Bloomberg News

South Sudan, Sudan Risk Economic Damage, Bank Says

January 29, 2012

(Corrects quote in third paragraph to say dispute may have unsalutary impact on economies.)

Jan. 29 (Bloomberg) -- The dispute between Sudan and South Sudan over oil fees, which led the south to suspend crude production, risks damaging both economies because of their dependence on the natural resource, the World Bank said.

South Sudan began halting production earlier this month after accusing Sudan of seizing oil that passes through its territory via a pipeline to an export terminal on the Red Sea and of seizing vessels carrying crude. Sudan says it is diverting the fuel to cover unpaid fees for allowing it to transit the country. South Sudanese President Salva Kiir said on Jan. 23 that Sudan has “looted” oil valued at $815 million.

“Considering the importance of oil to both sides, the lack of economic activities in the sector that’s predominant would have a huge, unsalutary impact on the economies,” Obiageli Ezekwesili, vice president for Africa at the World Bank, said in an interview yesterday in Addis Ababa, the Ethiopian capital.

South Sudan took control of about three-quarters of Sudan’s output of 490,000 barrels a day when it gained independence from its northern neighbor in July. The crude is pumped mainly by China National Petroleum Corp., Malaysia’s Petroliam Nasional Bhd. and India’s ONGC Videsh Ltd. Sudan is demanding compensation for the loss and also wants South Sudan to pay $6 a barrel to transit the oil via the country. The neighboring country has offered to pay $1 a barrel.

The dispute presents an opportunity to “look at options other than oil for growing their economies,” Ezekwesili said. South Sudan relies on oil to generate more than 90 percent of government revenue, and Sudan depends on it for 30 percent.


“Whether it’s South Sudan or Sudan, agriculture is a key potential source of transformational growth,” Ezekwesili said. “They need to focus on those, they need to focus on other aspects or opportunities in attracting foreign direct investment into manufacturing and that would mean they have to focus on macro-economic reforms.”

South Sudan is set to become a member of the World Bank next month, giving the country access to zero-interest loans of $75 million a year over the next three years, Ezekwesili said. Similar loans to countries like Sierra Leone and Liberia in the past have enabled the bank to “mobilize three times that amount from other partners,” she said.

--Editor: Shaji Mathew

To contact the reporters on this story: Paul Richardson in Addis Ababa at; William Davison in Addis Ababa via Nairobi at

To contact the editor responsible for this story: Antony Sguazzin in Johannesburg at

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