote an even more unstable situation on the ground. Imports of oil products have stopped since the conflict started, maybe due to the necessity of using the country’s infrastructure for evacuations.
Historical context
In August 1999 Sudan first started exporting crude oil and the country emerged to be one of Africa’s most important oil producers. Nine years later, in 2008, the country was pumping 500,000 barrels every day. Before the most recent conflict this number dwindled to only 70,000 b/d, an 86 percent fall in 14 years due to war over South Sudan and its consequent secession.
During the 1990s, in the middle of civil war, the present incumbent, Omar Al-Bashir announced that energy would help the country grow its new economy. In order to achieve this goal, the military regime ethnically cleansed the areas where oil would be extracted and partnerships were established with Chinese, Indian, and Malaysian national oil companies. Growing demand in Asia for these crude oil exports saw petrodollars flow into the country, increasing economic growth between 1989 and 2019.
Export Crisis
The conflict in Sudan is making other countries concerned, among other issues, about oil pipelines. South Sudan, for example, exports around 170,000 b/d via a pipeline that crosses the unstable area. Although there is no clear interest of either RSF or the country’s army in stopping oil flows, South Sudan claimed that this week's conflict had already obstructed logistics between the oilfields and Port Sudan. Pout Kang Chol, South Sudan’s oil minister, said that current fighting in Sudan may affect oil production. The Minister also stated that oilfield facilities such as pipelines, pump stations, field processing facilities, and export marine rerminal are safe from any damage at the moment and that logistics and transportation of equipment that pass via Port Sudan are slightly affected.
Despite the fact that, for now, Sudan’s oil operations have not been affected, the takeover of the refinery in Khartoum could lead to fuel shortages.
Imports of oil products are also obstructed. According to Vortexa, at least five vessels carrying around 130,000t of gasoil and 80,000t of gasoline are found in the Red Sea around Sudan. With Port Sudan being their destination, the containers arrived in Sudanese waters over two weeks ago and have not yet been discharged. This may also happen since the port is being used to evacuate foreign nationals from Sudan after operations at Khartoum International Airport were disrupted.
According to the U.S. Energy Information Administration, the main oil companies operating in Sudan are Greater Nile Petroleum Operating Company (GNPOC), Petro Energy E&P (PEOC), Petrodar Operating Company and Petrolines for Crude Oil Ltd. (PETCO). The main countries of origin of these companies are China, Malaysia, India, Sudan and Egypt.
DPOC, GPOC and SPOC have set up an Emergency Response Team that “will structure a contingency plan to mitigate the impact crisis by en-routing all the logistics and transportation of critical materials, Chemicals, and Equipment through other safer routes”.
Oil is not the only commodity being affected by the emerging conflict. Gold, the country's most important commodity export, also has political risks attached to it. The Russian paramilitary group, Wagner, operates a gold processing plant in Khartoum and has been accused of being involved in Sudan's conflict. This gold has helped Russia evade sanctions imposed by Western countries after the Ukraine invasion by using Sudan’s gold to fund war costs.
Therefore, among the humanitarian, economic, political and social issues related to any kind of war, it is important to keep an eye on the commodities sector, and how the conflict can impact already unstable oil exports and prices around the globe.