The increasing drone and missile attacks by Houthi rebels on the ships in the Red Sea make it impossible for South Sudan to export crude oil to the international market, South Sudan’s Information Minister Michael Makuei Lueth told Golden Times in a press briefing in Juba.
This follows the worsening economic situation partly contributed by war, sanctions, and Houthis attacks on ships in the Red Sea.
The Minister shed light on the high inflation and weakening status of the South Sudan Pound against the US dollar.
South Sudan’s economy is hugely dependent on crude oil exports through the Red Sea. East Africa’s landlocked country transports its crude oil through Sudan’s pipelines to Port Sudan but when the Houthi rebels started attacking the ships in the Red Sea, the country found it difficult to have its crude oil sold to generate hard currency for its survival.
According to Reuters, ship traffic has slumped 65% through the Red Sea chokepoint of the Bab al-Mandab strait since the end of November, and soared by 70% around South Africa’s Cape of Good Hope.
Operation Prosperity Guardian is a United States-led military operation by a multinational coalition formed in December 2023 to respond to Houthi-led attacks on shipping in the Red Sea. Despite this operation, Houthi rebels continue to pose serious threats to the ship traffic in the Red Sea.
In a press briefing attended by Golden Times, Minister Makuei disclosed that the government was unable to execute the financial year 2023/2024 budget to the satisfaction of its citizens due to the impact of Houthi’s drone and missile attacks on the ships in the Red Sea, coupled with the civil war in Sudan that affected the oil pipelines.
“The war in the sisterly neighbor [Sudan] has greatly impacted the economic situation in South Sudan which relies mainly on oil production,” Makuei revealed.
“Now the pipelines taking our crude oil to Port Sudan have experienced a jellying process in numbers 1 and 5 stations making it difficult for the crude oil to reach the export market. Even if the crude oil could reach Port Sudan, it would still not be possible to ship it for sale due to threats of blockage of shipping in the Red Sea,” he added.
The minister however said apart from the low oil production, there were physical difficulties confronting the oil sector, stressing that, the non-oil revenue collection alone could not build in value-added tax.
Yemen’s Houthis will not halt attacks on ships linked to Israel in the Red Sea, despite the United States announcing a new maritime protection force to counter them, a spokesperson for the rebel group said.
South Sudan-Israel covert ties exposed
In October last year, South Sudan sent a condolence message to Israeli Prime Minister Benjamin Netanyahu after the October 7 incident in which the Hamas-led attacked more than 20 communities, a musical festival near the Gaza Strip, and a nearby military base killing over 1,000 women, children and soldiers.
Upon hearing the report, the government of South Sudan then extended a condolence message to Benjamin Netanyahu, expressing South Sudan’s sympathy with the bereaved families of the victims of Hamas’s onslaught on innocent Israeli civilians.
South Sudan and the State of Israel enjoy cordial relations. In 2011, the State of Israel was among the first countries to recognize South Sudan’s independence from Sudan. The State of Israel provided military logistics and trained the then-Southern Sudan fighters during the armed liberation struggle for independence from Sudan.
As for South Sudan, it chooses to keep its historic bond with the State of Israel top secret to preserve its craving for Arab League membership.
For ex-Youth and Sports Minister Albino Bol Dhieu keeping the ties with the State of Israel a top secret was an unworthy idea. On 24 November last year, Minister Albino allegedly leaked the top secret on Al Watan Arabic Daily Newspaper, making ‘know’ South Sudan’s position on the Israel-Hamas war.
Barely weeks later, President Salva Kiir sacked Minister Albino and named his replacement. In addition, the state’s security agency [National Security Service] banned the printing of the Al Watan newspaper as a punishment for publishing the presidential letter of condolence to the State of Israel following the Hamas attack on southern Israel.
Impact of Red Sea instability on South Sudan
East Africa’s largest oil-producing country, South Sudan, relies on oil exports as the main source of revenue to keep the government functioning. 90 percent of the fiscal year budget depends on revenue collected from oil sales.
If the situation at the Red Sea persists, conflict over limited resources could escalate and mount pressure on the government to diversify the country’s economy.
In a rare move of defiance on February 14, a group of angry wounded soldiers stormed the highly secured ministries complex– adjacent to the office of the president– demanding the ministry of finance and planning to release emergency funds to settle their medical bills amidst the worsening economic situation.
The protest turned violent as the police forces deployed to secure the ministries complex clashed with the wounded soldiers, several people got wounded. The police shot live bullets in the air as the protestors attempted to raid the finance ministry.
Finance Minister Bak Barnaba Chol confirmed to Golden Times the incident and described it as an unfortunate protest, designating the demonstrators as ‘self-proclaimed’ wounded heroes.
The unity government may find it difficult to finance key institutions such as the health, education, and security sectors, hence, triggering unrest in the country already devastated by years of civil wars.
What is the alternative?
Managing Director of the state-owned Nile Petroleum Corporation Bernard Amour Makeny suggested to President Kiir building an oil refinery, including an oil depot storage facility, to ease fuel supply for local consumption.
The Russia-funded oil refinery in South Sudan’s Unity State could not function because of persisting conflict and floods. There is a likelihood that the government would construct the new oil refinery in a more secure location to avoid a similar blunder.
“The next target will be to work on the refinery and the storage facility. I will be able to build the right capacity for us to compete in the region and globally in terms of the oil and gas industry,” Bernard said.
“I was also able to brief H.E. on the progress of the situation on the pipelines (BS3), (BS4), and the progress of the maintenance that is going on in Sudan and the challenges that, of course, they will overcome,” he disclosed.
“In the oil and gas industry, such incidences are expected; it doesn’t mean a total shutdown; it means a period where engineers have to fix what has been damaged, and hopefully in the next couple of weeks the oil flow will be as normal,” Bernard assured.
Cabinet Minister Martin Elia Lomuro defended his colleague Minister Makuei’s argument that the economic meltdown has nothing to do with the political situation in the country.
Minister Lomuro confirmed that the Minister of Finance and Planning Bak Barnaba Chol could not implement the 400 percent salary increment due to challenges facing the oil production and the state of security at the Red Sea.
Minister Lomuro warned the journalists against provoking the public to create insecurity and political unrest in the country.
The minister said some of his colleagues have been sanctioned by the UN Security Council and the United States administration for speaking boldly about the situation facing the country.
Status of US & UNSC sanctions on South Sudan
United States administration and the United Nations Security Council imposed sanctions on some senior government officials serving in the current cabinet, which include Minister Martin Elia Lomuro and Minister Michael Makuei for obstruction of the peace process and human rights violations.
Minister Lomuro claimed he and his colleague Michael Makuei were sanctioned for speaking up for the country.
“Me and my friend here [Michael Makuei], we have been sanctioned for speaking up for the country. This makes us proud. I would even speak more if I wanted to be double-sanctioned because we believe the people who have died paid more price than us. We can do that by speaking steadfastly defending the government and the country,” Lomuro said.
The UN Security Council also imposed an arms embargo on South Sudan to lessen the arms violence against defenseless civilians across the country.
On his part, the Governor of the Bank of South Sudan Dr. James Alic Garang said the government has a plan to conduct the first-ever general elections, maintain peace and security, and address the weakening economic crisis, urging the public not to panic.
“In this country, we have one main source of foreign exchange and that’s oil. When oil has a crisis…when oil is affected, the inflow of foreign currencies would be affected. When oil is affected, everything is affected in [South Sudan],” Governor Alic stressed.
