Struggle for Sudanese oil, gold and territory sets up Libya-style split: analysts

Sudan is likely to follow neighboring Libya in splitting in two, as warring sides lock down territory and key commodities, ushering in a prolonged period of instability that could spill into oil producers Chad and South Sudan and impact crude flows, analysts told S&P Global Commodity Insights.

Eight months after fighting began between the Sudanese Armed Forces (SAF) and the paramilitary Rapid Support Forces (RSF), sparked by feuding generals Abdel Fattah al-Burhan and Mohammed Hamdan Dagalo -- known as Hemedti -- a string of territorial gains for the RSF have ended an extended deadlock.

But far from winning the war, the RSF -- which emerged from the feared Janjaweed militias in Darfur -- is likely to only succeed in bifurcating the country between the western part it controls and the eastern SAF-ruled territories, said Cameron Hudson, a senior associate at the Center for Strategic and International Studies' Africa program.

In recent weeks, the RSF has seized towns in Darfur -- home to a chunk of Sudan's gold reserves -- pumping stations along the region's main oil pipeline, three quarters of Khartoum, according to S&P Global Market Intelligence, and the Jebel Aulia dam bridge, which connects supply lines either side of the White Nile.

Jihane Boudiaf, senior research analyst at S&P Global Market Intelligence, said the militia -- which has previously secured the backing of the UAE -- has also threatened Sudan's oil fields, including in Kordofan.

Meanwhile, the SAF has established a new seat of government in Port Sudan, shifting the country's civil service and influential business community there, and controls the east.

While the RSF's stated aim is to take Port Sudan, a split along zones of influence is more likely. "We are looking at a Libya-style de facto partition," said Boudiaf. "It's currently unlikely to be a de jure one like Sudan and South Sudan."

Oil infrastructure

Sudan and South Sudan produce heavy, acidic Dar and Nile Blend crude from fields on both sides of the border. The crude grades' biggest buyers are major Asian players, including China, Malaysia and Singapore, as well as the UAE.

Platts, part of S&P Global Commodity Insights, last assessed Dar Blend FOB Singapore on Dec. 1 at $76.31/b. After fighting broke out in April, discounts of Nile and Dar crudes deepened to Dated Brent minus $5/b and minus mid-$2s to $4/b respectively, sources told S&P Global, as shippers declined to dock at Port Sudan, although differentials have narrowed since.

Sudan's southern neighbor pumps roughly 160,000 b/d of crude -- triple Sudan's own production -- which flows by pipeline to Port Sudan for export, as well as a small 28,000 b/d western refinery.

The SAF is reliant on a transit fee from Juba, while the RSF currently operates Sudan's main refinery, the 100,000 b/d capacity Al-Jaili refinery north of Khartoum, whose fuel stocks have supported their war effort.

So far oil infrastructure has not been damaged because both sides are profiting from it; the RSF want to demonstrate they can actually govern and doing so would drag South Sudan into the war.

Yet in a sign of the febrile atmosphere, the RSF recently seized towns containing pipeline pumping stations 1 and 4, chasing away engineers and forcing Juba to negotiate with the militia, a South Sudanese source told S&P Global.

Members of the business community have reported RSF fighters entering their factories and facilities and stripping them, inadvertently setting fires and damaging machinery. Rumors abound about a recent explosion in a fuel silo at the Al-Jaili refinery, which both sides blamed on each other.

Taking Sudan's western oil fields would be another key win for the RSF, even with production sliding in recent years. Output fell from 71,000 b/d in 2019 to around 47,000 b/d in 2022, according to S&P Global, due to political unrest, COVID-19 and mounting arears to foreign oil companies.

"The previous government aimed to raise output to over 150,000 b/d by the middle of the decade, but as most producing fields are mature and declining, production is likely to decrease over the forecast period in the absence of a significant uptick in E&P activities," S&P Global analysts said in a recent report. Any changes to fiscal terms could simply be undone by a future administration, the report said.

Peace talks

Talks between the RSF and SAF are taking place in Jeddah, Saudi Arabia, but the race to secure territory and commodities is undermining peace, according to analysts.

Meanwhile, a third, less-discussed faction comprised of Islamist elites in former ruler Omar al-Bashir's inner circle is also impeding talks, Sudanese sources told S&P Global. Nicknamed the "Kezan", they "have no interest in a peace agreement in Sudan that would bring a civilian led-government as was prior to the recent coup," said Boudiaf, "as this would risk threatening their entrenched interests."

With little chance of a settlement, a Libya-style breakup -- which occurred in the North African country in 2014 and continues today with rival administrations in east and west -- now threatens to fuel further ethnic violence, destabilize neighboring countries and suck in Islamist extremists from across the Sahel.

Chad and South Sudan could pay the biggest price.

"The situation in Sudan is a source of threat to Chad as well," said Boudiaf. The vast oil-rich Central African country has been ruled since 2021 by Mahamat Idriss Deby, who replaced his father as president after he was killed while battling rebels.

Deby is facing a northern insurgency and popular pressure after postponing elections. Meanwhile Hemedti could use the RSF's tribal affiliates in Chad to unseat him, should ties sour.

The RSF is likely using bordering countries such as Chad and the Central African Republic -- home to scores of mercenaries from Russia's Wagner Group -- to secure supplies, according to analysts. "Deby is already on shaky ground and Hemedti is very much aware of that," said Boudiaf.

The UAE has been accused of assisting the RSF through a remote airbase in Chad, which the Gulf state denies. Chad produces 160,000 b/d of heavy, sweet crude popular with Asian refiners.

Meanwhile, South Sudan, which has frequently been consumed by civil war since independence in 2011, is vulnerable to regional instability, particularly if crude flows are threatened. "[President Salva] Kiir faces a lot of threats at home," said Hudson. "They struck this Faustian bargain a long time ago. Kiir's revenue stream is tied up in this war effort."