Sudans Discuss Concession on Oil - Wall Street Journal

By JENNY GROSS

South Sudan offered concessions to Sudan that would waive billions of dollars in debt and increase the amount it is willing to pay to use Sudan's oil pipelines. But Sudan said Monday it wants to tackle security issues first.

The proposal, issued Sunday during the latest round of talks in Ethiopia between the two countries, raised the possibility that they will be able to work through a deadlock and reach an agreement by the United Nations Security Council's Aug. 2 deadline.

South Sudan in late January shut its roughly 350,000 barrels of day production amid a deadlock with Sudan over oil transit fees and disputed territory.

On Saturday, South Sudan accused Sudan of launching fresh aerial bombardments along its border after a lull in fighting, and the army warned of retaliation.

South Sudan seceded from Sudan last July, but the neighbors are still working out how to share oil revenue and define borders. The U.N. has threatened sanctions if the two countries don't resolve their issues.

Rabie Abdelaty, a spokesman for Sudan, said Sudan's delegates in Ethiopia would consult with the presidency and reply to South Sudan's proposal.

South Sudan, a landlocked country, said it is willing to increase its offer on transportation fees to $9.10 a barrel for use of one major pipeline that traverses Sudan and $7.26 a barrel for another.

This offer is an increase from less than $1 a barrel South Sudan had previously said it was willing to pay, in line with international norms, but short of the $36 a barrel Sudan has demanded.

"The distance is still far away," said Mr. Abdelaty "But South Sudan has gone from less than $1 barrel a day to $9, so they are going toward the logic. This is an improvement."

In addition to raising its offer on transit fees, South Sudan is also offering to pay Sudan a net cash transfer of $3.2 billion over a period of 3½ years. South Sudan said it would finance this cash transfer through the sale of oil.

"We have tabled the proposal and are waiting for their response," said Atif Kiir, a spokesman for Juba's delegation.

South Sudan also said it would waive $500 million in lost revenue resulting from what it called Sudan's "confiscations and diversions" of South Sudanese oil. Overall, South Sudan said it is forgiving $5 billion of debt owed to it by Sudan.

In the proposal, South Sudan said it reserved the right to construct and use alternative transportation infrastructure. South Sudan is seeking to build one pipeline through Kenya and another through Ethiopia and Djibouti to avoid total reliance on Sudan to export its oil to international markets.

The African Union issued a statement Monday saying action is "desperately needed" to resolve the unfolding humanitarian crisis in Sudan and South Sudan's border regions. Amid armed conflict between the two countries, civilians in the Blue Nile and Southern Kordofan states are experiencing hunger, disease and displacement and need urgent aid, the statement said.

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