Clinton urges South Sudan, Sudan to settle oil dispute

JUBA (Reuters) - U.S. Secretary of State Hillary Clinton urged South Sudan and Sudan on Friday to end an oil dispute that has brought the neighbors to the brink of war, during the highest-level visit of a U.S. official to Juba since its independence a year ago.

Clinton began her first visit to Africa's newest nation just hours after a U.N. Security Council deadline expired for the neighbors to solve a long list of disputes ranging from border security to oil payments.

The two nations came to the brink of a full war in April after border fighting escalated, the worst violence since South Sudan became independent in July last year under a 2005 agreement that ended decades of civil war with Khartoum.

The messy divorce failed to clarify where the border lay and how much landlocked South Sudan should pay to export its oil through the north. Oil is the lifeline of both economies.

Clinton said the two nations should reach an oil agreement as a first step to ending hostilities. Juba sent both economies into turmoil when it shut down its oil output in January to stop Khartoum seizing oil for what the latter called unpaid fees.

"This is a delicate moment...Now we need to get those (oil) resources flowing again," Clinton told reporters after meeting South Sudanese President Salva Kiir for more than one hour in his office, where she hugged him upon arrival.

"A percentage of something is better than a percentage of nothing," she said, referring to the importance of an oil deal.

"Both countries will need to compromise to close the remaining gaps between them," she said during her 3-hour visit to Juba, part of an 11-nation African tour.

South Sudanese Foreign Minister Nhial Deng Nhial said Juba had made a "generous offer" to Sudan of a higher oil transit fee and a $3.2 billion package to compensate it for the loss of oil.

"We hope the international community, with the U.S. leadership, can persuade the Republic of Sudan to accept that," Nhial said at a joint news conference with Clinton.

STILL FAR APART

The African Union has been trying to mediate between the neighbors but talks have made little progress. Both sides have made some concessions on oil but remain far from a deal.

Sudan insists it wants a border security agreement first, before agreeing on oil. Khartoum accuses South Sudan of supporting rebels in two of its southern border states, claims some diplomats find credible despite Juba's denials.

South Sudan itself accuses Khartoum of often bombing its side of the border. Although Khartoum denies this, Reuters reporters have witnessed several such aerial attacks.

Clinton vowed continued support for South Sudan, which Washington helped guide through years of talks with Khartoum that led to independence in July 2011.

Before her Juba visit, Clinton called Sudanese Foreign Minister Ali Ahmed Karti on Wednesday to signal continued U.S. support for both nations to settle all disputes peacefully, the Sudanese state news agency SUNA said.

Washington shuns Sudanese President Omar Hassan al-Bashir, who has been indicted by the International Criminal Court for war crimes in the Darfur region. The United States also has a trade embargo on Sudan for its past role of hosting Islamist militants such as Osama bin Laden.

Clinton later flew back to Uganda, where she had first arrived coming from Senegal, for talks with President Yoweri Museveni - a U.S. security ally who nevertheless faces criticism for his authoritarian policies at home.

Clinton will thank Museveni for helping in Somalia, where Ugandan troops form the backbone of an African Union peacekeeping force battling to restore order to the Horn of Africa nation after it was overrun by al Shabaab Islamist insurgents.

(Writing by Ulf Laessing; Editing by Tim Pearce)