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Sudan Tribune

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South Sudan threatens to suspend oil production if north imposes charges unilaterally

November 30, 2011 (JUBA) – The South Sudan government on Wednesday reacted negatively to reports that Sudan plans to take 23% of the new country’s oil exports, saying it will consider suspending oil production if north Sudan continues to impose high transportation and refinery costs.

Sabir Mohamed Hassan, Sudan's co-chair of negotiations on economic issues, speaks at a news conference in Khartoum November 30, 2011 (Reuters)
Sabir Mohamed Hassan, Sudan’s co-chair of negotiations on economic issues, speaks at a news conference in Khartoum November 30, 2011 (Reuters)
Agence France Presse (AFP) quoted an anonymous senior official at north Sudan’s oil ministry as saying, “In the interim period, we are not going to charge the full fee. We will deduct about 23 percent as payment in kind.”

Talks between the North and South collapsed once again on Wednesday after the African Union High Panel Implementation (AUHIP) failed to resolve differences between two the countries.

Speaking to Sudan Tribune shortly after his arrival from the Ethiopian capital Addis Ababa, Stephen Dhieu Dau, South Sudan’s oil minister said no agreement has been reached on what his landlocked country would pay as charges to Khartoum.

After South Sudan’s independence in July, the only way to export oil has been through north Sudan. The new country has been pondering building a pipeline that runs through neighboring Kenya will but analysts say it will take years to build.

“To the best of my knowledge, there was no agreement on charges. The Sudanese delegation did not accept our proposal. They insisted on demanding $36 dollar per barrel. This was very expensive charge to accept. So we reject their demand because it is discriminatory. It is not a charged based on a cost principle,” Dau said.

“This is a clear discrimination. They are [Khartoum] demanding charges not based on any principle. This was [why we] did not reach any compromise because they were not negotiating with us”, said the senior member of the delegation.

Attempts by Sudan Tribune to reach Pagan Amum, the Secretary General of South Sudan’s ruling Sudan People’s Liberation Movement (SPLM) and the leader of Juba’s delegation failed on Wednesday evening. His aides said he was tired and resting.

Dau said that if Khartoum did not change its stance, South Sudan may be forced to stop exporting oil through north Sudan. This week Khartoum announced that it would stop allowing South Sudanese oil to be exported through Port Sudan but then appeared to reverse its position.

Sudan’s oil ministry said on Monday that it had blocked southern exports, claiming the Juba government had failed to pay transit fees of $727 million covering the period from July until the end of October.

But a foreign ministry spokesperson said that north Sudan was determined to get a percentage of South Sudan’s oil exports even if no agreement has been reached on transit fees but without forcibly closing the pipelines.

Less than five months ago South Sudan became the world’s newest country after voting for independence in a January vote, taking with it three-quarters of the country’s oil.

“There is no immediate alternative. The only option which I think will not be in the best interest of both the north and us is to suspend oil production because there are no storage facilities at the Port Sudan export terminal”, Dau said.

The oil minister said his government did not want to stop exporting oil but said that it was an option if Khartoum continues to prevent oil from leaving the Port Sudan and reaching the international market.

In such a situation, “the only option will lead to full shutdown”, Dau said.

But Sabir Mohamed Hassan, Khartoum’s chief negotiator on economic issues claimed, after returning from the talks in Ethiopia, that the south was in fact continuing to ship its oil through the north.

“The south has access [to our facilities] and it will continue to export, and it is in our interests that they continue to export through our territory,” he told a news conference.

“[But] we’ve told them that we have a responsibility to take our dues in kind, and that is exactly what has happened in the past few days,” he added.

Khartoum and Juba are locked in a bitter dispute over how much the south, which gained independence in July and produced some 75 percent of the country’s 450,000-500,000 barrels of oil per day before independence, should pay to use the north’s infrastructure.

The escalating dispute prompted China, the largest foreign investor and main buyer of Sudanese oil, to urge both sides on Tuesday to “exercise restraint” in their negotiations.

The Chinese ambassador in Sudan Luo Xiaoguang described Khartoum’s decision as “very serious and unjustified”.

Xiaoguang further told the pro-government al-Rayaam newspaper in remarks published yesterday that there is no reason to stop the exporting of oil as long as there are negotiations now underway between the two countries in Addis Ababa.