On July 9, 2011, the Republic of South Sudan became the world's newest country. After a referendum in which 98 percent of voters favored independence, some 30 heads of state celebrated the nation's independence. Together with the crown prince of Norway, UN Secretary-General Ban Ki-Moon, and the political leadership of the North, the officials affirmed collective acceptance of South Sudan's sovereignty. And the international community breathed a sigh of relief, as the vote, which was mandated by the 2005 peace agreement between the North and South, was meant to bring the 55-year conflict to an end.

But the referendum and the South's formal declaration of independence have not produced a lasting peace, yet. Despite the mediation of former South African President Thabo Mbeki, negotiations before independence (and since) left several unresolved issues to fester: How much the South would pay to transport oil through the North, where the actual border would lie (especially the status of the disputed region of Abyei), debt sharing, and what the citizenship status of South Sudanese remaining in the North, and vice versa, would be. In addition to tension surrounding these questions, a wider opposition that includes the three major Darfur rebel movements, the Northern arm of the Southern political movement, is growing. It is making this moment all the more precarious for Khartoum. In fact, the tangle of contestations and conflicts across the country marks the most serious challenge to the survival of Omar al-Bashir's Islamist government since it usurped power more than two decades ago.

What the South will pay to ship oil north to Port Sudan is the divisive matter at present. Eighty percent of Sudan's oil reserves are in the South. The newly created South Sudan initially offered one dollar per barrel—the standard international rate—and a one-time cash transfer of $2.6 billion to help with the North's budget deficit. Khartoum refused the offer, demanding $36 per barrel. When the South refused to pay earlier in January, Bashir's government decided unilaterally to divert enough oil (read: steal it) to make up the difference. Last Friday and Saturday, the South turned off the spigot, shutting down 900 oil wells. Last week, Juba signed an agreement with Kenya instead to build a pipeline heading south to the port at Mombasa. South Sudan says the new route to market could be ready in 11 months; oil experts doubt a project of such proportions could be finished so quickly.

Both Khartoum and Juba have a history of brinkmanship. And Bashir is once again edging up to a precipice—he seems to think invading the South would settle the impasse. Last week, along with his minister of defense, Abdel Rahim Muhammed Hussein, Bashir told 700 army officers to prepare for war. But the military pushed back. The officers told Bashir and Hussein that they were appalled at the regime's loose talk of battle. Political interference by Bashir's ruling political party, the officer said, had weakened the Sudanese military by repeatedly purging those suspected of disloyalty and promoting officers based on loyalty rather than competence. There was widespread corruption in the procurement of weapons—200 tanks bought last year were all defective. And the army was already battling against the 60,000-man coalition army in Darfur, the Nuba Mountains in South Kordofan, and Blue Nile that has been fighting to overthrow Bashir.

The political situation in the South looks less precarious, but there have been warning signs of future conflict over the last few months. For its part, in previous years, Juba kept its quarreling tribes united by focusing their attention on the looming and ever-present (and very real) threat from the North. But in the past two months, the historic rivalry between the Lou Nuer and Murle tribes has boiled over -- several thousand may have been killed. Chronic syphilis has left the Murle largely sterile; to keep from disappearing, they steal children from neighboring tribes. Ongoing drought has reduced food supplies, so now they are stealing cattle as well. Fed up, the Lou Nuer retaliated. South Sudanese President Riek Machar—also the new country's leading Nuer political figure—has urged restraint. If not addressed soon, internecine fighting among armed young men in the countryside could destabilize the new state.

Indeed, the map of Sudan is divided by more lines than the North-South border. Since May, an anti-Bashir alliance has been coalescing in the northern periphery. Last June, Khartoum ordered the Sudanese army to attack the forces of Abdel Aziz al-Hilu in the Nuba Mountains and attempted to kill the elected governor of Blue Nile, Malik Agar, and defeat his forces. Both offensives failed badly. In desperation, Khartoum initiated a bombing campaign in the Nuba Mountains and Blue Nile states, causing the mass displacement of civilians. He imposed a blockade on humanitarian and food aid. Aid workers now predict famine conditions within the next two months if the blockade is not lifted. On November 12, Agar, Hilu, and the three major rebel leaders in Darfur formally announced a new alliance to depose Bashir's Islamist autocracy (the Sudanese affiliate of Egypt's Muslim Brotherhood) and install a secular democratic pluralist state. Khartoum has accused the South Sudanese government of supplying the rebel alliance with weapons. The Obama administration repeated the charge. That led to an acrimonious meeting between U.S. President Barack Obama and South Sudanese President Salva Kiir late last year. The South has since stopped weapons transfers.

The toppling of Libyan leader Muammar al-Qaddafi inadvertently handed the Darfur rebels money and weapons as well. When Qaddafi came under fire early last year, the three most powerful Darfuri rebel leaders rushed to support him (after all, Qaddafi had armed them in the past). He supplied Khalil Ibrahim, one of the rebel groups' leaders, with a large stash of cash and surface-to-air missiles. Then Qaddafi was killed, and on December 25, Sudanese air strikes killed Ibrahim, too. It is rumored that the new Libyan government provided Khartoum with the coordinates of Khalil's camp in the bush, where he may have been moving his troops for an assault on Khartoum. The Sudanese air force—reportedly manned by mercenary pilots from Iran, Egypt, and Russia—is the one reliable element of its military force standing between the rebels and an assault on Khartoum. Khalil's death may have given the Bashir government a reprieve from the assaults coming from the new coalition, but it is likely only temporary.

Khartoum's deteriorating military position parallels a perilous economic situation. Bashir's government has kept itself in power over the past decade by subsidizing food and gas prices to keep big cities pacified and by massively increasing patronage jobs for its Islamist supporters&mdashthe public sector grew from 10 percent of GDP in the 1990s to 23 percent in the 2000s—funded with the oil revenues that began pouring into the national treasury after 1999. But today, Khartoum faces a 30 percent gap between budget and revenues, as oil revenues abruptly and sharply declined when the South declared independence and most oil deals transferred to Juba. The International Monetary Fund has estimated that the North will face a major economic contraction over the next two years. Bashir will be forced to lay off tens of thousands of his Islamist supporters and curtail subsidies as the private sector contracts. Food prices have been steadily rising over the past year—the cost of beef doubled in the first nine months of 2011—triggering demonstrations in Khartoum last September that the police brutally suppressed. The 2011 sorghum crop, one of the principal stable grains, dropped 50 percent below the previous year's, which will fuel even more food price increases—and hunger.

Western governments, including Washington, have been slow to react to the Bashir regime's humanitarian blockade and bombing of civilian targets (there have been public statements, but little else). The shutdown of the oil fields last week and Bashir's preparations for war, however, prompted Deputy Secretary of State William Burns, Assistant Secretary of State Johnnie Carson, and U.S. Special Envoy Princeton Lyman to rush to Juba to talk down the situation. Both the White House and the State Department have sought to be more even-handed in dealing with North and South Sudan over the past year, likely part of its broader strategy of accommodating itself to the Muslim Brotherhood's rise to power across the Arab world. Bashir's party, along with that of Hassan al-Turabi, is the Muslim Brotherhood in Sudan.

Since Bashir's Islamist party first took power in Sudan, more than 1.5 million people have died in wars, both in Darfur and the South. There have been horrendous atrocities against the civilian population, repeated famines that Khartoum prevented aid agencies from addressing, campaigns of forced Islamization against non-believers, and the mass rape of women in Darfur and the South. This sorry record has driven Khartoum's decline.

The immediate challenge is to make clear to Khartoum that any attack on the South will be an act of war between sovereign states to which the United States will respond with its own air assets: The South has a large standing army and does not need or want ground troops, but it has no air force, which is Khartoum's greatest advantage. Washington could also try to broker a deal on revenue sharing that would allow both sides to save face and address the North's real budget crisis, negotiate an end to the North's humanitarian blockade of rebel areas, and encourage Khartoum to address the legitimate demands of the rebel alliance in the North through reform. But absent a real military threat from the United States, Khartoum may ignore all outside pressure as it fears its end is near.