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Oil Negotiations Break Down Between Sudan & South Sudan

By: EW News Desk Team Date: 1 February 2012

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01 February 2012

South Sudan has rejected a proposal by the African Union to pay its neighbours Sudan $6.5 billion for oil transit fees, reported the Financial Times on Tuesday, with the two nations still locked in a stalemate over shared oil revenues since separating on 9 July 2011.

“We could not sign; they (Sudan) were stealing the oil and obstructing the flow of our oil, and this robbery continues up to today,” said South Sudan’s chief negotiator Pagan Amum, while questioning the African Union’s (AU) motives in participating with the cross-border talks.

“The AU has lost sight of the principle of mutual economic viability,” he said. “Now it is not secure for us to put our oil through Sudan because of this state piracy. This is about our economic independence.”

The South Sudanese government attained independence from Khartoum last year following decades of civil war. As part of the separation, the new nation took control of about three quarters of the former-unified country’s oil fields, though they had to transport its oil daily through pipelines across Sudan, which leads to the Red Sea port for exports.

But while the arrangement meant that both countries were mutually bound to each other for their economies, neither party have been able to come to a compromise over the sharing of oil revenues.

Earlier this year, the Sudanese government admitted to confiscating oil that passed through its pipelines after insisting that it had been owed billions of dollars in transit fees. The South Sudanese government then responded to this action by shutting down its entire oil production on January 20, forcing its top buyers, such as China and Japan, to seek for oil elsewhere.

Consequently, the AU attempted to mediate in discussions through a summit at the Ethiopian capital of Addis Ababa, though talks now appear to have failed.

According to the Financial Times, the AU had proposed that South Sudan give its neighbours a direct cash transfer of between $2.6-$5.4 billion to compensate for its oil losses after the split; and pay an additional $1.1 billion in oil transit fees $1.1 billion, which would cover the period until the end of 2014.

The South though want an agreement that would secure for it the contested territory of Abyei, along with other disputed border areas, as part of a settlement over oil.

“The issues of sovereign territory of the South are being pushed off the table by the panel because Khartoum does not want to discuss these things,” said Amum. “In that situation there is nothing that we can do other than keep the oil in the ground, so it remains for our future generations.”

Amum also reiterated South Sudan's position that the country should pay a fee of $0.69 per barrel for one of the pipelines and $0.63 per barrel for another. Sudan, on the other hand wants a fee of $36 per barrel.

Still despite the breakdown in talks, the two sides have agreed to resume negotiations once again in Addis Ababa on February 10, with former South African President Thabo Mbeki set to play the role of AU’s mediator.