Oil row with South cost Sudan $2.4 bln: minister - San Marino Tribune

by Ian Timberlake

KHARTOUM, May 7, 2012 (AFP) - Sudan's failure to agree with South Sudan on oil fees has cost the Sudanese economy $2.4 billion dollars, the finance minister told parliament on Monday.

The disagreement has been at the heart of tensions between north and South, which came to the brink of all-out war until a United Nations-imposed ceasefire came into effect along their border last Friday after a month of fighting.

"Our losses from not reaching an agreement with South Sudan for using the pipeline are 6.5 billion Sudanese pounds," said Finance Minister Ali Mahmud al-Rasul.

At the official exchange rate, the figure corresponds to $2.4 billion, although on the black market where the pound has plunged in value since South Sudan separated last July, it would be about $1.2 billion.

When the South became independent it took with it about 75 percent of Sudanese oil production worth billions of dollars.

Southern oil represented more than a third of Khartoum's revenues and its largest source of hard currency, leaving the government struggling for alternatives since independence.

The landlocked South, which said oil provided 98 percent of its revenues, depended on the north's pipeline and port to export its crude.

But protracted negotiations led by the African Union could not reach an agreement.

Khartoum wanted the South to pay $36 a barrel including a "transit fee" and charges for using its marine terminal, transportation and processing, but the South proposed 70 US cents a barrel.

With the two sides far apart, Khartoum began seizing oil in lieu of compensation and South Sudan in January shut down its oil production after accusing the north of theft.

An international economist has estimated Sudan's already depleted oil revenues shrank by a further 20 percent -- more than $700 million -- after its main Heglig oil field was damaged and shut down in fighting with invading Southern troops last month.

The government said last week it had begun pumping oil again after partial repairs to the Heglig facility, but it did not say how much oil was flowing or when full production could resume.

While revenue has fallen sharply over the past year, Rasul told parliament that expenditures increased by 13 percent "because of the war in South Kordofan and Blue Nile."

The army has been battling an insurgency in South Kordofan since June and a lesser rebellion in Blue Nile since September.

Costs of the border war with South Sudan, which began in late March, have not been revealed.

Economists have described Sudan's economic situation as dire but President Omar al-Bashir, speaking after the "liberation" of Heglig, said Khartoum does not want oil fees from South Sudan and will not reopen its pipeline to southern oil.

Along with a weakening currency, Sudan has been struggling with soaring inflation, which jumped again in April to 22.6 percent, up from 22.4 percent the previous month, the central statistics bureau said on Monday.

Under last Wednesday's UN Security Council resolution, which the world body imposed because the situation on the undefined border "constitutes a serious threat to international peace and security", the two sides face a series of deadlines.

They must resume within two weeks negotiations on issues -- including oil payments -- left unresolved after South Sudan separated following a 22-year civil war.