Sudan says oil deal with south depends on security

KHARTOUM (Reuters) - Sudan will continue to take a share of oil from South Sudan to compensate for what it calls unpaid transit fees and said an oil deal was unlikely without an agreement on border and security issues, its foreign minister said on Wednesday.

South Sudan became Africa's newest nation in July under a 2005 peace deal that ended decades of civil war between north and south, but many issues remain unresolved, including oil, debt and violence on both sides of the poorly-defined border.

Tensions escalated last week when Khartoum said it had started confiscating oil from landlocked South Sudan, which exports its crude through Sudan's pipelines to a port on the Red Sea.

Sudan's economy has been badly hit by the loss of two-thirds of oil production to the South, and the country is under pressure to ease the hardships of people already exhausted by years of conflict, inflation and a U.S. trade embargo.

The two sides were meant to conclude an oil agreement that would see them sharing revenues, with the south paying fees to export its oil through the north.

The African Union is sponsoring talks between the two countries this week, but Sudanese Foreign Minister Ali Ahmed Karti dampened hopes of a quick deal, rejecting the south's criticism of its move as "childish."

"If they are not ready to sit down and conclude an agreement, we will take our right. We will take our entitlements," he told Reuters in an interview.

"Nobody can hamper us from taking our right. This is our entitlement," Karti said.

He said South Sudan's support for rebels in the border states of South Kordofan and Blue Nile was hindering the talks. Juba denies giving support to the insurgents, who fought as part of the southern army during the civil war.

"If you are hosting rebels, preparing them against me, supporting them by munitions, by salaries, by everything, by training, by giving them all facilities. What shall I wait for? What shall I wait for you to do? I'm waiting for war," he said.

"So if you are preparing to instigate war against me, what kind of any other agreement will be useful?"

He said Sudan had monitored conversations that proved Juba was supporting the rebels - known as the Sudan People's Liberation Movement Army (SPLA-N) - by continuing to pay their old salaries.

"We listen to them. They know that we listen to them. What kind of stupidity? You know I'm listening to what you say every day, and you go on talking about salaries, ammunition, supporting us, and bringing more tanks near the borders, and the rest," he said.

Any oil agreement would likely depend on a broader deal that addressed the fighting and other security issues, such as marking the border, Karti said.

"To me, it could be a holistic approach. A piecemeal way of doing things is not enough, and it proved not to be working. It's better to begin with the top issues - the security issue to me is very important - and then the rest will be easy," he said.

DEBT PILE

Sudan and South Sudan have been discussing a transit fee for southern oil exports since Juba's independence, but their positions have remained wide apart. Khartoum wants $1 billion in rear payments plus $36 a barrel to use the export pipeline, roughly a third of the South's export value.

South Sudan has offered to sell oil to Khartoum at discounted prices and give financial aid, but Karti said some southern officials had taken a "sarcastic" approach.

"Even some of them, sarcastically, they tell us that they are donors and they will give us some tens of millions, and they will be spending those millions on humanitarian issues, and trying to solve problems in the needy areas," he said.

"They talked to us like donors, whereas we are calling for them to sit down at a table to talk seriously," Karti said.

"(Saying we are) taking their oil, stealing their oil - this is childish," he said. "This is our right. If this does not (suit) them, let them block the oil. It is their oil. We will not at all fight for the oil to come through our pipeline."

He said a debt pile of almost $40 billion for which Juba refuses to share responsibility was weighing on the economy but rejected some analysts' forecasts that Sudan's economy is headed for a severe crisis.

"It is not bad. I will not accept this word," he said. "We are trying our best to emerge as a country that has good resources, and as a country that should be supported."

Most Western firms have shunned Sudan since the United States put a trade embargo in place in 1997 for the country's role in hosting prominent militants like Osama bin Laden.

Karti said Gulf Arab states were increasing their investments but Sudan would not ask for any outside help to overcome economic difficulties.

"We are not begging from anybody, we have our resources," he said.

(Additional reporting by Khalid Abdelaziz; Editing by Peter Graff)