The State of the Game between Juba and Khartoum

I continue to be fascinated by the nature of the strategic interaction between Juba and Khartoum, without really pretending to understand it very well. As it turns out, Juba's strategy seems to be push ahead with a Kenya pipeline whilst resuming export through North Sudan in the meantime, to give them an alternative option. So what is Khartoum's optimal response to such a move?

A friend suggests that Khartoum's strategy is to continue to create chaos in Jonglei (South Sudan) in order to disrupt future exploration, knowing that a Kenyan pipeline would not be economically viable without further discoveries.

I thought I'd also email someone who is an actual game theory expert, who makes the interesting point that - a little counter-intuitively - it may actually be in Khartoum's interest to encourage the development of a Kenya pipeline, as a way of credibly committing themselves to continued future cooperation on mutually favourable terms.

Paraphrasing the words of the great philosopher Sting, “If Someone Does Not Trust You, Set Them Free“.

The oil deal

I haven't read any coverage yet, so I've just had a quick skim of the actual agreement (available here, HT: Nicki Kindersley). 

As a reminder, pre-agreement North Sudan wanted to charge half of the value of the oil, or around $36 a barrel. South Sudan wanted to pay $1 a barrel. 

It looks like there is a 

- processing fee - $1.60 per barrel

- transportation fee - $8.40 per barrel for one oilfield and $6.50 for the other

- transit fee - $1 per barrel

so a total of $11 or $9.10

plus a Transitional Financial Arrangement (payoff) of an additional $15 per barrel until a total of $3.028 billion has been paid (at production of 180,000 barrels per day this would take just over 3 years).

So - whilst this seems like a good deal for North Sudan in the short run and a good deal for South Sudan in the long run, my main concern is the hold-up problem. What is stopping North Sudan ripping up the agreement in 3 years, demanding a higher cut, and just confiscating oil (again). Here is Tony Venables from Oxford in a paper on these issues;

Even if the purchaser and investor entered an agreement before the investment is undertaken, ex post the purchaser may act opportunistically, breaking the agreement and only offering a lower price ... 

The hold-up problem between states is radically more severe than that within countries because the whole domain of international law is fragile: essentially, the concept of national sovereignty constitutes a barrier to the enforcement of any contract entered into by states.

Thoughts?

The State of the Humanitarian System

There is a new edition coming out in a couple of weeks, but until then, the data on coverage from the 2010 State of the Humanitarian System caught my eye.   

On average, total humanitarian contributions equalled over 85% of total stated requirements in 2007 and 2008, compared with 81% in 2006 and only 67% in 2005. However, the needs of affected populations have gone up as well, and are still not matched by resources, so the result is a nearly universal perception of insufficiency, despite quantitative evidence of progress.

So; yet again; things are getting better, but they are still really bad. Unmet humanitarian need means that people are dying for the sake of what is really pennies in the grand scheme of things (overall funding for the sector is around $7 billion, considerably less than, say, the $50 billion US residents spend on their pets each year). 

If you take the data at face value, the simple framing of the problem as a quantifiable one with some kind of definite limit, I find incredibly encouraging. Perhaps the really interesting question though is what that data really means. "Humanitarian need" is presumably some kind of function of the actual need on the ground, but processed through the humanitarian agencies on the ground who report those needs to funders. And the agencies are locked in a very long repeated strategic game with those funders - for instance agencies have incentives to overstate need in order to get more funding. But donors know this. And agencies rationally prefer funding before a disaster happens rather than after, but it is presumably harder to both fund raise and demonstrate impact when you have averted a crisis (i.e. nothing happened) than when you responded to one has started (i.e. something is clearly happening). And what on earth is the line between humanitarian need and development need?

You may have noted a couple of "presumably"s in that last paragraph. Anyone know of any studies on game theory and the political economy of humanitarian fundraising?

The Aftermath

So Juba was a bit of an anti-climax yesterday. As much as noone really expected anything (well apart from the UN who actually did buy up all of the water and juice from the only supermarket in town), it was still quite exciting until absolutely nothing happened.

NGOs being kicked out of the North is doubtless going to create a huge humanitarian disaster in Darfur, but its unlikely there will be much effect on the South. And as for creating a "reversal of commitment to elections and self-determination for Southern Sudan", well a cynic might say thay Khartoum isn't all that committed to elections and giving away all its oil. The question to be asking is how does this alter each side's incentives in the Game Between Juba and Khartoum. Personally I would be slightly more hesitant to go back to war with that hanging over my head.