By Elias Biryabarema
KAMPALA, April 11 (Reuters) - Uganda, which was accused by UN experts last year of backing M23 rebels in eastern Democratic Republic of Congo, is being closely watched in its mediation efforts to end the revolt in North Kivu province. Uganda also faces uncertainties over resumption of foreign aid and the development of a nascent oil industry.
CONGO REBELLION
A United Nations group of experts last year accused Uganda and Rwanda of helping M23 rebels in . Both denied this, and for months Uganda has played mediator between Kinshasa and the insurgents.
The on-off talks have been fruitless and the UN's authorisation of an intervention brigade to neutralise M23 is likely to make Kinshasa unwilling to make concessions to the rebels, eroding chances for a quick, peaceful settlement.
What to watch:
- If talks fail, Congo could blame Uganda and decide to punish it by supplying arms to the Allied Democratic Forces (ADF), an anti-Kampala rebel group with camps in eastern Congo.
- If M23 and Kinshasa reach no deal, North Kivu could remain lawless, providing a vast sanctuary for new militant groups determined to fight Uganda's President Yoweri Museveni.
- North Kivu borders Uganda's oil-rich Albertine basin and lawlessness there could disrupt crude production, a potentially harsh blow to east Africa's third-largest economy.
AID CUTS
Six Western donors have suspended aid worth about ${esc.dollar}282 million after Ugandan officials were accused of embezzling ${esc.dollar}13 million. They want corrupt officials punished, stolen money recovered and tight controls put in place.
In January, Uganda said it would make special audits to uncover graft and freeze assets of corrupt officials, hoping for a resumption of aid by mid-year. A European Union delegation source said a meeting with Museveni in early May would assess any progress.
What to watch:
- No official has yet been convicted of embezzling aid money, and half-hearted implementation of promised reforms is unlikely to persuade donors to resume aid.
- Aid flows partly support the Ugandan shilling and a long suspension is likely to weaken the currency.
- A prolonged aid freeze could hit public services, such as health, and stir public anger.
OIL PRODUCTION
Progress toward commencement of crude production has been stymied by tax and other disputes, but two long-delayed oil bills awaiting presidential assent would clear the way to construct a refinery and a new round of exploration licensing focused on 13 new blocks in the Albertine graben.
Exploration company Tullow Oil and its partners, Total and China's CNOOC, disagree with the government on whether to prioritise construction of a refinery to process crude, and if so how big, or building a pipeline to overseas markets.
What to watch out for:
- If investors perceive the government's insistence on a refinery as an unreasonable and costly option to develop Uganda's hydrocarbons industry, they might opt to exit.
- Critics say one of the new laws vests immense power in the minister responsible for the petroleum sector, including negotiating, granting and revoking oil deals, and potentially exposes the sector to graft. (Reporting by Elias Biryabarema; editing by Stephen Nisbet)
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