AT THE confluence of the White Nile and the Blue Nile in Khartoum lies Africa's largest commercial construction site. Across 1,500 acres, at a place called Alsunut, Sudanese and Chinese workmen are working in shifts around the clock to build a new Dubai: a vast complex of gleaming offices, duplexes and golf courses that will turn Khartoum, it is hoped, into the commercial and financial hub of Islamist east Africa.

The first tower of this $4 billion development, due to be finished by next October, will be the headquarters of the Greater Nile Petroleum Operating Company. Close behind, in a building shaped like a sail, will rise the headquarters of Petrodar. Both these companies—Chinese, Malaysian, Indian and Sudanese joint ventures—are pumping out Sudan's oil, most of which is being bought by China.

A Sudanese company, DAL Group, is investing about $700m in the infrastructure for the project, but the buildings themselves are being put up by their new owners, a Who's Who of the oil-producing Arab world and oil-consuming Asia. All the Gulf states are buying plots. Khartoum is not only awash in its own oil money, but is also mopping up some of the surplus petrodollars of the Middle East. The Kuwaitis, the Malaysians and the Chinese are well represented. A Pakistani group is adding a snazzy 350-room hotel.

And that is just on one side of the White Nile. Opposite Alsunut, on the Omdurman side, Saudi and Kuwaiti investors have bought a large plot of land on which they intend to build a huge financial centre. And all this is taking shape in a country which is still subject to comprehensive economic sanctions, imposed by America, for giving shelter and support to terrorists—including, at one time, Osama bin Laden.

Sudan is now one of the fastest-growing economies in Africa. The IMF expects its GDP to grow by 13% this year, and the investors in Alsunut seem confident the boom will go on. Having found itself isolated in the 1990s for its Islamist extremism and terrorism, Sudan has found a way back into international esteem without the West, by re-inventing itself as the new entrepôt state of east Africa.

But this, of course, is not the whole story. Behind the fast-rising glittering towers lies a region that has been ignored: Sudan's south, where 80% of the oil lies. After 1956, when the country gained independence, the south, which is Christian and animist, was in an almost permanent state of rebellion against the Muslim Arab north, demanding a bigger share of the national wealth and a greater degree of self-rule. This region, which holds the key to the development of Sudan, also holds the key to its peace in future; not only in the south, but also in the war-ravaged western region of Darfur.

Taking grenades to school

Under intense American pressure, a comprehensive peace agreement (CPA) was signed between the north and the south in 2005. Under the CPA the political arm of the main rebel group, the Sudan People's Liberation Movement (SPLM), is now part of the national government in Khartoum; Salva Kiir, the SPLM leader, is both vice-president of Sudan and president of the official new government of South Sudan. This is an interim arrangement; in 2011, southerners are meant to decide whether they want to stay as part of Sudan, or found their own independent state.

Southern Sudan remains a tense, chaotic place in which memories of fighting have not faded. In Juba, the capital of the putative state of South Sudan, Mr Venisto (he will give no first name), wonders what to do about boys who bring hand grenades to his primary school. His “boys” range in age from six to 25; some bring guns, others turn up drunk. They have known little else in their lives but bush warfare. Like everyone in Juba, Mr Venisto has to survive on his wits rather than money, trying to instruct more than 2,980 pupils with just 51 teachers, all of them new to the job. With as many as 150 in each class, the tents that serve as classrooms are ripped and shredded as the pupils tumble out of them. Mr Venisto insists on a full morning of classes, as breaks quickly degenerate into all-out fighting.

The new government of South Sudan, composed of former commanders of the Sudan People's Liberation Army, is trying to enrol 750,000 new pupils this year, out of a population of 12m. If they succeed, still only about 30% of school-age children will be at school. But it is progress of sorts, and at least the south is in a state of relative peace. At the moment, the best guess is that a huge majority of southerners will vote for their own state when they get the chance.

Their own state would mean their own oil industry. Riek Machar, South Sudan's vice-president, eagerly outlines a plan for a refinery just east of Juba and pipelines through Congo to the Atlantic and Kenya to the Indian Ocean. The construction companies, he says, have already been chosen for the pipelines and the finance is nearly in place; the fact that the Kenya pipeline is supposed to reach the sea at Lamu, a World Heritage site, does not worry him. (“They're just tourists.”)

Mr Machar's plans, combined with the election schedule, mean that the northern government may have only five years to extract as much oil from the south as it can before it loses control. And this deadline puts the peace in jeopardy. The aggressive search for, and extraction of, oil by north-sponsored companies is not only messing up the environment but also inflaming tensions with the southern government. And it is provoking a dangerous backlash.

Cows, oil and poisoning

The dangers can be seen all too clearly in remote villages like Longuchuk, near the oil-rich Sudd marshes of Upper Nile state. Two years ago, Chinese oil workers arrived there. They were escorted by armed men in T-shirts, whom locals later identified as Sudanese soldiers. They stayed for six months, sank four wells and cleared access roads, all without talking to the villagers or asking their permission. A pool of slimy water beside one of the capped wells shows where the surplus oil was dumped. A hundred cows, the villagers say, died from drinking that water. When the oilmen came back last April, the local people—furious that they had got neither jobs from the project, nor compensation for their losses—refused to let them in.

Diane de Guzman, a specialist on oil in Sudan for the United Nations, argues that the rape of Longuchuk is part of a pattern across the oil zones of the south. Villagers are displaced by militias to allow exploration, the land is despoiled, cattle die within hours of drinking contaminated water. Under the terms of the CPA, the southern government is meant to be consulted about these oil missions; but it is not, and almost no compensation has been paid.

The southern government has just begun to fight back; it recently impounded two oil-company helicopters that were carrying out unauthorised seismic tests. Individual villages and militias have also begun to mount their own attacks on oil workers and installations. The past few weeks alone have brought reports of seven oil workers killed around the village of Paloich and an attack, by a group from another village, on a convoy of 21 oil tankers. More worrying for the northern government is the news that rebel groups from elsewhere are joining in. On November 27th, for the first time, one such band ventured out of terrorised Darfur to attack a refinery at Abu Jabra in North Kordofan state. This is not yet an insurgency against oil companies of the type that has been seen in Nigeria, but the first signs are there.

The northern grip

Oil is at the heart of other critical disagreements between the north and the south. The CPA requires the proper delineation of the north-south border; but the north has rejected the rulings of a border commission in the oil-rich Abyei region, fearing that too much land will go to the south. This has delayed the whole process of marking out the border. At present, the southern government is said to be getting half of the net oil revenues from the southern oilfields, as they are entitled to under the peace agreement. But it is the north that provides the statement of the net amount. Southern politicians say they are not allowed to examine the books to see whether they are getting their fair share.

Most disappointing of all, little progress has been made towards demobilising the scores of militias that roamed the south during the war. These militias, constantly shifting their alliances, were sometimes used as proxy fighters for the northern government. The Sudanese army has pulled back from most of its bases in the southernmost states, but only as far as the oilfields. There the north also keeps up to 60,000 of the more Islamist Popular Defence Forces, which it can deploy whenever it likes.

The danger of having so many armed militias still wandering about was dramatically illustrated last week in the town of Malakal. In the biggest breach of the 2005 ceasefire so far, the SPLM engaged in several days of fighting with both a militia group and the regular (northern) Sudanese army. Hundreds died. Previous weeks had seen about 20 attacks on the main road from Juba into Kenya, leaving more than 100 dead. Having caught 15 of the attackers, the SPLM identified them as members of a militia directed by the Sudanese army. Pa'gan Amum, the secretary-general of the SPLM, called this “an act of war” and an attempt to “terrorise and destabilise” the south.

In such an atmosphere of distrust, it is not surprising that the southern government is rapidly converting its old guerrilla force into a proper army. In the latest budget, over 40% of the precious oil money, South Sudan's only source of income, has been earmarked for military expenditure. If the north is spoiling for a fight over the oilfields and southern secession, then the south wants to make sure it is ready.

Next year 1m refugees are expected to return to the south, and a census is planned for November to pave the way for elections in the whole of Sudan in 2008. Failure could see the south reverting to chronic instability, or even to war again. Peace was achieved in the south only when America, the European Union and regional African countries bullied the north into making the necessary deals. Now that pressure has been relaxed.

The Darfur distraction

The reason is obvious. American and European attention has become focused on a much more unhappy province, Darfur in the west. Since rebel groups there started their own military campaign against the Islamist north, in 2003, the northern government has been trying to expel or kill the African pastoral tribes, even though most of them are Muslim. Appalling acts of barbarity have displaced over 2m people and killed about 300,000 more. The disaster in Darfur, and in particular the West's endless wrangling with Khartoum over whether or not to get a UN force into the region, is sapping the outside backing that is essential for securing the north-south peace accord.

The conflict in Darfur continues unabated. Indeed, despite the comings (and goings) of ceasefires and peace talks, the fighting today is as intense, and the human toll as dreadful, as ever. The north's campaign there, however, appears increasingly futile. In the past month the Sudanese army has suffered two considerable defeats in Darfur, one at Umm Sidir and the other at Karyare; there, the rebels killed about 100 government soldiers and took 200 prisoner.

Even the government's strongholds do not appear secure. This week the UN evacuated most of its staff from el-Fasher, the capital of North Darfur, after fighting broke out in the market with rebel fighters; there had been rumours of an imminent attack on the town by a coalition of rebel groups. The northern army seems demoralised and ineffective, which is one reason why it has reverted to using the fearsome janjaweed Arab militias as its proxies, in combination with high-level bombing, to terrorise and subdue the locals. But the army's defeats may not lead to meaningful peace deals; so many different rebel groups now infest Darfur that striking any sort of agreement with them all has become dauntingly difficult.

Chris Czerwinski, head of the World Food Programme (WFP) in el-Fasher, says that the recent fighting has created another 20,000 refugees to add to the hundreds of thousands already in the area. In the couple of months since the breakdown of a peace deal signed in May between one of the rebel groups and the government, many places have become too dangerous for aid workers.

Between June and September, 13 local staff members of NGOs were killed in attacks on vehicle convoys in North Darfur. As a result, NGOs are now withdrawing staff from permanent postings servicing the refugee camps in some of the more remote areas. In a recent attack the janjaweed pillaged four WFP stores, taking about 1,000 tonnes of food destined for refugees. The fighting in Darfur has also spilled over into the Central African Republic and Chad; there, Sudanese-backed militias are attempting to overthrow President Idriss Déby's regime, creating more refugees on the border between the two countries.

Under the CPA, elections throughout Sudan (including for the presidency and the national assembly) have to be held not later than the summer of 2009. These may provide a way out of the current impasse in the south and the west. Sudan's president, Omar al-Bashir, thinks that their problems have been overblown anyway, especially in the case of Darfur, which he presents as a distant and unimportant province. The Western media, he says, exaggerates it all. In Khartoum, at least, he has a sympathetic audience, for 70% of all the foreign money pouring into Sudan—according to the minister of investment—is flowing into Khartoum state, the heart of the regime, binding people there all the more closely to the ruling National Congress Party.

Yet Mr Bashir's oppressive government is not popular outside Khartoum. Indeed, it is hard to see how it could win a majority in national elections. The economy may be booming, but it is also displaying all the classic symptoms of an overheating petro-economy, with a rapidly appreciating currency, rising prices and creeping corruption, both in the northern and southern governments. Not many Sudanese have a real stake in the current oil boom, and elections might just sufficiently reshape the political landscape to alleviate the pressures from the centre on the long-suffering peoples of Darfur and the south. Perhaps the most urgent task facing everyone involved in Sudan is to hold the CPA together to ensure that those elections take place.

Timid stakeholders

On paper, a properly united Sudan seems well worth aiming for: an oil-rich but underdeveloped south complementing an educated, commercial north with few natural resources. But the northern government still feels no obligation either to share its wealth with poorer peripheral provinces, or to behave well towards them. What is more, too many countries now have a large financial stake in Sudan. Their wish to be nice to the regime in Khartoum means they have no interest in forcing it to mend its ways, by, for instance, imposing further sanctions over Darfur. The Chinese would never agree; but there has been little help from the Arab League either, or from India and Malaysia. They are more focused on the German pile-drivers laying the foundations of the towers of Alsunut—and on the oil concessions.

Alsunut is not the only huge construction site in Khartoum. About 15km (9 miles) across the city the largest American embassy in Africa is going up, which will supposedly house the biggest CIA listening post outside America. It reflects the spooks' cosy relationship with the Sudanese intelligence services in the name of the “war on terror”. When it comes to that particular war, and the lure of oil, old enmities—and the old hopes of peace in Sudan—can rapidly be forgotten.