May 2 (Bloomberg) -- The United Nations Security Council warned Sudan and South Sudan to halt fighting and settle their differences on splitting revenue from South Sudan’s oil reserves within three months or face possible sanctions.
The 15-member council unanimously passed a resolution today calling for withdrawal of all forces from disputed territories, an end to air raids by the north and a negotiated solution to the issue of payments by South Sudan for shipping oil to Port Sudan in the north.
The resolution reinforces a peace plan outlined by the African Union and comes two weeks after troops from the South withdrew from the disputed oil-producing Heglig region. Support for the resolution came from China, a major buyer of Sudan’s oil, and Russia, which both generally oppose sanctions.
Sudan and South Sudan “are on the brink of returning to the horrors of the past and threaten to take the whole region with them” U.S. Ambassador Susan Rice said in remarks to the council after the vote.
Chances of a permanent resolution to the Sudanese conflict depend on settling the dispute over oil, said Helima Croft, a geopolitical analyst at Barclays Capital in New York. Landlocked oil producers like South Sudan and Iraq’s Kurdistan region are at the mercy of the powers that control their pipelines and export routes, she said.
“South Sudan needs to export through the north and unless you can get a comprehensive agreement I don’t see how there will be smooth sailing ahead,” Croft said in an interview. “The West should never have let the independence referendum go ahead without deciding first what to do about the oil.”
While South Sudan will continue talking with the north to reach agreement on a price for transporting its oil through northern pipelines to Port Sudan, it won’t pay the $32 to $36 per barrel it says the north is asking, Minister for Government Affairs Deng Alor Kuol told journalists at the UN in New York after the vote.
“If we reach an agreement, we will continue to export our oil through Port Sudan,” Kuol said. “At the same time, we will continue to look at building alternative pipelines.”
Relations between the two countries have deteriorated since South Sudan seceded from Sudan in July after a popular referendum on independence intended to end a long-running civil war. The South kept three-quarters of the formerly united country’s oil output of about 490,000 barrels a day. Sporadic clashes between them escalated after the South Sudanese occupation of Heglig.
Sudan resumed oil production in the disputed border region of Heglig, three weeks after output was halted when the area was occupied by forces from the South, Sudan’s Oil Minister Awad Ahmed al-Jaz said today.
Pump station No. 1 in Heglig resumed operations at 10 p.m. yesterday, al-Jaz told reporters in the town, about 700 kilometers (435 miles) southwest of Sudan’s capital, Khartoum. Production is currently 20,000 to 30,000 barrels a day, compared with the 55,000 that was being pumped before the occupation, said Omar Mohamed Omar, head of production at the Greater Nile Petroleum Co.
South Sudan said it withdrew from the oil-rich area on April 20, while Sudan said its soldiers forced them to retreat.
The oil fields in Heglig supply about half of Sudan’s 115,000 barrels a day of production. China is the biggest purchaser of Sudanese crude and China National Petroleum Corp. is among the largest producers in Sudan and South Sudan.
The shutdown in the south alone cost China 260,000 barrels a day, New York-based Eurasia Group said in February. The main producers in Sudan and South Sudan are China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd., known as Petronas, and India’s ONGC Videsh Ltd.
To contact the reporter on this story: Peter S. Green at the United Nations at firstname.lastname@example.org