Sudan and South Sudan have reached a “reasonable” deal over oil, a first step in resolving other disputes, Sudanese officials said on Saturday after breakthrough talks in Ethiopia.
But an analyst said it will take months for South Sudan to resume full crude production after the last-minute deal brokered under the threat of international sanctions.
“We have reached a final agreement with South Sudan on oil transit, and we expect to settle other files under negotiation,” the undersecretary at the ministry of petroleum, Awad Abdul Fatah, told the official SUNA news agency.
Earlier on Saturday, African Union mediator Thabo Mbeki announced the deal in Addis Ababa, two days after the expiry of a UN Security Council deadline for the two countries to settle crucial differences following border fighting in April that raised fears of wider.
The SUNA report did not provide any financial details of the agreement, but Sudanese delegate Mutrif Siddiq said the deal on oil transit fees was “reasonable” although it did not meet the expectations of either side.
Oil has been at the heart of tensions and economic difficulties for Sudan and South Sudan since the South separated with about 75 percent of Sudanese oil production worth billions of dollars, sending the north’s economy into crisis.
Since mid-June Sudan has faced sporadic anti-regime protests sparked by inflation, which hit 37 percent year-on-year in June.
The landlocked South, which said oil provided 98 percent of its revenues, depended on the north’s pipeline and port to export its crude.
But the two sides could not agree on how much South Sudan should pay to send its crude north for export. In January, the South shut down its oil production after accusing the north of theft.
Sudan had been seeking up to $36 a barrel in fees, but in a position paper released on Thursday said it was proposing $22.20, compared with $7.61 offered by South Sudan.
The position paper also said the two sides had agreed South Sudan will pay Sudan a “transitional financial arrangement” of $3.028 billion over 42 months.
“It was a last-minute thing,” one Sudan analyst said of the final deal, on condition of anonymity.
“They had in mind that the Security Council is really serious,” and they needed to show some kind of progress on which to secure more time to deal with other key issues: the disputed border, the status of nationals of one country in the other, and the contested Abyei region.
A foreign analyst, who also asked for anonymity, said it is widely expected that South Sudan will need six months to resume full oil production.
“Maybe in three months they can have between one-third and one-half of production,” he told AFP.
The UN Security Council ordered the settlement of key issues by last Thursday, against the threat of possible sanctions.
“I think the easiest was the oil because they needed something to secure their positions,” the Sudan analyst said. “Both knew that the economic situation has really got them in a tight corner.”
Khartoum is already under United States sanctions imposed in 1997 over human rights and other concerns.
“In reality, they cannot afford to live under sanctions,” the Sudan analyst told AFP.
The oil deal comes despite Sudan's insistence, as late as Thursday, that any pact on oil must be subject to a “full and final agreement” on security.
Sudan accuses South Sudan of supporting insurgents on its territory, a charge analysts believe despite denials by Juba, which, in turn, accuses Khartoum of backing rebels south of the border.
In its resolution, the UN Security Council told both sides to stop supporting each other's rebels.
The Sudan analyst called the oil deal “a major step forward” in settling other outstanding issues.
South Sudanese officials had no immediate reaction to the agreement but people in Juba welcomed it. They said plans for pipeline alternatives to Sudan were unrealistic in the short-term.
“If it (the agreement) will bring stability for the two countries, I think it is okay for now, until we have an alternative way,” said Lillian Riziq, a former civil society activist who is now agriculture minister for South Sudan's Western Bahr el-Ghazal state.
“The problem is we don't have an alternative,” she concluded.