South Sudan says U.S. oil sanctions will undermine search for peace

JUBA (Reuters) - U.S. sanctions on 15 South Sudanese oil operators will work against efforts to restore peace and stability in the nation, the government said on Thursday.

The sanctions, which were announced on Wednesday, will require companies and government bodies to apply for special licences to do business in the United States, an action designed to increase pressure on President Salva Kiir to end the conflict and humanitarian crisis in South Sudan.

"These measures are viewed by the Ministry of Petroleum as counterproductive to the shared mission of the Republic of South Sudan's and the United States' governments to bring peace and stability to South Sudan," the ministry said in a statement.

It pledged to work with the U.S. Department of Commerce "to remove these restrictions and resume normal relations with the U.S.".

South Sudan has been torn by civil war since 2013 when fighting erupted between troops loyal to Kiir and those loyal to then-Vice President Riek Machar. The conflict has claimed tens of thousands of lives, slashed oil production and driven about a third of the population of 12 million from their homes.

Earlier this month, activists accused the government of funnelling cash from the state oil company to militias responsible for atrocities and attacks on civilians.

Announcing the sanctions, the U.S. State Department also said the government and corrupt officials were using oil revenue to buy weapons and fund militias.

Washington has already placed sanctions on South Sudanese military and political figures, and in January imposed an arms embargo to try to halt the flow of weapons into the country, signalling that it had lost patience with the warring factions for ignoring ceasefires.

Last year, the government said it planned to more than double oil production to 290,000 barrels per day in fiscal 2017-2018.

South Sudan is the most oil-dependent country in the world, with oil accounting for almost all its exports and around 60 percent of its gross domestic product, according to the World Bank.

The government said on Thursday it will encourage more investments in the petroleum sector.

Petroleum minister Ezekiel Lol Gatkuoth extended an exploration and production sharing agreement with Petronas of Malaysia for six years.

The deal covers blocks 3 and 7 in Unity oilfield which have been shut down due to the conflict. The government said it had secured a commitment from Petronas to resume operations soon.

"Bringing back production at Unity and other fields, and increasing production overall, are the priorities of this ministry," the minister said in a statement.

(Writing by Duncan Miriri; editing by David Stamp)