South Sudan Poised to Secure Largest Oil-Backed Loan from UAE Entity

South Sudan, the world's youngest nation, is on the verge of securing a monumental USD 13 billion loan from Hamad Bin Khalifa Department of Projects, a company based in the United Arab Emirates. This development comes amidst the country's struggle with managing debts that are backed by its significant oil reserves. According to a report by a panel of UN experts to the UN Security Council, this loan represents the largest oil-backed financial agreement for South Sudan. The experts, tasked with monitoring an arms embargo against the nation, highlighted concerns that repaying this loan could potentially consume a substantial portion of South Sudan's revenue for many years, heavily influenced by fluctuating oil prices.

The Hamad Bin Khalifa Department of Projects, although registered in Dubai, remains somewhat elusive with no operational website or contactable phone number. The UAE Mission to the United Nations has refrained from commenting on the matter, emphasizing that Hamad is a private entity. South Sudan's economy heavily relies on oil, which has been its backbone since gaining independence from Sudan in 2011 after enduring decades of civil conflict. The country plunged into its own civil war from 2013 to 2018, which concluded with a power-sharing agreement between President Salva Kiir and Vice President Riek Machar.

Under international pressure, notably from the United States, South Sudan is urged to expedite the implementation of the 2018 peace deal and prepare for upcoming elections. As per the US Energy Information Administration's latest data, South Sudan produced approximately 149,000 barrels of liquid fuels daily in 2023. The landlocked nation relies on Sudan's pipelines for oil exports, paying USD 23 per barrel in transit fees.

External factors, including ongoing conflict in Sudan and environmental challenges such as heavy flooding, have adversely affected South Sudan's oil exports, as stated by South Sudanese Information Minister Michael Makuei Lueth. The loan agreement with the UAE company, signed between December and February by South Sudan's finance minister, proposes allocating about 70% of the funds to infrastructure projects. Following a three-year grace period, repayment will be secured against crude oil deliveries over up to 17 years.

The UN panel expressed concerns regarding South Sudan's capacity to manage its oil-based debts effectively. The country recently lost a case at the International Center for Settlement of Investment Disputes related to a USD 700 million loan from Qatar National Bank obtained in 2012. Additionally, it owes USD 151.97 million to the Eastern and Southern African Trade and Development Bank from a previous deal.

Election timelines in South Sudan have been postponed to December 2024, with President Kiir urging lawmakers against overstaying in power. This comes amid warnings from the panel of experts about the urgent need for South Sudan's leaders to reconcile divergent expectations to avoid further tensions and strife. The humanitarian situation remains dire, with an estimated nine million out of 12.5 million citizens requiring assistance and protection amidst an influx of refugees from neighboring Sudan.