Oil fans flames of South Sudan war

Conflict over oil in South Sudan is prolonging a war predicted to spiral into famine if fighting does not end, and risks dragging in regional nations, analysts warn.

Despite heavy international pressure, a second ceasefire this month for the world's youngest nation has crumbled, in a war that has already claimed thousands -- possibly tens of thousands -- of lives.

With the war entering its sixth month, oil fields that once generated hundreds of millions of dollars providing 98 percent of government revenue are "key strategic objectives", the International Crisis Group (ICG) said.

"There are clear and mutually reinforcing military and political reasons for the parties to continue fighting," the ICG's Casie Copeland and Jerome Tubiana said in a report.

"Both sides believe they can capture or retake territory, including key towns and oil installations, and thereby strengthen their negotiating positions."

Less than three years old, grossly underdeveloped South Sudan was the most oil-dependent nation in the world at independence.

"Oil is a significant driver of the conflict," said Emma Vickers of Global Witness, a campaign group focusing on resource conflicts.

With some of the heaviest fighting in the oil state of Unity, production has slumped by almost half according to industry sources, dropping to between 130,000 to 160,000 barrels per day, from around 245,000 before fighting began in December.

Rebel chief Riek Machar "has made his plans very clear to attack and take oil fields as a way to hold the government hostage," Vickers added, with fighting now concentrated in the main remaining oil producing fields in Upper Nile.

"It has probably already prolonged the conflict and will likely prolong it for longer," said Luke Patey, author of "The New Kings of Crude", a book examining China and India's oil role in the country.

"Oil fields give the rebels a clear target, as they seek to gain a stronger hand in negotiations," he told AFP.

The United Nations has warned of the risk of famine if fighting does not stop.

- History repeating itself ? -

The war offers bleak parallels to the 1983-2005 violence that preceded South Sudan's 2011 independence, when Sudan's government backed proxy militia forces to secure fields, creating deadly ethnic rivalries that still remain.

Today's rebel chief Machar was a key commander in that war, fighting on both sides of the conflict.

Key foreign oil investors include China, India and Malaysia.

But despite conflict damaging their investments -- and oil worker citizens wounded -- the countries seem reluctant to use strongarm tactics to intervene.

South Sudan has become a "basket case investment", Patey warned, noting it dropped in importance for Beijing with growing Chinese investments elsewhere, and now provides less than two percent of oil imports.

"Certainly there has been diplomatic pressure, but China is unlikely to take any higher steps than that," Patey said.

Yet there are also fears of trouble from old enemies Sudan, even though Khartoum insists it backs Juba's government.

It has a vested interest: Sudan's earnings for transporting landlocked South Sudan's crude to the sea, initially expected to make up some 10 percent of government revenue, will be cut by around a third at current rates, experts suggest.

"I am starting to fear Sudan is playing both sides.. so that when or if the war does end, they end up on the right side," Patey added, noting that Khartoum is also wary about the fact that soldiers from Uganda, an old enemy from civil war days, helping guard fields.

Kampala supported South Sudan's independence fight, while Khartoum retaliated by backing Uganda's Lord's Resistance Army (LRA) rebels, which are still based in Sudan, according to the UN.

Regional politics are key, said Ahmed Soliman of Britain's Chatham House think tank, noting the old adage in "the politics of the Horn of Africa, that the enemy of my enemy is my friend."

Khartoum is also wary South Sudan is eyeing deeper ties with East Africa, including a planned pipeline south to Kenya.

Amid fears South Sudan's government may offer new oil deals to generate cash or pay for military support, Global Witness is calling for a moratorium on all new contracts.

"The risk of conflict and corruption is way too high," Vickers said.

The United States already slapped sanctions on top military commanders from both sides but the ICG notes "an oil embargo and a moratorium on new oil and mineral concessions are also under discussion."

As battles rage, many fear that political leaders can no longer hold back their warring forces as communities spiral into cycles of revenge attacks.

While the meeting of President Salva Kiir and rebel chief Machar at the ceasefire deal was a "key shift", Soliman said, it remains to be seen if the commanders are able -- or even willing -- to rein in forces on the ground.