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South Sudan will continue talks with Khartoum despite halting oil production

By Ngor Arol Garang

January 20, 2012 (JUBA) - South Sudan said on Friday that it will continue to negotiate with Khartoum over post-independence issues despite announcing that it is stopping oil being exported through North Sudan over transit fees dispute.

South Sudan council of ministers meeting today January 20, 2011 in Juba (GoSS website)

South Sudan’s cabinet on Friday passed a resolution that will see a total halt to oil production within two weeks. The ministry of petroleum and mining will immediately proceed with construction of a new alternative pipeline through Ethiopia to the Kenyan port of Lamu, according to South Sudan’s oil minister.

"We are planning that building an alternative pipeline will be a national duty for all South Sudanese," South Sudan’s oil minister, Stephen Dhieu Dau, told reporters in Juba.

Juba claims that Khartoum has stolen $350 million worth of its oil and prevented over $400 million of it from leaving Port Sudan, while Sudan says that the South Sudan owes it more than $1 billion in unpaid fees.

Sudan wants $36 a barrel as a transit fee, which is roughly a third of its value, and for Juba to share the north’s $38 billion national debt. Juba wants to pay a much smaller fee similar to the rate Chad pays to export it oil through West Africa.

Landlocked South Sudan officially became an independent state in July 2011 after a 2005 peace deal with Khartoum that ended decades of civil war in which 2 million people died.

However, since South Sudan seceded the two countries have been unable to agree over the poorly demarcated border, citizenship, national debt and the exportation of South Sudan’s oil using northern pipelines and refineries.

South Sudan’s minister of information, Barnaba Marial, told reporters at the council of ministers that they had resolved to pursue negotiations with Khartoum through the African Union High Implementation Panel (AUHIP) on the outstanding issues between the two countries.

So far the AUHIP mediated talks, led by former South African president Thabi Mbeki, have failed to resolve any of these issues. Minister Marial said the Khartoum government have spoiled the environment for discussion.

Marial said the council had directed the minister for petroleum and mining to communicate the decision to all oil companies involved in the production in order to initiate immediate construction of the alternative pipeline.

"This decision was necessitated by the continuous behaviour, which the Khartoum government has adopted recently toward South Sudan. They have been stealing and blocking our oil from going to the international markets. Our oil worth 350 million US dollars has been stolen", the minister said.

Marial said the cabinet made the decision to build the pipeline after the minister in the office of the president, Emmanuel LoWilla, and the minister of petroleum and mining, Stephen Dhieu Dau, tabled a report about recent visits to the neighbouring countries of Uganda, Kenya and Ethiopia.

The minister accused Khartoum of forcing oil companies to load the oil into its vessels without the permission of the government of South Sudan.

“How can we be discussing with Khartoum on the issues of oil especially the transit fees while they are now confiscating our oil by force?” minister Marial asked.

South Sudan’s oil minister told Reuters that the six month-old government could last for 18 months without oil, despite oil accounting for 98 percent of the budget.

The oil minister said that despite the issues with the project the government wanted to build the pipeline to avoid exporting out of north Sudan.

The new pipeline route runs through difficult and insecure areas of southern Ethiopia and northern Kenya and there is scepticism that the project is financially viable as oil production is expected to decrease by half over the next decade.

Meanwhile, the Sudanese government has downplayed South Sudan’s move, saying that the latter will be more affected by it.

Sudan’s official news agency SUNA reported that Khartoum’s foreign ministry responded to the announcement by releasing a statement saying that it has the right to confiscate South Sudan’s oil because Juba was not serious about negotiating a fee for using northern infrastructure.

Khartoum said there would be "a negative impact on both sides but the damage will be bigger for South Sudan than Sudan". Since Sudan lost South Sudan’s oil revenue, which made up 75% of oil revenues, its economy has suffered severely.

North Sudan has not said whether it will attempt to sell the oil it has diverted to its two refineries but Juba has said it will sue any company who buys its oil from Sudan rather than them.

Sudan’s president Omer Hassan al-Bashir has recently admitted that his country will be negatively affected if the South decides to halt oil production, but warned that Juba has more to lose from such step.

Over the last six months the two countries have accused each other of supporting rebels in each others territory. Both sides have denied the allegations. North Sudan has also been accused by the United Nations of bombing South Sudan, a charge denied by Sudan Armed Forces (SAF).

Sudan’s foreign minister Ali Karti said this week that an oil deal with South Sudan is unlikely to be reached without an agreement on border security and Juba’s cessation of alleged support to Sudanese rebels.

Some observers have suggested that South Sudan’s decision to halt oil production is aimed at putting pressure on Khartoum in order to elicit concessions on the negotiation table.

In New York, the United Nations Secretary General Ban Ki Moon issued a statement saying he is "is deeply concerned by continuing tensions along the border between Sudan and South Sudan as well as the current oil crisis".

"This situation indicates a worrying deterioration in the relationship between the two states," he said.

"The United Nations fully supports the efforts of the African Union High Level Implementation Panel (AUHIP) to resolve these and other outstanding issues between the parties based on the concepts of mutual viability, security and peaceful coexistence".

"The Secretary-General strongly urges the parties to do everything possible to reach agreement in their current negotiations in Addis Ababa under the auspices of the AUHIP, to defuse the current oil crisis, and address the other contentious issues on the agenda that require immediate resolution".


Sudan Tribune: South Sudan shuts down its oil production countrywide

Bloomberg: South Sudan Plans to Shut Down Crude Output Over Oil Dispute With Sudan

Reuters: UPDATE 3-S.Sudan plans to halt oil output within 2 weeks

All Africa: South Sudan: Khartoum Scuttles the Addis Ababa Talks