US seeking to exempt South Sudan from sanctions, says diplomat

The US government has indicated that South Sudan will be exempt from the sanctions regime applied to Sudan, from which it declared independence earlier this year.

On 16th September, US special representative for Sudan Princeton Lyman, said that the US Treasury Department was currently drawing up a new set of regulations governing investments in South Sudan, which would allow oil companies to start moving into Juba without running afoul of sanctions targeted at Khartoum.

Technically, companies investing in South Sudan are already exempt from the sanctions on Sudan (imposed in 1997 in response to human rights violations and support for terrorism). The two countries' oil industries and infrastructure are so tightly connected, however, that it is difficult to invest without inadvertently becoming involved with Sudanese companies. Currently, the Sudanese oil industry is dominated by Asian companies, particularly Chinese and Indian firms, and US companies are eager to return to the market.

Revising the sanctions regime will take time and would require Congressional approval. Lyman suggested that the Treasury's Office of Foreign Assets Control would produce regulations which permit new oil deals provided that the benefit to northern Sudan was incidental.

A major challenge will be ensuring that oil from South Sudan reaches world markets without breaching sanctions on Sudan. Although the south contains most of the oilfields, the north controls the pipeline infrastructure which allows oil to be exported.

Foreign investment will be critical to maintaining and upgrading South Sudan's dilapidated oil infrastructure. Another challenge will be to tackle corruption and transparency in South Sudan, which US officials have warned is a major factor in inhibiting foreign firms from investing in the country.

Sources: Reuters, Sudan Tribune

For more news and expert analysis about the Sahara region, please see Sahara Focus.