A promising deal

Print edition : July 20, 2002

The India-Sudan oil pact is, among other things, a significant step towards ensuring India's long-term oil security.

THE bold decision of the Indian government to invest $750 million in the oil sector in Sudan has led to some controversy. Oil and Natural Gas Corporation Videsh Limited (OVL), a leading player in the global hydrocarbon industry, has invested in many countries across the world and has big stakes in West Asia, Central Asia and East Asia. OVL will acquire the 25 per cent equity that is held by the Canadian Talisman Energy Inc in Sudan's Greater Nile Oil Project. The Canadian company reportedly withdrew from the consortium after it came under sustained pressure from some human rights groups in the West. Coincidentally, Sudan was elected to the United Nations Human Rights Commission this year.

The other partners in the big oil venture are reputed Chinese and Malaysian companies. The China National Petroleum Company has 40 per cent equity and the Malaysian firm, Petronas, accounts for 30 per cent. Five per cent of the equity is held by the Sudanese company, Greater Nile Petroleum Operating Company (GNPOC).

Sudanese President Omar al-Bahsir.-AMR NABIL/ AP

In recent years, Sudan has entered the ranks of oil-exporting countries in a big way. It would have done as much earlier but for the civil war and the machinations of the West. It is no secret that the big Western oil companies are waiting in the wings to exploit the natural resources of countries like Iraq, Iran, Libya and Sudan, which have been characterised unilaterally by the U.S. State Department as "rogue" states. The Western oil companies hope that once a "regime change" is forcibly effected in these countries, they can just walk in. Russian companies, which are engaged in oil exploration in Iraq, are being enticed to stay away with the promise that they would be given a big slice of the pie when the current Baghdad government is overthrown.

In April this year, it was reported that former U.S. Secretary of State James Baker was in New Delhi to lobby with the Bharatiya Janata Party-led government against any Indian involvement in Iraqi oil exploration. Indian officials denied that this was the purpose of Baker's visit but it is well known that Baker is a pointman for the influential American oil lobby working out of Texas, the home State of President George W. Bush.

Until early last year, the U.S. used in its dealings with Sudan the same yardstick as it applied in the case of Iraq. The Clinton administration was bent on effecting a regime change in Khartoum. It was under President Bill Clinton's watch that the pharmaceutical factory in Khartoum, the only major one in the country, was turned to rubble in an American missile attack, following the terrorist attacks on the U.S. embassies in Nairobi and Dar-es-Salam. Al Qaeda leader Osama bin Laden had briefly taken refuge in Sudan in the mid-1990s. But at that time he was not America's enemy number one. Under pressure from Washington and also owing to the compulsions of domestic politics, Osama was told to leave the country. Relations between Khartoum and the West improved considerably after the events of September 11. Sudanese intelligence officials cooperated closely with their American counterparts to help track down suspected terrorists.

The political situation within Sudan and the surrounding region has also changed for the better in the last couple of years. The civil war continues, but it is mainly confined to a few areas along the border with Uganda. Peace talks between Khartoum and the rebel factions are on in Nairobi. The only significant rebel holdout is John Garang of the Sudan Peoples Liberation Army (SPLA, Garang group). The veteran guerilla leader is getting more and more isolated. All the other SPLA factions have signed ceasefire agreements but Garang, encouraged by a few western governments and some Church groups, wants to keep fighting. There are predictions that very soon he could end up like Jonas Savimbi if he continues to be inflexible. As in the case of the late Savimbi, he is running out of friends and allies in the region.

Until the late-1990s, Sudan was virtually surrounded by hostile forces. The Clinton administration had pledged more than $2 billion for the overthrow of the government in Khartoum. Today, the situation has radically changed. Relations between Khartoum and Kampala have improved dramatically. Until last year, each side was trying to subvert the other militarily and politically. Today, Sudan cooperates with Uganda to eliminate the fanatical rebel group called the Lords Resistance Army, which is fighting against the government in Kampala. Sudan's relations with Ethiopia and Eritrea are cordial once again. Cairo, which viewed Khartoum with suspicion through most of the last decade, supports the present government in Sudan. Cairo is dependent on Khartoum's cooperation for the smooth flow of the Nile to Egypt.

Several factors were responsible for the positive changes in the region, domestic politics being the most important one. The former Speaker of the Sudanese Parliament, the Islamist ideologue Hassan-al Turabi, was politically sidelined last year. The Sorbonne-educated scholar, who was viewed as the power behind the government, was not liked by the West. There were allegations that Turabi was close to Osama. President Omar al-Bashir, whom many people had written off as the ideological protege of Turabi, has in the last two years mended relations with Opposition figures such as former Premier Sadiq el-Mahdi. Late last year, the U.N. Security Council lifted the five-and-a-half-year-old economic sanctions on the country. The Bush administration also tried to play a role in settling the civil war.

Those in India who opposed the OVL's decision argued that the government had rushed into a deal with a country that exported terrorism and was inherently unstable. The facts on the ground speak otherwise. The Sudanese Ambassador to India, Abdal Mahmood Abadalhaleen Mohammad, said that the oil deal "is within the old framework of bilateral relationship and south-south partnership". According to the envoy, such deals would enthuse the entire African continent. Lately, the Indian government has also been saying that its foreign policy focus is being shifted towards Africa. He pointed out that the relationship between Sudan and India dated back to ancient times.

Mohammad said that it was India's Election Commission which helped organise Sudan's first general elections in the late 1950s and that Indian engineers played a major role in setting up the country's sugar industry and railways. According to the Sudanese Ambassador, Indian companies have pledged heavy investments in the new giant sugar factory, 'White Nile Sugar'. Once completed, it will be the biggest sugar factory in the world. The Sudanese economy is also showing signs of a fast recovery, with Gross Domestic Product growing at 7 per cent annually. At the Organisation of Islamic Conference meeting it hosted recently, Sudan lent India a helping hand by putting on the back burner documents that were critical of the latter on human rights and related issues.

The Sudanese envoy said that reputed international oil companies were queuing up to invest in the growing Sudanese oil sector, whose reserve levels were second only to those of Saudi Arabia. Sudanese law provides unprecedented guarantees and privileges to foreign investors. The agreement between the Indian and Sudanese governments states: "Each Contracting Party shall accord to investments of the investor of the other Contracting Party, treatment which shall not be less favourable than that accorded either to investments of its own or investment of investors of any third state." Another clause gives a commitment that the investments of foreign companies will not be nationalised or expropriated. Khartoum has assured India adequate compensation in the unlikely event of civil disturbances or a war that would adversely impact a joint venture.

There have also been criticisms about the price to be paid by OVL to acquire the stake of the Canadian company. However, according to oil experts, the Indian move to acquire a stake in the Sudanese venture is an important step forward to ensure long-term oil security for the country. The Sudanese venture is expected to provide India with 5 per cent of its crude imports, worth around $400 million. Those who are said to be opposed to the deal in the government were Ministers such as Pramod Mahajan and Arun Shourie. There are many people who think that the objections raised by these two were mainly because of their ideological predilections. These two avowed privatisers would have preferred the involvement of one of the big Indian private players instead of a successful public sector company. Arguments about Sudan being an unsafe place and too distant to invest in, were apparently not taken seriously by the Prime Minister and other senior Cabinet members. Shourie has been trying his best to privatise the Indian Oil Corporation (IOC) and the Oil and Natural Gas Corporation (ONGC), ever since he embarked on his disinvestment spree.

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