Sudan investment conference called off as U.S. pulls out

KHARTOUM (Reuters) - An international conference to drum up investment in Sudan has been called off after the United States and other powers signaled they would not attend in protest over Sudan's crackdown on rebels, diplomats and officials said on Sunday.

Sudan needs a financial lifeline after its economy was thrown into turmoil when South Sudan declared independence in July under a 2005 peace deal, taking with it three-quarters of the oil production -- the driving force of both economies.

Diplomats said Western powers such as the United States had initially supported the joint Norwegian and Turkish initiative for a high-level Sudan conference to help soften the blow of the loss of oil by generating investment and economic assistance.

It was scheduled to be held in Istanbul on March 23/24. A Norwegian diplomat confirmed the meeting had been postponed with no new date set.

Sudan is waging a campaign against rebels of the SPLM-North in the South Kordofan and Blue Nile border states. The United States and refugees have accused Khartoum of air strikes against civilians, charges strongly denied by Sudan.

The United Nations says more than 410,000 people have been displaced by the fighting.

Western powers also shun Sudan's President Omar Hassan al-Bashir who was indicted by the International Criminal Court over war crimes in Darfur, the scene of a nearly-decade old insurgency.

NO NEW DATE SOON

Diplomats said the conference was unlikely to happen anytime soon with no Western economic aid or debt relief likely to be forthcoming as long as fighting in the two states continued.

"We were surprised by the U.S. request to ask to not get invited to the conference," Ashraqa Said Mahmoud, minister for international cooperation, told reporters in Khartoum.

"The United States has decided to back off from its earlier commitments ... We agreed to postpone this conference until we can guarantee an effective participation."

Fighting broke out in South Kordofan in June and spread to Blue Nile in September. Both states border South Sudan which Khartoum accuses of supporting the SPLM-North rebels. The SPLM is the ruling party in Juba which denies any rebel support.

The two states are home to populations who sided with the South during the civil war and were left on the Sudan side of the border after Juba's secession.

(Reporting by Ulf Laessing and Khalid Abdelaziz; Editing by Sophie Hares)