Arab North Reportedly Blocks South's Oil Shipment

A shipment of oil produced in South Sudan has been prevented from leaving Port Sudan for dispute over fees, an official in Juba said today.

Garang Deng, South Sudan’s oil minister, said that the oil tanker contained 600,000 barrels and that Port Sudan authorities refused to let it proceed to its destination unless it service fees are paid upfront.

“We have failed to reach solutions with the government of Sudan that would guarantee that the ship would depart at the specified time,” Deng said.

“I have contacted the finance and energy ministers of the Northern government but they refused to talk about it on the pretext that they have meetings” he added.

The South Sudan official warned that shipment delay could inflict penalties on Juba according to the terms of the contract with the buyers. He provided no details on who the sale was made to or the price.

The oil-rich nation became an independent state last month after its citizens voted almost unanimously in favor of secession from the Arab-Muslim dominated north. But the latter contains the infrastructure and pipelines that transports the oil from the landlocked South to Port Sudan.

Both sides are still negotiating the transit fees to be assessed per barrel for usage of the pipelines. The figures proposed by Khartoum initially were called “daylight robbery” by Juba.

South Sudan officials have threatened to seek other venues to export their oil and rejected any revenue sharing arrangement similar to the one that was in place prior to July 9th.

The first oil shipment containing 1 million barrels was made in July out of Port Sudan without any issues.

But many observers believe that there are mounting signs of an economic warfare between the two countries.

In recent weeks Khartoum and Juba traded accusations over the almost simultaneous introduction of new currency in the two countries.

The ruling National Congress Party (NCP) in Sudan said that the South breached an understanding that the North and South would maintain one currency for an interim period of at least six months.

Furthermore, the situation got more tense after Sudan said it rejected a request from the South that old Sudanese pound in circulation in the new country be exchanged with foreign currency or used in bilateral trade.

It is estimated that $700 million worth of old Sudanese pound is circulated in South Sudan. Khartoum said it has taken measures to prevent the old notes from being sneaked from their Southern neighbor.

This week, the Central Bank of South Sudan reduced the window for exchanging the old Sudanese pound from 90 days to 45. The North on the other hand said banks would open once again over the Friday-Saturday weekend to allow citizens to get new notes to “speed up” the process.

While the South would be hit if the old pound it had bought for dollars in the run-up to independence would be worthless, there is also a risk for the north: If the south tried exporting old notes back there it would add to inflationary pressures.