Khartoum, Juba Strike Oil Exportation Deal

By IndepthAfrica
In East Africa
Aug 4th, 2012

Sudan’s President Omar al-Bashir welcomes his South Sudanese counterpart Salva Kiir during his arrival at Khartoum Airport October 8,2011. REUTERS/ Mohamed Nureldin Abdallah

ADDIS ABABA, Ethiopia — South Sudan and Sudan announced Saturday that they have struck a deal over the south’s exportation of oil through Sudan’s pipelines and the distribution of oil revenues.

A disagreement over oil sharing prompted South Sudan to shut down its oil production in January. Oil also sparked a dangerous military confrontation between the two countries that threatened to become all-out war in April when South Sudan captured the disputed town of Heglig, which is responsible for more than half of Sudan’s oil production.

South Sudan said in a statement Saturday they will pay $9.48 per barrel to use one of Sudan’s pipelines. Sudan had demanded that the south Should pay $36 per barrel, the statement said.

Mutrif Sidiq, the official spokesman for Sudan’s delegation in Addis Ababa told The Associated Press from Khartoum, that there was an agreement on the transit fees for two different pipelines, one transporting crude for export and another that is light crude oil that goes through a refinery before going to the port. One fee agreed to was $9.48, and another was for about $11.

“The deal is accepted by both sides. Even though it falls below the expectations of both sides, it constitutes a middle ground,” he said by telephone.

South Sudan said the agreement on the pipeline transportation fees will last for three and half years after which the countries may negotiate lower rates or South Sudan, which expects to have constructed a pipeline through Kenya, will stop using Sudan’s pipeline.

A $3.028 billion payment will be made to Sudan by the south to compensate their neighbor for the loss of oil revenue following South Sudan’s independence last year, according to South Sudan’s statement. That amount is a one-off payment and compromises of a third of Sudan’s financial gap resulting from the loss of South Sudan’s oil revenue, it said.

Sidiq said Sudan’s budget deficit reached $10.4 billion. He said it is now the turn of the international community to provide assistance, expected to be around $3.5 billion to Khartoum.

To deal with its deficit and loss of oil revenues, Sudan introduced austerity measures in June which raised the price of fuel and basic commodities. The measures, commended by the International Monetary Fund, sparked protests in Sudan. The protesters, in part inspired by Arab protests in Sudan’s neighboring Egypt and Libya, demanded the fall of Sudan’s regime, triggering a heavy security crackdown and a campaign of arrests and intimidation of activists.

Sidiq said more talks will be held after Ramadan and Eid el-Fitr, which conclude before the end of August, to discuss security arrangements and other border issues. He said the deal won’t come into effect until security arrangements are in place.

Secretary of State Hillary Rodham Clinton welcomed the oil agreement and said in a statement released Saturday that it reflects “leadership and a new spirit of compromise on both sides.”

“Now was the time to bring this impasse to a close, for the good of the people of South Sudan and their aspirations for a better future in the face of ongoing challenges. South Sudan’s leaders have risen to the occasion,” the statement said.

Clinton had briefly visited South Sudan’s capital of Juba Friday to offer U.S. support and to stress the urgency of ending disputes with Sudan over oil and territory.

Sudan and South Sudan are engaged in negotiations in Ethiopia hosted by the African Union over a host of issues, including the separation of their once-unified oil industry and the demarcation of the long, joint border.

South Sudan peacefully broke away from Sudan last year after an independence vote as stipulated in a peace agreement that ended a more than two decades-long civil war in 2005, but the two sides never resolved the most contentious issues between them.

In January, South Sudan shut down its oil production after accusing Khartoum of stealing oil shipped through Sudanese pipelines for export. Sudan said it had taken the oil in lieu of transit payments for the use of its pipelines. The decision has cost both governments millions of dollars in revenue, further burdening their weak economies.

Because the south’s oil travels through pipelines that run through Sudan, the decision cut off a major source of Khartoum’s revenue has led to instability in that capital. But the move cost South Sudan as well. The landlocked nation derives 98 percent of its normal government budget from oil.

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