SUDAN - Background.

Sudan gained its independence from Egypt and the UK in 1956. The current government, led by Bashir, came to power in 1989 after overthrowing a transitional coalition government. A new constitution was adopted on Jan. 1, 1999. Presidential and parliamentary elections were held in December 2000, and President Bashir and his party, the National Islamic Front (NIF) claimed a big victory, tainted by accusations of vote rigging and a boycott by all the main opposition parties.

In October 2003, Bashir ordered the release of all political prisoners and lifted the ban on Sudan's main Islamist opposition group, the Popular National Congress (PNC). But he has since kept Islamist militant Hassan Al Turabi, the PNC leader who once was his main ally, under house arrest. On Sept. 24, 2004, the government said it had foiled a coup attempt by Turabi's PNC, while the situation on the border with Chad was tense as a result of a continuing flow of Darfur refugees into the neighbouring country.

Despite considerable natural resources, Sudan remains one of the world's poorest countries. Traditionally, its economy has been mainly agricultural - a mix of subsistence farming and production of cash crops such as cotton and gum arabic. With the start of major oil production and exports in late 1999, however, Sudan's economy is changing dramatically. Oil income now accounts for 74% of Sudan's total export earnings. Sudan no longer relies on expensive imported oil, which has helped its trade balance. Foreign investment is flowing into the country. The economic performance has been strong over the past few years. In 2002, the real GDP grew 5%, increasing to 5.6% in 2003 to $15.6 bn, and is forecast to reach 6.5% in 2004.

Inflation has fallen from an average of 110% per annum between 1991-96 to 8.3% in 2002 and 7.7% in 2003. Exports have grown sharply since 1999, when an oil export pipeline was completed, although Sudan ran a current account deficit of $727m in 2003. Oil production has risen to 375,000 b/d and is expected to exceed 500,000 b/d by end-2005. It is expected to rise to more than 750,000 b/d by end-2006.

Despite its economic progress, Sudan still faces developmental obstacles, including a limited infrastructure and an external debt put at about $21 bn in 2003, representing a debt-to-GDP ratio of about 134%. Khartoum has been negotiating payment of its debts to the IMF so it can improve ties with the fund. Sudan's debt to the IMF was rescheduled in 2002, and the IMF deferred Sudan's arrears payments so that Khartoum can give priority to repaying loans from the Arab Fund for Social and Economic Development. Some of those funds will be used to finance a new hydroelectric dam in Merowe.

As part of the rescheduling deal, Khartoum agreed to reduce its military spending and make management of its oil income more transparent. Sudan also has been following IMF-approved macro-economic policies which have resulted in an improved fiscal balance.

The US has imposed economic sanctions against Khartoum since November 1997, prohibiting trade between the two countries, as well as US investment in Sudan. In February 2000, the sanctions were broadened to include a prohibition against US citizens and companies conducting business with the Greater Nile Petroleum Operating Co. (GNPOC), an international consortium now producing oil in Sudan. The sanctions, however, did not apply to the foreign individual parent companies of GNPOC, which then included Calgary-based Talisman Energy, Malaysia's Petronas, and the Chinese National Petroleum Corporation (CNPC). Since 9/11, relations between Washington and Khartoum have improved somewhat, as the US has encouraged Sudanese co-operation in the war against terrorism.

Sudan reacted unfavourably to the passage of the Sudan Peace Act in October 2002, which outlined sanctions ranging from a downgrading of diplomatic relations to a UN arms embargo, that could be imposed on the Sudanese government if it negotiated in bad faith with the country's main rebel force, SPLA, based in the primarily non-Muslim, non-Arab south. In April 2004, however, President Bush decided not to impose additional sanctions under the Sudan Peace Act as part of a strategy aimed at encouraging the country's peace process. Sudan's costly, 21-year conflict with the SPLA and other rebel movements has, over the past two decades, claimed (directly or indirectly through famine) as many as 2m Sudanese lives.

In May 2004, after two years of negotiations (starting with the July 2002 Machakos Protocol), the government and SPLM reached agreement on several major issues - sharing of oil revenues on 50/50 basis, non-application of Islamic law in the south, self-determination for southern Sudan, with a referendum on secession to be held after a transitional period of six years, etc.

One expert told a US Congressional hearing on the peace talks over the south last February: "The extent of human suffering in Sudan cannot be said enough. The figures are staggering: over two million dead in 20 year. Millions more have been displaced. Who knows how many victims of slavery, persecution and atrocities? There is no doubt where the responsibility for this calamity lies. This Congress is on record condemning the National Islamic Front government of Sudan for genocide. It does not get clearer, or starker, than that. There is no doubt about who is responsible for the carnage in the western region of Darfur...Darfur is an ominous cloud over the peace process [for the south]. It jeopardizes the negotiations, while underscoring the great complexities of moving ahead".

Roger Winter, assistant administrator of USAID, visited Darfur in February and later told the US Congress the war there as "today's most serious humanitarian crisis on the African continent". He said: "The extent of the violence and terror being inflicted on the population is frightening. Humanitarian workers have witnessed the looting and burning of villages by the Janjaweed militia and have seen that the government police and military forces in the area do nothing to stop the violence".

It was thanks to US-led Western pressure and UN tough UN Security Council resolutions that Khartoum has finally agreed to move seriously towards peace in the south and in Darfur. It is now widely expected that a final resolution of the civil war in the south will help Khartoum to negotiate successfully with the rebels in Darfur, the western region which is as large as France. This would help the economy, lead to the lifting of various sanctions against Khartoum, and encourage investment by foreign companies.

Expectations of peace in the south have caused another humanitarian crisis in recent weeks, however. Southern refugees who had fled the war zone and moved to the north since the 1980s were now returning to their villages. Along myriad channels that the Nile River cuts through Sudan, thousands of southerners, mostly women and children, have been crammed onto the decks of rusty river barges. The vessels, essentially little more than large rafts, were designed for freight; there are no cabins, no toilets, no cooking galleys, no shelter from the sun - or more critically, the rain, now that southern Sudan is soaked by seasonal downpours. Each boat is packed with as many as 400 people. Others are returning by bus or on foot against the advice of aid workers.

At the beginning of 2004, Sudan was on the verge of bringing to an end its 21-year civil war between the Muslim north and the south. But while Khartoum-SPLM negotiations dragged on, the world turned its attention to the Janjaweed massacres in Darfur. Some international aid destined for the southern refugees was diverted to Darfur. Some aid is sitting in limbo until the final north-south peace treaty is signed. With growing numbers of the internally displaced beginning to return home, aid workers worry that another Sudanese humanitarian disaster may be in the making.

On Sept. 24, the Christian Science Monitor (CSM) quoted Ben Parker, spokesman for the UN humanitarian co-ordinator for Sudan, as saying: "Darfur is a distraction from the needs of the south, both in terms of political engagement and humanitarian funding for relief and development". When the internally displaced people (IDPs) finally arrive home, the conditions will be dire. Because of late rains this year, famine is hitting the villages in the south.

Beyond that, the CSM noted, two decades of civil war have robbed the south, with a population of 7.5m, of schools, hospitals, and roads. The paper quoted Parker as adding: "Donors remain on standby to help if a peace agreement is signed in the south, but we hope they see the wisdom of investing now to prepare for the expected mass movement of people north to south if that peace happens. We haven't had much luck on that yet". Until Darfur erupted, confidence was high that the Khartoum government and SPLM would finally sign a comprehensive peace agreement to end their conflict.

The southern rebels took up arms against Khartoum in 1983, starting what became Africa's longest civil war. The SPLM/SPLA of Garang had massive support from the predominantly Christian and animist southern population, who were angry at a programme of forced Islamicisation. And what the south saw as an unfair allocation of resources, especially $2 bn in annual oil revenues, accelerated the conflict. Aid agencies want to smooth the way home for refugees like those on the Nile barges, but rules forbid the release of funds until a full peace agreement is signed.

The former enemies came together with great fanfare four months ago in the Kenyan town of Naivasha to sign a comprehensive agreement, leaving only fine print to be worked out. Final talks will resume in Kenya on Oct. 7, after a month-long break, Sayed El-Katib, Sudan's government negotiator, said on Sept. 22 and this was confirmed by Dr. Garang on Sept. 24.

With the situation in the western province, however, observers question whether the international community will accept a peace for the south signed by Khartoum when the same government is implicated in what the US terms genocide in Darfur.