South Sudan says North wages economic war with oil fee


South Sudan said its former civil war foe Khartoum, which controls the pipelines for its oil exports, had declared economic war against the new African nation by demanding a transit fee of almost US$23 a barrel.

This charge would take up about 20 percent of the value of oil sold by South Sudan. The dispute could threaten to disrupt the flow of crude from the country, a significant exporter notably to China and Japan.

Pagan Amum, secretary general of the southern ruling Sudan People’s Liberation Movement (SPLM), said yesterday Khartoum had demanded a pipeline usage fee of US$22.8 a barrel.
“Khartoum has all of a sudden written to oil companies and the Republic of South Sudan that they are imposing US$22.8 in every barrel we export,” Amum told reporters in the southern capital of Juba.
“For Khartoum to try to impose nearly US$23 (per barrel on oil), this is just nothing but broad daylight robbery,” he said.
“…It is a hostile act, an attempt to loot … a landlocked country,” he said.
“The government of Sudan has declared and is engaged in economic war on the newborn Republic of South Sudan,” he said.

South Sudan became independent on July 9 after an independence referendum in January agreed under a 2005 peace deal that ended decades of civil war with the North.

The South took 75 percent of the country’s 500,000 barrels a day of oil production but depends on the North to use the only cross-border pipeline to the Red Sea port of Port Sudan to sell the oil. Refineries also only exist in the north.

Experts say southern plans to connect to a pipeline in east African neighbour of Kenya are years away.

Both sides have been unable to agree yet on how to divide oil revenues that are the lifeblood for both economies. Analysts expect the South to pay gradually less in transit fees than the 50-50 percent revenue split agreed under the peace deal.

Amum did not say how much the South was willing to pay but said a typical transit fee would be between 60 cents and US$2 a barrel. Such a fee usually depends on the length and pumping performance of a pipeline.

The fee sought by Khartoum would amount to a fifth of the June price of around US$114.50 for Nile Blend sold by state-owned Sudapet to trading house Arcadia.

Analysts say there has been little transparency for years about how oil revenues are booked in Sudan, hit by years of conflicts, inflation, corruption and U.S. trade sanctions.

There was no immediate reaction from Khartoum which last week unveiled an alternative 2011 budget that lawmakers said included an annual income of US$2.6 billion for transit fees — the same amount expected for the loss of southern oil production.

Amun also said the launch of a new currency in the north on Sunday — days after a similar southern step — would cost Juba US$700 million because Khartoum had made its old currency circulating there worthless.

On Sunday, north Sudan said it had started issuing a new currency to gradually replace the old Sudanese pound as precautionary measure after the south started its own currency.

Since both sides have failed so far to coordinate their moves the estimated 1-1.5 billion old notes circulating in the south become effectively worthless. Khartoum says it is open for more talks but has banned the import of old notes.

Amun said the south would now lose US$700 million for old pounds it had bought in the interim period before the independence from Khartoum for dollars.
“Their first act in receiving the newborn nation is to destroy the economy of South Sudan and to make South Sudan lose nearly US$700 million,” he said.

Khartoum says it has complied with all parts of the 2005 peace agreement. Apart from sharing oil revenues both sides also need to end violence in some parts of the joint border and divide other assets and debt.