Oil's decline threatens Sudan government

KHARTOUM, SUDAN — Ask a Sudanese citizen what troubles him these days and he might not even mention Darfur or the International Criminal Court arrest warrant against the president.

To many here, it's the economy that is keeping them up nights.

Sudan's once-hard-charging economy, a source of national pride over the last five years, is in danger of grinding to a halt because of plummeting oil prices.

With the nation's oil-dependent budget in tatters, government employees are facing pay cuts. Newly opened luxury hotels are slashing rates. Even supermarkets are feeling the pinch.

"People don't have as much money," said grocery store owner Nassir Aldin, who said his sales were down 50% since last year. Aldin was once able to sell Kellogg's Corn Flakes, a luxury item here, for $12 a box. Now it's down to $9, and still no one is buying.

For Sudan's embattled government, which is facing increased international isolation because of the ICC war crimes case against President Omar Hassan Ahmed Bashir, the financial crisis is the latest unwelcome development, and one that could have a steep political cost.

For years, the government has used rising oil revenues to fund a military buildup and buy political support, including paying off opposition leaders and arming private militias such as the janjaweed in the Darfur region.

"Oil is what has kept them in power," said Mohamed Ibrahim Nugud, secretary-general of the Communist Party in Sudan.

Economists predict that if oil prices don't rebound, public anger over the economy could cause much more domestic frustration than Darfur or the ICC arrest warrant. In 1985, protests over rising gas and food prices helped bring down the government.

"This is the fuel of revolution," said Elhaj Hamed M.K. Haj Hamed, a political economist at the Social and Human Development Consultative Group here in Khartoum. Sudan has been one of Africa's fast-growing economies since it began exporting oil in 1999. Oil revenues account for about 65% of the national budget and 97% in the autonomous southern region.

Beginning in 2006, the rise in crude prices helped transform this dusty capital into a modern city with dreams to build a skyline that would rival Dubai's. The growth was all the sweeter to many Sudanese because it came despite U.S. sanctions, imposed over the bloodshed in Darfur and the government's support of organizations on Washington's list of terrorist groups.