Global Policy Forum

Summary

Russia inked a $200 million deal Jan. 15 to develop untapped oil fields in central Sudan. The agreement is part of an emerging relationship between the two countries that will increase Russia's influence in the continent and strengthen Sudan's domestic arms industry.

Analysis

Sudanese Energy Minister Awad Ahmed Al-Jaz signed a production-sharing agreement with Russia's state-owned Slavneft oil company Jan. 15, Reuters reported. The oil deal is part of a larger agreement worked out last year in which Khartoum will pay Moscow for the right to manufacture Russian battle tanks in exchange for oil concessions.

The agreement heralds a new relationship between Sudan and Russia that will bring substantial economic benefits to both countries, as well as possibly set the framework for stronger political ties in the future. Moscow will secure another arms market in Africa and increase its influence over the global oil sector. At the same time, Khartoum will leverage its oil wealth to develop a domestic arms industry.

Russia and Sudan until now have had only limited economic ties due to Moscow's alliances with other regional powers like Ethiopia and Egypt. But now Slavneft will become a key player in Sudan's infant oil industry, and Moscow will be a chief source of the country's arms. This will advance Russia's efforts to assert its political influence throughout Africa while a domestic arms industry will help Sudan diversify its own sources of revenue and aid government forces fighting southern-based rebels.

Under the terms of the production-sharing agreement, Slavneft will invest $180 million to develop oil fields in central Sudan. State-owned Sudan Petroleum Co. (Sudapet) will invest an additional $20 million in the project, with exploration expected to begin in early spring.

Though no production estimates have been released, the project could account for a substantial portion of Sudan's emerging oil industry. The country so far has proven reserves of 262.1 million barrels, according to the U.S. Department of Energy's Energy Information Administration. But the government has continued to court investors in hopes of identifying additional reserves and expanding development to central and northern Sudan, which investment from Russia will help achieve.

The Greater Nile Petroleum Operating Co. (GNPOC) currently dominates the country's oil sector. The GNPOC is a consortium, led by Canada's Talisman Energy, which includes China's National Petroleum Corp., Malaysia's state-owned Petronas and Sudapet. It has invested more than $1 billion to develop fields in Sudan since 1997, earning the country an estimated $500 million in revenues in 2000, according to The Associated Press.

But those fields are in the southern and western parts of the country. The Russian investment will open competing fields in northern and central Sudan and expand the petroleum sector overall.

Moscow's funding injection is predicated on Khartoum's purchase of Russian arms. Construction of a factory to assemble Russian Tu-72 battle tanks began last year in Sudan. Khartoum will pay for the right to assemble the tanks, and in exchange Moscow will invest the proceeds in oil projects in Sudan, the Nairobi-based Sudanese Catholic Information Office reported in March 2001.

Khartoum is also discussing the purchase of MiG-29 Fulcrums from Russia, the U.N. Integrated Regional Information Network reported Dec. 31. The single-seat fighter is designed primarily for air-to-air combat, but it is also capable of limited air-to-ground operations. Both governments may also be discussing the inspection of Mi-17 helicopters and optical sighting devices, the military information Web site Periscope reported in October.

The government of Sudan -- still fighting an 18-year-old civil war against southern-based rebels -- has been modernizing its military for the last several years. Khartoum hopes domestic arms production will reduce unemployment in the north, raise government revenues and supply the military with cheap, reliable and easy-to-use weapons. A deal with Russian arms-makers is the first step toward this goal.

However, closer ties with Moscow, including the involvement of so many state-owned oil companies in Sudan, could pose a problem for Khartoum. Russia often uses its state-owned enterprises to extend the interests of the Kremlin in foreign countries, and it could use its leverage over Sudan's oil sector to influence the government's policies in the future.

FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.