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Rising China and Africa's development: oil
Rising China and Africa's development: oil

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4 Oil, war and the economy

As Professor el-Battahani noted in the videos, the oil economy has been central to the consolidation of elite rule in Sudan. The history of oil exploration in Sudan has been a long one, but equally has been riven with tensions and conflicts. As you will see, a number of IOCs tried to develop oil fields in the 1970s and 80s, but it was not until the Chinese and other rising power firms came in the mid-1990s that development took off. Remember from Session 1 that it was in 1993 that China became a net oil importer so this search for new sources of oil was in part spurred by this need for energy security. What follows is an outline of the development of Sudan’s oil sector and China’s role in it.

Oil exploration began in Sudan in 1959 but it was not until 1979 that the first discovery was made in the South, west of Muglad. Then in the early 1980s other major fields such as Unity fields, Adar Yale and Heglig were discovered. Italy’s Agip oil was the first Western company to start exploration in Sudan, which was initially restricted to the Red Sea Area. Several other companies such as Oceanic Oil Company, Texas Eastern Company, Union Texas and Chevron were also attracted to Sudan’s potential oil wealth and engaged in exploration activities. However, it was Chevron that first discovered oil in commercial quantities in the South of Sudan in 1979, when the end of the first civil war allowed exploration activities to be undertaken in the southern provinces.

With Khartoum under economic and diplomatic sanctions from the UN, the US and its allies, as well as pressure from international human right campaigners, Western companies that took over from their predecessors, such as State Petroleum, Arakis and Talisman, faced major difficulties. As a result, Arakis left Sudan in 1996 because it was not able to raise capital to fulfil its exploration and production agreement with Khartoum. It should be noted that Chevron and its contemporaries in Sudan faced similar pressures, however, and it’s been argued that Chevron’s departure from Sudan in 1992 was not solely due to increased insecurity in the oilfields but also due to US influence. Patey (2006) has argued that what seemed to be a strategic decision on the part of Chevron and the other IOCs that left Sudan was hugely driven by political pressure from the governments of their countries of origin, particularly Washington. There is anecdotal evidence indicating that the US government encouraged Chevron to leave Sudan by offering the company a tax write-off of about US$ 550 million for its operations in Sudan as a compensation for any losses (Zaida, 2007). This is believed to be part of the efforts by the US and its allies to isolate Al-Bashir’s government which was viewed to be supportive of terrorist activity against the West and Islamic fundamentalism. The US-Sudanese relationship had been generally smooth until President Brigadier Omar al-Bashir came to power in 1989 and adopted an antagonistic posture towards the US, to which the US responded with hostile and aggressive policies in the 1990s in order to destabilise the Al-Bashir regime. This could be seen in the US economic sanctions on Sudan, its support of UN diplomatic sanctions on Sudan, its support to the SPLM/A (South Sudan Peoples Liberation Movement in Opposition) and the blacklisting of Sudan under the 1966 Anti-terrorism Act, placing it alongside countries such as Iraq, Iran, North Korea and Libya.