South Sudan: Bad News for Beijing As Rebels Attack Oil Fields

The current conflict in South Sudan has now lasted nearly half a year, killing thousands and displacing hundreds of thousands of South Sudanese. Oil, South Sudan's only major source of revenue, has neither been the reason for nor the focus of the conflict up to this point. But this is rapidly changing as the flow and whereabouts of the oil revenue, as well as the security of the oil fields themselves, moves to the very centre of the conflict.

Although production is only at half-capacity, oil revenue continues to fill Juba's coffers with roughly $15 million a day. The income from the oil sector is the main financial support for the government of Salva Kiir in Juba and its armed fight against former vice president Riek Macher and rebel groups. Riek Machar has, in recent weeks, been struggling to maintain his fight against the government, in part due to a relative lack of resources available to the rebels compared to the government.

Over the last week the attacks on both the oil fields and a planned refinery in the oil-producing Unity State have intensified significantly. Attacking South Sudan's oil sector is intended to cut off Salva Kiir's main source of income and limit his political and military capabilities severely. It is highly unlikely that a scenario will develop in which the armed groups around Riek Machar are able to secure access to substantial oil revenues. However, threatening to, or actually disrupting oil production might be used as a bargaining chip in the negotiations with Kiir's government, as well as in the ongoing negotiation process currently underway in Addis Ababa. Disrupting oil revenues means cutting deep into the lifeline of the government in Juba as well as threatening both the profits of international oil companies and the safety of their personnel.

All of this is bad news for the main actors in South Sudan's oil business, namely the three national oil companies; the China National Petroleum Corporation (CNPC), India's ONGC Videsh Ltd. (OVL), and Malaysia's Petronas. It is especially bad news for Beijing and somewhat ironic that China might find itself once again at the epicentre of the conflict in South Sudan.

China, unlike the other two international actors in South Sudan's oil sector, has always played a more significant political and economic role in Sudanese-South Sudanese politics and economics as well as the regional oil sector. It was a result of the close ties between China and the government of Sudan (North) that rebel groups targeted Chinese companies ahead of independence in 2011. The goal was to increase their leverage over the government in Khartoum. Following independence, China and South Sudan went through a rough yet effective phase of rapprochement. Their new relationship even managed to survive the oil shutdown between January 2012 and April 2013. Then, in December 2013, the armed conflict broke out.