Dr. Haitham Fathi, Economic Expert, in an Interview with (Al-Ahdath): Risks of Damage to the Remaining South Oil Pipelines

Economic expert Dr. Haitham Fathi highlighted the difficulties citizens face in withdrawing money from bank branches in some unstable states. These areas also face challenges in sending or receiving remittances, along with the lack of telecommunications networks. Dr. Fathi warned of a complete economic collapse, which could worsen the living conditions of displaced citizens within the country.

Speaking to (Al-Ahdath), he pointed to the sharp increase in essential commodity prices, such as lentils and rice, with rates rising between 400% and 600% across the country. He emphasized the need for a new gold refinery in secure areas linked to production zones to enhance the value of locally produced gold, noting that Sudan currently exports gold abroad for re-smelting and aggregation according to the London Bullion Market.

There has been a 40% decline in grain production in Sudan between 2022 and 2023. Additionally, half of the Sudanese population is now unemployed. The banking system has been severely affected, and there are difficulties in withdrawing money from banks in some unstable states, as well as challenges in sending or receiving remittances. There are also no telecommunications networks in these areas. Furthermore, the prices of essential commodities, such as lentils and rice, have surged by 400% to 600% nationwide. More than 20% of the population has been displaced internally or fled across borders due to the war. Sudan has lost 25% of its GDP in just one year of conflict. While it’s difficult to estimate the full extent of the losses, they could reach $200 billion, excluding the country’s lost economic opportunities. Sudan’s economy contracted sharply in 2023, possibly by up to 40%, and is expected to shrink further this year due to declining revenues. This is natural, as factories have shut down, and exports, especially from the western states, have been heavily impacted. Production in many projects has halted, and even transportation post-production has been disrupted. The Sudanese economy has been plagued by structural problems for years, including low production levels, customs and tax evasion, and price and invoice manipulation in imports and exports, resulting in annual losses of around $5.4 billion.

Since South Sudan’s secession, Sudan has relied on raw materials, especially gold, to boost its GDP. Therefore, Sudan must start establishing a new gold refinery in secure areas linked to production zones to maximize the value of locally produced gold. Currently, Sudan sends its gold abroad for re-smelting and aggregation in line with the London Bullion Market standards. To make the refinery economically viable, it would need to process around 18 tons of gold annually, and Sudan’s production is close to this figure.

The war has affected both Sudan and South Sudan’s economies, exacerbating internal conflicts and reducing Juba’s oil exports from 350,000 barrels per day to 150,000. Sudan’s annual revenue from oil, which amounted to about $300 million, has also been impacted. The damaged oil export pipeline, the longest in Africa, cost around $1.8 billion to construct. There are risks of damage to the remaining oil transport lines, which could hinder agreements for transporting crude oil from production areas to export ports, governed by international agreements. The economy has also suffered from the destruction of infrastructure, including the main refinery in Al-Gaili, which produced around 100,000 barrels per day.

South Sudan possesses the third-largest oil reserves in Sub-Saharan Africa but depends on Sudan, from which it seceded in 2011, to sell its oil via pipelines, refineries, and ports. The oil sector plays a vital role in Sudan’s economy, serving as its main revenue source, thanks to its Red Sea ports, which facilitate exports. Sudan currently produces around 60,000 barrels of oil per day after losing three-quarters of its production to South Sudan’s secession. The war’s effects extend beyond Sudan to other countries like China, which used to import about 66% of South Sudan’s oil.

Russia, besides owning the largest direct investment fund, has immense accumulated expertise in wheat cultivation and is one of the world’s largest wheat exporters. It leverages advanced technology in this field. Sudan views Moscow as a strong strategic ally within its diversified partnerships with traditional global powers. Moscow, in turn, sees Sudan as a key regional hub near the Red Sea. The current rapprochement between Russia and Sudan comes at a time when both need to diversify their international relations in both political and economic spheres. This is especially important considering the cooling of Sudanese-Western relations and the sanctions imposed on Russia due to the Ukraine crisis.

There are promising opportunities to export Sudanese vegetables and fruits to the Russian market, especially since previous attempts in 2018 succeeded after these products passed all quality tests. Moscow excels in technological value-added processes, technology transfer, and national workforce training, offering opportunities for product development and the adoption of Russian technology. Moscow also seeks to regain its international role as a political and strategic power, particularly after the disintegration of the former Soviet Union. The Sudanese-Russian relationship has deep historical roots, making it one of Sudan’s strongest international partnerships.