On July 6 2011, the world’s diplomatic elite flocked to one of the globe’s most underdeveloped regions to bask in the warm glow of the birth of a new nation. That South Sudan’s struggle for independence had claimed the lives of an estimated 2million people, and that the majority of its inaugural citizens had been displaced by decades of war, ensured that the Juba inauguration was all the more remarkable – brimming with the promise of peace, and the fruits of freedom. Now, in an act of apparent economic suicide, South Sudan has literally turned off the taps of their economy. “This is a matter of respect,” Pagan Amum, the South’s chief negotiator with Khartoum asserted, “We may be poor, but we will be free.” By shutting down 90% of the country’s oil production Juba seems willing to entirely forego 98% of the government’s non-aid related foreign currency earnings. How did we get here?

Recent events are almost inexplicable when one considers the developmental and economic progress that accrued to both Sudans in the six years that spanned the signing of the Comprehensive Peace Agreement (CPA) in 2005, and the independence of South Sudan last year.

But then again, perhaps not: Khartoum began to act in bad faith with regard to the terms of the CPA almost as soon as the ink had dried: siphoning money from the proceeds of oil fields in the South; failing to administer a referendum on the final status of the disputed, and oil rich, Abyei region; reneging on their commitment to conduct “popular consultation” processes in the border states of South Kordofan and Blue Nile; and failing to demobilize and integrate Northern rebel militias affiliated with the Sudanese People’s Liberation Army (SPLM) into the Sudanese Armed Forces (SAF).

As secession grew near, critical issues of resource division, citizenship, inherited debt, and the final status of borders remained unresolved. Hardliners, and military men, in the northern establishment, emasculated by the failure of Omar al-Bashir to extract any concessions to end or mitigate Sudan’s pariah status, buttonholed the president in a soft coup, forestalling the prospect of effective conciliation with the South. Fratricidal, petty, and pathetic politicking is now the order of the day.

Rump Sudan now faces a chronic fiscal crisis. Having lost 75% of known oil reserves to the South, the Khartoum regime, under the shadow of the Arab Spring, must enact 26% spending reductions in the face of a restive population, whose marginal livelihoods are being squeezed at the crosshairs of inflation, failed or conflict affected cultivation, and the lifting of government subsidies on staples. The full extent of the bankruptcy of government’s current fiscal positions was exposed in December when Finance Minister Ali Mahmood Abdel Rasool admitted to a hostile Majlis that current fuel subsidies accounted for a gobsmacking 25% of government expenditure.

That the SAF has invaded and occupied Abyei, and vast swathes of South Kordofan and Blue Nile states, will divert more resources to oppressive state apparatus in lieu of poverty reduction and the provision of basic services. The UN now estimates that as a consequence of these new conflicts a quarter of a million citizens have been “severely affected”, and that half a million may require food aid. The government’s refusal to allow international aid groups to work with conflict-affected populations has the potential to induce a catastrophic, but entirely avoidable, humanitarian disaster.

Moreover, the destabilization of Libya – actively supported by Bashir – has forced Darfuri rebels from their former safe haven. Notwithstanding the assassination of the leader of the Justice and Equality Movement (JEM) in December, the influx of battle-hardened militia and military hardware to the Darfurs, and Kordofan states, has breathed new fire into that conflict. Increasing cooperation between the SPLM-North and Darfuri rebel groups now trace the contours of a new “South” and, potentially, protracted conflict.

Domestic protests – often spontaneous – have been suppressed, amid allegations of torture and human rights violations.

In this cauldron of unrest and economic decline, perhaps it is no surprise that the Sudanese government began to ‘officially’ confiscate Southern oil to offset their demands for a $36 a barrel surcharge to cover the costs of transit through the Red Sea pipeline. The South now accuses Khartoum of stealing more than $800m worth of oil, a charge that is not denied.

Ongoing efforts to negotiate a sustainable compromise appear to be floundering with the South offering to pay a $1 surcharge per barrel. Both sides are, moreover, insisting on linking any agreement to border disputes, allegations of proxy warfare, and the Abyei conflagration. The negotiating teams appear bent on holding hands and plunging off the economic precipice together.

The North may be in an economic crisis, but the South desperately needs money. Human development indicators for the region are abysmal, but for the South they are positively medieval. The influx of 362,000returnees’ from the North, joined by throngs of refugees from Abyei and South Kordofan, has strained the limited welfare capacity of the new state, while bloody internecine violence in Warrap and Jonglei states continues to undermine internal security, with tens of thousands dead, and hundreds of thousands displaced. Khartoum will soon consider 700,000 South Sudanese resident in the North as foreign; their return would trigger unthinkable social destabilization.

Against this backdrop, the Government of South Sudan is shutting down oil production. If oil does not flow the pipeline will atrophy and become moribund, leaving both nations economically adrift in a sea of conflict.

With the United States utterly alienated from the process – comprehensive and longstanding sanctions against the North leaving them with few card to play – and both sides unwilling to consider the African Union’s interventions, it is difficult to see who can bring the parties back from the cliff face.

China, however, could still play a significant and constructive role, but only if they were to blur the edges of a longstanding policy of non-interference in the sovereign affairs of African states. China’s burgeoning and commodity intensive economy derives 6% of oil needs from Sudanese oil fields. There are also over 100 Chinese companies, with over 10,000 employees, heavily invested in the extraction and refinery capacity of both Sudans, whose security is increasingly tenuous. These sunk costs, in conjunction with the compounded opportunity cost of economic growth foregone as a consequence of diminished oil resources, could force China’s hand. Already diplomats have been shuttling, amid calls for restraint. A selfish foreign policy could yet bring Sudan back from the brink.