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Oil Row With South Cost Sudan $2.4B

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Oil Row With South Cost Sudan $2.4B

KHARTOUM - Sudan's failure to agree with South Sudan on oil fees has cost the Sudanese economy $2.4 billion, the finance minister told parliament on Monday.

The disagreement has been at the heart of tensions between north and South, which came to the brink of all-out war until a United Nations-imposed ceasefire came into effect along their border last Friday after a month of fighting.

"Our losses from not reaching an agreement with South Sudan for using the pipeline are 6.5 billion Sudanese pounds," said Finance Minister Ali Mahmoud al-Rasul.

At the official exchange rate, the figure corresponds to $2.4 billion, although on the black market where the pound has plunged in value since South Sudan separated last July, it would be about $1.2 billion.

When the South became independent it took with it about 75% of Sudanese oil production worth billions of dollars.

Southern oil represented more than a third of Khartoum's revenues and its largest source of hard currency, leaving the government struggling for alternatives since independence.

The landlocked South, which said oil provided 98% of its revenues, depended on the north's pipeline and port to export its crude.

But protracted negotiations led by the African Union couldn't reach an agreement.

Khartoum wanted the South to pay $36 a barrel including a "transit fee" and charges for using its marine terminal, transportation and processing, but the South proposed 70 U.S. cents a barrel.

With the two sides far apart, Khartoum began seizing oil in lieu of compensation and South Sudan in January shut down its oil production after accusing the north of theft.

Copyright (c) 2012 Dow Jones & Company, Inc.

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