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Billions of dollars 'hostage' in Sudan-S. Sudan dispute

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(Globalpost/GlobalPost)

Billions of dollars in oil revenue for the crisis-hit economies of Sudan and South Sudan are being held hostage by Khartoum's concerns over border security, diplomats and experts say.

Sudan's allegations that South Sudan supports rebels continue to halt the flow of lifeline oil from the south.

There is no immediate hope of a resolution to the dispute between the two states despite months of African Union mediation, the experts say, concerned that tensions are escalating.

"All of us are fed up with the negotiations," Ali Abdullah Ali, a Sudanese economic expert, told AFP before the latest round of talks scheduled for Wednesday.

"The failure of the two Sudanese nations' negotiations has become an unquestionable reality," The Citizen newspaper wrote in an editorial.

South Sudan split from the north in 2011 with about three-quarters of united Sudan's oil production on its territory.

The new nation said petroleum provided 98 percent of its revenue. But it stopped production more than a year ago, accusing Khartoum of theft during a row over how much the South should pay for shipping its oil through Sudanese pipelines for export.

Optimism returned in September when the Sudan and South Sudan presidents hailed an end to their conflict. They signed deals in Addis Ababa to resume the oil flow and demilitarize the undemarcated, disputed border where they fought in March and April.

But months later, none of those agreements has been implemented.

Sudan would have received $1 billion-$1.5 billion (750 million-1.1 billion euros) annually as transit fees and other payments under the oil deal, according to an international economist.

Billions more dollars would have reached South Sudan from its oil exports.

But Khartoum insists oil cannot flow until security issues are addressed.

-- 'A recipe for no progress' --

It accuses South Sudan of backing rebels in South Kordofan and Blue Nile states, and this has been the major obstacle to implementing the September deals.

The South denies such support.

Among agreements in addition to oil, those pacts called for a border buffer zone and a reopening of crossing points for trade and passage.

Khartoum is holding all these provisions "hostage" to security, particularly for South Kordofan and Blue Nile, a foreign diplomat said.

"I think the north feels that if they allow a few of these things to go ahead that they will lose the leverage on the thing that's most important to them," said the envoy, asking for anonymity.

But this is "a recipe for no progress," said an international economist.

It also runs counter to the African Union's implicit directive last month that oil should not be held up by "differences of interpretation" on other issues, diplomats said, although they blame both north and south for the deadlock.

"It's an incredibly complex situation," one envoy said.

The African Union agenda has also become more complicated after crises in Mali and the Democratic Republic of Congo.

"All the African heads of state are more or less getting sick" of the Sudan-South Sudan issue, another foreign diplomat said.

In the meantime Sudan's economy is worsening.

The currency is under pressure and inflation, already above 40 percent, could hit 70 percent by mid-year, fuelled by the printing of money to finance a deficit officially set at 10 billion pounds (around $1.49 billion at black market rates).

"The only way that they can sustain this without inflation becoming out of control is if they get an oil deal," the economist said.

But Sudan "seems to be muddling through" and the revenue from a deal may not be worth the risk of Juba's petrodollars flowing back to the rebels, a diplomatic source said.

Even though Sudan remains short of revenue South Sudan is worse off, said Ali.

"They wanted to punish the north but they ended by punishing themselves," he said.

South Sudan's President Salva Kiir in late January said "the cycle of negotiation cannot continue indefinitely."

The two sides have to come to an agreement, said Ali, but "it's going to take some time."

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http://www.globalpost.com/dispatch/news/afp/130212/billions-dollars-hostage-sudan-s-sudan-dispute