By Andrew Green
JUBA (Reuters) - South Sudan's President Salva Kiir has asserted his power by firing his biggest political rivals along with his entire cabinet, but he risks splitting the African oil producer at a time of new tensions with civil war foe Sudan.
On Tuesday, Kiir removed Vice President Riek Machar and top negotiator Pagan Amum, senior officials in the ruling Sudan People's Liberation Movement (SPLM) who had indicated they would challenge him as party frontrunner for elections in 2015.
Analysts said Kiir acted to end increasing infighting inside the party, which led the country to independence in 2011 after a peace deal that had ended one of Africa's longest civil wars fought with Khartoum.
Rivalry inside the SPLM has hampered its government at a time of a new confrontation with Sudan over oil flows and frustration among ordinary people who have been waiting for a development "peace dividend" after the 2005 end of the war.
Despite earning more than $10 billion from oil sales since then, the government has built no new hospitals or power stations, while rural areas lack the most basic services.
But Kiir's dismissal of the two rivals and his entire cabinet threatens a shaky consensus among rival tribes and militia leaders dominating the country the size of France.
"If the current power struggle within the SPLM continues unabated, it is certainly bound to have far-reaching consequences," the Sudd Institute, a local think tank, said.
"This could include a possible party split, state failure, or a remote chance of emergence of a genuine multi-party democracy," it added in a report.
With institutions still weak, the fissures in the party could follow ethnic lines and lead to a new civil war in a worst-case scenario, the Institute warned.
Stability in South Sudan is not only vital for crude buyers in China, India and Malaysia but also for east African neighbors such as Ethiopia, Kenya and Uganda which were swamped with refugees during the decades of civil war.
SOLDIERS CHOSEN OVER TECHNOCRATS
Kiir had presided over a cabinet of 29 ministers and one of the world's biggest parliaments, made up of fellow bush commanders and tribal leaders.
Some of these had been fighting each other during the civil war when Sudan paid rivals to divide its southern enemy.
He managed to keep powerful ministers with their own militias on his side by looking the other way over corruption, despite a public promise to recover $4 billion in funds allegedly "stolen" from the Treasury by government officials.
Kiir, a no-nonsense army man most comfortable in the field, chose militia commanders for their loyalty over technocrats, although the latter would have been more suitable in helping to build up state institutions.
But after a 16-month oil shutdown and the prospect of Sudan again blocking crude sales from the landlocked southern nation, government money is running short - and so is aid donors' patience.
In the past few months, authorities managed to pay civil servants only thanks to loans from the United States and the European Union, with unofficial conditions attached relating to improved governance, diplomats say.
In a first step, Kiir decided to cut the number of ministries to 19 in his future lineup which he has yet to name.
"The transition from liberation to governing has proven quite challenging," said Biong Deng Kuol, a fellow at Harvard's Kennedy School of Government. He recommended that the president bring in new, competent technocrats to form a new cabinet.
However, spending less on patronage such as official Land Cruisers - every senior official is entitled to two of the vehicles - might fuel dissent inside his party, exacerbating a trend in the past few months when some state governors turned against Kiir.
EYES ON THE ARMY
Neither Machar nor Amum, who belong to different tribes from Kiir's dominant Dinka, have said what they plan to do next.
In a new sign of tensions, Kiir ordered Amum not to leave the capital, Juba, or make any comments while being investigated for "his deliberate endeavor to create unnecessary divisions" in the SPLM, state radio said on Thursday.
Much will depend on the reaction of the army, which consumes at least 60 percent of the state budget and is the power broker in the SPLM.
Analysts say Sudan has been fuelling dissent by supporting rebels led by David Yau Yau, who is fighting the army in South Sudan's Jonglei state. This has hindered plans to search for oil there and enraged SPLM hardliners who want to arm Sudanese rebels battling the Khartoum government.
Others, like Kiir, would prefer negotiation to end conflict with Khartoum over disputed territory. "Salva is by nature a conciliator and wants the South to get on with becoming a nation," said Eric Reeves, a U.S.-based Sudan activist.
Before the announcement on Amum, life had been getting back to normal in Juba. Soldiers beefed up security at Kiir's presidential office and major ministries but U.N. staff have gone back to work after being initially advised to stay at home.
Top security officials went on state radio to calm people. "If you are one of these who enjoy themselves with a glass of wine or beer or anything that makes you happy or having fun somewhere after working hours at bars or anywhere you usually go, please continue to do so," one radio announcement said.
But locals remain wary. "People are getting scared," said Paul Mandela, a motorcycle taxi driver.
(Writing by Ulf Laessing; Editing by Pascal Fletcher and David Stamp)