FACTBOX-Key political risks to watch in north and south Sudan

North and South Sudan face disputes over sharing oil revenues and ending fighting on both sides of the joint border after southern independence in July as both nations seek to overcome serious economic challenges.

Sudan's south became independent on July 9 after voting in a January referendum agreed under a 2005 peace deal to part from its former civil war foe.

But they have so far failed to sort out major economic issues such as dividing oil revenues and other assets, coordinating the launch of their new currencies and resolving disputes over the border or the contested Abyei region.

Assets at stake include millions of acres of fertile land, gold, oil and the waters of the river Nile.

Following are factors to watch:


Southern President Salva Kiir visited Khartoum in October in his first visit since southern independence, allaying fears of a return to civil war.

But both sides have failed to reach an agreement how to divide up oil revenues, the lifeline for both economies. Around 75 percent of the country's 500,000 barrels a day oil production now comes from the South.

The South is seeking to pay less than the 50 percent transit fee agreed under the 2005 peace deal but needs to use the North's pipeline, refineries and port to sell the oil.

Both sides have also failed to coordinate the launches of their new currencies, which is hampering cross-border trade due to a lack of bilateral trade agreements.

On the political front, both countries have not reached an agreement on the contested Abyei region into which the north sent troops and tanks in May, triggering the exodus of tens of thousands civilians. The U.N. Security Council has now deployed Ethiopian peacekeepers to Abyei but the Sudanese army has not withdrawn yet.

Fighting between the northern army and armed opposition in the border area has spread to the northern state of Blue Nile neighbouring South Kordofan where fighting broke out in June. The joint border needs marking, too.

What to watch: -- Continued meetings. The worst moments of the past years came when the parties stopped talking. A series of high-level meetings would promote confidence.

-- Will fighting spread further? Rebels in Darfur, scene of a separate insurgency, have said they want to form an alliance with armed groups in Blue Nile and South Kordofan. How realistic is such an alliance ?

-- Oil revenues. Any details or signs of escalation over the transit fee the South will have to pay. Any signs that the North will stop southern exports.

-- Abyei. Will both sides agree on a referendum that was supposed to happen with the southern independence vote?

-- Nile water. Sudan's split has created a new country in the Nile Basin. There is a bitter dispute between Egypt, which refuses to give up its major share of the Nile waters, and other basin countries which suffer drought and famine. South Sudan is likely to support its East African neighbours.


After years of relying on oil revenues, which make up more than 90 percent of Sudan's exports, the growing import bill has caught up with Khartoum. Banks are unable to meet the demand for foreign currency in the country, forcing an effective devaluation of the Sudanese pound and driving up inflation.

Khartoum has avoided an "Arab spring", witnessing only small protests, but many ordinary Sudanese fret about annual inflation hitting almost 21 percent in September from 15 percent in June. In November, inflation was 9.8 percent.

The Sudanese pound has suffered a slide on the key black market due to a shortage of dollars. With oil revenues expected to fall it will be harder for the government to get foreign currency needed for food and other imports. Plans to diversify the economy are in an early stage.

The United States just renewed a trade embargo, shutting off the north from international markets, making borrowing to fund its budget deficit difficult.

The central bank has said expenditures will need to be cut by more than 25 percent this year.

What to watch:

-- Will the Sudanese pound fall further in the north? That would hit Sudan's ability to buy imports. Will food inflation rise further?

-- Any signs of protests after Khartoum saw several small anti-government demonstrations in recent weeks? -- By how much will Khartoum have to cut spending at a time of grave challenges as oil revenues are expected to fall?


South Sudan in 2005 was one of the least developed regions in the world. The southern ruling Sudan People's Liberation Movement (SPLM) has struggled to find the calibre of people to run a government and to entice talented members of the southern diaspora back home. So development has been very slow.

Politically and militarily the south needs to ensure it opens a dialogue with the opposition to build the kind of multi-party democratic state donors will want to see in return for their financial support. But a transitional constitution gives President Kiir wide powers.

The biggest challenge will be to build an economy that now depends by 98 percent on oil. Investors have been reluctant to commit money due to a lack of infrastructure, corruption and rampant rebel and tribal violence.

Annual inflation hit 61.5 percent in September, up from 57.1 percent in August.

Rebellions in southern oil areas with fighting at the border to Sudan could create a humanitarian emergency in the region, soaking up aid meant for development.

What to watch: -- Failed state syndrome. Some analysts believe the south without its northern enemy will descend into chaos amid ethnic rivalries, political meddling and cattle raiding. -- The South is building from scratch a new nation with a small budget. Help from donors may be less forthcoming following the global financial crisis. (Reporting by Ulf Laessing)