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Sudan, South Sudan Agree to Set Up Demilitarized Border Zone

Jan. 6 (Bloomberg) -- Sudanese President Umar al-Bashir and South Sudan’s Salva Kiir agreed to set up a demilitarized zone along their border “without further delay” as the African states seek to resume oil flows vital to their economies.

They also agreed to consider establishing a commission to hold a referendum on the status of the disputed Abyei area at a planned meeting on Jan. 13 in Addis Ababa, according to a statement posted on the African Union’s website after the presidents met yesterday in the Ethiopian capital. The African Union High-Level Implementation Panel for Sudan and South Sudan will determine the dates for agreements to take effect.

South Sudan, which gained independence from Sudan in July 2011, shut down its 350,000 barrel-a-day crude production last January after accusing authorities in Khartoum, the Sudanese capital, of stealing $815 million of its oil. Sudan said it took the crude to recoup unpaid transportation and processing fees. That dispute and others, including differences over border security, brought the neighbors to the brink of war in April.

The two countries face a stalemate over the disputed region of Abyei. The area is contested by the Ngok Dinka people, who are settled there and consider themselves southerners, and Misseriya nomads, who herd their cattle into the area in the dry season and are supported by Khartoum.

Sharing Oversight

The presidents at their meeting next week will consider setting up an Abyei administration, council and police service, according to the statement. The African Union’s Peace and Security Council gave the two countries six weeks from Oct. 24 to consent to its mediator’s proposal for a deal on Abyei.

Sudan has had limited success boosting non-oil businesses after South Sudan seceded and took with it three-quarters of the north’s oil revenue. Sudan’s economy shrank 11.2 percent in 2012 after contracting 4.5 percent the previous year, according to International Monetary Fund estimates. South Sudan’s economy may have contracted 55 percent in 2012, the fund estimates.

The north’s inflation rate for food rose to 46.5 percent in November from 45.3 percent in October, while inflation in South Sudan almost doubled to 41 percent in November from 21.5 percent the previous month.

Oil Flows

Both states have deployed troops within 10 kilometers (six miles) of their border, and each accuses the other of backing rebels in its territory. U.S. Secretary of State Hillary Clinton, Norwegian Foreign Minister Espen Barth Eide and U.K. Foreign Secretary William Hague last week urged the two sides to “seize the opportunity” and “immediately withdraw” armed forces from the border zone.

Sudan’s government has refused to allow South Sudan to resume oil shipments through its territory, despite agreeing in September to do so. It accuses authorities in Juba, South Sudan’s capital, of continuing to support rebels in Southern Kordofan and Blue Nile states. The oil is pumped mainly by China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd. and India’s ONGC Videsh Ltd.

To contact the reporters on this story: Shaji Mathew in Dubai at shajimathew@bloomberg.net; Dana El Baltaji in Dubai at delbaltaji@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net

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