Sudan poses new obstacle to oil sales - South Sudan

JUBA/KHARTOUM Mon Nov 26, 2012 4:01pm GMT

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JUBA/KHARTOUM (Reuters) - Sudan has put a new obstacle in the way of allowing its land-locked southern neighbour to pipe its oil to the Red Sea, South Sudanese President Salva Kiir said on Monday, dashing plans to revive production after an 11-month break.

Sudan's currency fell to a historic low against the dollar on the black market on Monday, highlighting the importance for both countries to get oil from South Sudan's oilfields via the north for export.

In January, South Sudan shut down its entire oil output of 350,000 barrels a day after tensions with Sudan over oil fees escalated, but an agreement to reopen the export pipelines was signed in September. Oil is the economic lifeline for both.

But Kiir said Sudan had now demanded as a new condition for reopening the pipeline that South Sudan disarm rebels of the Sudan People's Liberation Movement-North (SPLM-North), which operate in two states bordering South Sudan.

"It is an impossible mission which our brothers in the government in Khartoum would want us to undertake. Because of this Khartoum authorities have refused to accept passage of South Sudan oil through their territory to market," he told state governors and U.N. officials in a speech in Juba that was attended by Reuters.

"We are a different country, SPLM-North is in a different country. You cannot imagine that a foreign army can cross to another country to go and conduct disarmament. That can't be. It will not happen," he said.

Sudan accuses South Sudan of supporting the SPLM-North, which seeks together with rebels from the western region of Darfur to topple Sudan's veteran president, Omar Hassan al-Bashir. Juba denies any links to the SPLM-North.

Sudanese officials were not immediately available to comment on Kiir's remarks. State news agency SUNA said in a brief report that Bashir and Kiir had spoken by phone on Monday and agreed to speed up executing the deal to restart oil. It gave no details.

DELAYS

Any delay in restarting oil exports would be a serious blow to both crumbling economies. South Sudan inherited three-quarters of Sudan's oil production when it seceded in July 2011 but needs to pay Khartoum for using northern export pipelines.

Under the previous plan, the first oil exports were to reach markets by January but this now seems unlikely after South Sudan delayed last week turning on wells, which had been scheduled originally for November 15.

Having come close to war in April, the neighbours agreed in September to set up a demilitarized zone along their disputed border to pave the way for exports. But this has not happened yet, with both sides trading accusations.

Kiir said he spoke to Bashir two days ago by phone to restart security talks. "He (Bashir) assured me that he is going to direct the minister of defence to write now an invitation letter to our team in Juba so that they go to Khartoum to start negotiations," he said.

"When we signed the cooperation agreement (in September) we thought it was going to be implemented unconditionally. Now it appears that we have to renegotiate its implementation again. We will do all that it takes to maintain peace between our two countries and avoid any return to war."

Diplomats are trying to bring both sides to the negotiating table for a meeting sponsored by the African Union in Addis Ababa in early December to discuss setting up the buffer zone.

"I am not pessimistic. In fact I think that both sides are concerned about the current impasse and want to move the issue forward...Both have common interests," Norway's Special Envoy to Sudan and South Sudan, Endre Stiansen, told Reuters in Khartoum.

He declined to give a date when oil exports would restart. "Both sides told me that they are making good progress from the technical side and they are getting ready to push the button," said Stiansen. Norway is respected as a mediator since it advises both sides on oil issues.

South Sudan seceded from Sudan under a 2005 peace agreement which ended decades of civil war between the mainly Muslim north and the South, where most follow Christian and African beliefs.

(Writing by Ulf Laessing; Editing by Mark Heinrich)

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