June 10 (Bloomberg) -- South Sudanese President Salva Kiir said Sudan’s threat to halt its oil exports amounted to a declaration of war and reiterated his government’s denial that it supports rebels in the neighboring country.
Sudanese President Umar al-Bashir on June 8 said he was ordering a halt to oil flows from South Sudan because his government has evidence that the south is backing renegade fighters in the western region of Darfur and the southern states of Southern Kordofan and Blue Nile. The shutdown will take place within 60 days unless the support ends, Sudanese Information Minister Ahmed Bilal Osman said yesterday.
“President Bashir is declaring war indirectly,” Kiir told reporters today in the capital, Juba. “We don’t want war.”
Landlocked South Sudan exports all of its crude via pipelines that traverse Sudan to Port Sudan on the Red Sea. South Sudan seceded in July 2011 and took three-quarters of the formerly united country’s output of 490,000 barrels a day.
A dispute last year over how much South Sudan should pay for the transport resulted in its production being shut down for 15 months. Output resumed in April. The nation’s largest field, Palouge in Upper Nile state, started pumping 120,000 barrels a day last month and is expected to reach its full capacity of 250,000 barrels a day by September, Oil Minister Stephen Dhieu Dau said May 6.
Brent crude, the benchmark price for more than half the world’s oil, traded 0.6 percent lower at $103.92 a barrel at 2:38 p.m. in London today. The July contract closed at $104.56 on June 7, the highest settlement since May 20.
The support for the rebels undermines cooperation accords signed between the two nations last year and for which a timeframe was agreed in March, Osman told reporters yesterday in the capital, Khartoum.
“It is clear that the purpose of supporting the rebels is to bring down the regime, which is why we have to stop the petrol,” he said. “We asked them to stop their support so that it wouldn’t affect all the agreements that were signed.” The decision to halt the oil flows may be reversed if South Sudan stops backing the rebels, he said.
South Sudan has yet to be officially notified about the planned shutdown, Kiir said today, while calling for dialogue to address Sudan’s grievances and reiterating his government’s denial that it supports any rebels in Sudan.
“We must always remain firm that we’re not supporting the rebels in these areas,” he said. “It’s not true.”
Kiir also refused to withdraw government troops from the border town of Joda in South Sudan’s northeastern Upper Nile state, where he said 10 oil wells are located.
“We will not accept to give an inch of South Sudanese territory and will be ready to go to war over it,” he said.
South Sudanese army spokesman Philip Aguer yesterday accused Sudan of deploying troops in Upper Nile state. The presence of the Sudanese forces is “unacceptable,” he said told reporters in Juba.
Oil in South Sudan is pumped mainly by China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd., known also as Petronas, and India’s Oil & Natural Gas Corp. Prior to the January 2012 shutdown, the country depended on crude exports for 98 percent of government revenue.
Sudan’s threat to halt oil flows follows a warning by Bashir in May when he said his government would close oil pipelines from South Sudan “forever” if the neighboring state backs rebels in the western Sudanese region of Darfur and the Blue Nile and Southern Kordofan states.
“Sudan won’t allow revenue from oil exports from South Sudan to be used for buying arms for rebels and mercenaries,” Bashir said at a ceremony on June 8 to mark the opening of an electricity plant on the outskirts of Khartoum. The remarks were broadcast on state television.
Clashes began more than 18 months ago in Southern Kordofan and Blue Nile between Sudanese government troops and the SPLM-N rebels who fought alongside the forces of South Sudan during the civil war. The fighting has displaced more than 1 million people, according to the United Nations.
The SPLM-N has also formed an alliance with three insurgent groups in Darfur to create a “viable democratic alternative” to Bashir’s government, the Small Arms Survey, a research group at the Graduate Institute of International and Development Studies in Geneva, said in an April 2012 report.
South Sudan has sought to reduce its reliance on Sudan for oil shipments by announcing plans to build a pipeline either via neighboring Ethiopia to an export terminal in Djibouti, or to a port being built at Lamu on Kenya’s coast.
The country can export its oil via Kenya or Djibouti “or wherever they want to take it,” Bashir said.
Sudan plans to begin importing oil from Iraq, payment for which will be deferred, Oil Review Africa, a London-based magazine, reported on June 6, citing Investment Minister Mustafa Osman Ismail. Sudan produces about 130,000 barrels of crude per day, which is insufficient to meet domestic demand, it said.
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