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S.Sudan Sees Progress with North in Oil, Currency Row

Source: Reuters 7/30/2011, Location: Africa

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South Sudan sees progress in resolving disputes with Khartoum over the sharing of oil revenues and launch of new currencies, it said, striking a conciliatory note after earlier accusing its former civil war foe of starting an economic war. South Sudan will pay a pipeline transit fee for its oil in line with international standards after the North dropped its demand for a "discriminatory" $22.8 a barrel, said Pagan Amum, secretary general of the southern ruling Sudan People's Liberation Movement (SPLM). South Sudan became independent from Sudan on July 9, taking with it 75 percent of the African country's 500,000 barrels a day of oil production -- the economic lifeline for north and south.

South Sudan will have to pay Khartoum a fee to carry its oil through a pipeline to the countries' only Red Sea port but the two have yet to agree on how to divide oil revenues that have so far been split equally. Amum said Khartoum had withdrawn an earlier request for a pipeline fee of $22.8 per barrel -- about 20 percent of the oil's export value based on June prices -- after fresh bilateral talks in the Ethiopian capital Addis Ababa. The two sides wanted to solve all disputes by September 30, Amum told reporters in the southern capital Juba after his return. Western diplomats had hoped they would reach an agreement before southern independence.

"We will be paying pipeline fees ... and also we will be paying transit fees that are within the international practices and standards," he said, without saying how much the South was willing to pay. "This discussion brought to an end the attempt to impose discriminatory surcharges by the government in Khartoum, who announced they would impose $22.8 per barrel ... They have withdrawn officially this position," he said.

There was no immediate reaction by the northern government, which had not confirmed the $22.8 a barrel demand the South announced, calling it "broad daylight robbery." The dispute over sharing oil revenues could threaten to disrupt the flow of crude from the country, a significant exporter to China and Japan. The South won its independence in a referendum in January agreed under a 2005 peace deal that ended decades of civil war with the North. Analysts say there has been little transparency for years on how oil revenues are booked in Sudan, hit by years of conflict, inflation, corruption and U.S. trade sanctions.

CURRENCY TURMOIL

The countries are also discussing ways to build confidence in their new currencies, he said. North and south each started circulating new money in July, without coordination, a move that poses risks for both sides. The north has said old Sudanese pounds held in the south will be worthless, which would hit the new nation hard. But any efforts by the South to export the old notes north could add to strong inflationary pressures there.

"We have agreed to form a joint committee from the two central banks so that the replacement and exchange of the (old) Sudanese pounds with the (new) South Sudan pound, as well as the change of Sudanese pounds in Khartoum, will be done in a transparent manner," Amum said. "The old pound will be kept within a very clear framework of management so that there will be no dumping of the Sudanese pound," he said, without being more specific.

The northern central bank has said it is open to more talks, but that if they came to nothing it would speed up replacing the old currency which would become worthless in the South. Apart from economic issues, the dividing countries have to fix their long border, end violence in some border areas, and find a solution for the contested Abyei region which straddles north and south.

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