FACTBOX-Key political risks to watch in Sudan
By Opheera McDoom and Andrew Heavens
KHARTOUM Nov 1 (Reuters) - Sudan is just 10 weeks away from the scheduled start of a referendum on the independence of its oil-producing south that could split the country in two and, if mishandled, destabilise the whole region.
The possible outcomes of an expected vote for secession range from the worst case scenario of a return to war between north and south Sudan to, at best, a period of social and economic transformation on both sides of the border that would still create uncertainty for investors.
With trust at an all-time low as both sides exchange fiery rhetoric, progress has slowed on resolving key disputes such as the status of the oil-producing Abyei region, citizenship and oil sharing -- all of which could cause conflict.
The assets of Africa's largest nation include millions of acres of fertile land which could become the bread basket of the arid Middle East, gold, oil and the precious river Nile water.
Investors who began to pour in money in the euphoria that followed the 2005 accord that ended the civil war between north and south will be wary given the uncertainty surrounding the looming plebiscite.
Following are factors to watch:
CALM BEFORE THE STORM?
The north's dominant National Congress Party (NCP) and the Sudan People's Liberation Movement (SPLM), the biggest party in the south, strengthened their already strong grip on their respective halves of the country with overwhelming victories in April elections.
There has been a falloff in fighting between government and rebels in western Darfur -- although this could be mostly thanks to heavy rains flooding roads and blocking troop movements. In the south a reconciliation process has borne fruit and ethnic violence has abated. The north-south armies also agreed to verify tit-for-tat accusations of troop build ups along the sensitive border hoping to defuse tensions there.
What to watch:
-- More conflict. It remains to be seen whether this largely enforced calm will hold. A surge of fighting in the south or Darfur, which borders the south, would threaten the chances of a peaceful referendum. Organisers are already badly behind schedule and could not cope with additional obstacles. The south is refusing to budge beyond the Jan. 9 deadline and any delay could be another cause of conflict.
-- Currency worries. Sudan's central bank has been intervening to defend the Sudanese pound and stave off the potentially destabilising impact of import-led inflation. The government has also taken steps to cut imports and regulate foreign currency transactions to bolster its dwindling forex reserves. Analysts have said Sudan is fighting a losing battle, given the widening difference between official and black market rates for the pound. Rising prices in basic commodities have caused unrest in the past and there are currently particular worries about the cost of bread.
Negotiations on the economic and political makeup of the country -- or countries -- after the secession referendum have lost momentum but U.S. envoy Scott Gration is hoping to revive them especially on Abyei, which has emerged as the key to any deal.
The SPLM has said it is prepared to offer a financial package to the north and citizenship rights to the nomads traversing into Abyei for months a year to graze their cattle in exchange for a settlement which could see Abyei annexed to the south. But they say a long delayed referendum is still their preferred option.
Other issues cover everything from the still-undecided position of their shared border to how they will share out Sudan's assets, including oil revenues and Nile water, and unpaid international debts, now totalling $38 billion according to the International Monetary Fund.
What to watch:
-- Continued meetings. The scariest moments over the past five years have come when the parties stopped talking to each other. A continued steady programme of these "post-referendum" meetings would give investors some confidence despite the public rhetoric.
-- Oil revenue shares. The parties will have to reach some sort of deal if they want to continue benefiting from the crude that provides 45 percent of government revenues in the north and up to 98 percent in the south. Most of the known reserves lie in the south but the only way to get them to market at present lies through the north's pipelines, refineries and port.
-- The border. The parties have still not agreed on 20 percent of their shared border, despite years of debate and experts' reports. Potential flashpoints include the central oilfield Heglig, claimed by both sides -- northern and southern armies have already accused each other of building up nearby. Another is the central Abyei district, which is supposed to have its own referendum on whether to join the south on Jan. 9. The parties are deadlocked on who will vote and who will plan the process.
-- Citizenship. There could be huge unrest and displacement if NCP ministers go through with threats to cancel the citizenship of hundreds of thousands southerners living in the north after an independence vote.
THE INTERNATIONAL CRIMINAL COURT
The Hague-based court has issued arrest warrants for Sudan's President Omar Hassan al-Bashir to face charges of masterminding genocidal attacks and war crimes in Darfur.
Bashir has become more daring in his international travels, visiting both Kenya and Chad which, as signatories of the court's charter, technically should have arrested him.
What to watch:
-- Arrest. Any move on the president in the build-up to the referendum -- an eventuality that is seen as highly unlikely -- would drag the country and the whole peace process into uncharted and extremely dangerous waters.
-- Long term. It will be difficult for north Sudan to rebuild its bridges with the West while Bashir remains in power. Washington has promised to help Khartoum with debt relief and reduce trade sanctions if Sudan delivers a peaceful referendum and settles Darfur. It remains to be seen if U.S. President Barack Obama has the will or ability to persuade the U.S. Congress and Sudan's creditors to help him follow through on those promises while Sudan has a wanted man as president. Britain has voiced support for improving trade links but British banks and companies have yet to move.
SOUTH SUDAN AFTER THE VOTE
South Sudan in 2005 was one of the least developed regions in the world. Since then SPLM has struggled to find the calibre of people to run a government and entice talented members of the southern diaspora back home, so development has been very slow. A humanitarian crisis has re-emerged. [ID:nMCD033219]
What to watch:
-- Failed state syndrome. Many believe a fully independent south, which no longer has a common northern enemy, may descend into chaos over ethnic rivalries and tit-for-tat cattle raiding. While a south-south reconciliation conference in Juba united even the SPLM's harshest critics and rebel militia leaders have accepted amnesties, some analysts say the rapprochement may not last long after any declaration of southern independence.