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US plots South Sudan sanctions relief

US government officials are drawing up guidelines that will allow the country’s oil companies to operate in South Sudan, without breaching sanctions imposed against its northern neighbour

It is understood the Treasury Department is preparing to issue licences for operations in South Sudan, although it is uncertain how long it would take for such licences to be issued.

The US’ special representative to Sudan, Princeton Lyman, told a trade briefing in Washington that sanctions could not be lifted, a move that would require congressional approval. But he said the Treasury Department would define new criteria for licensing oil deals that would provide only incidental benefits to Sudan, making some deals with South Sudan possible.

“The rules of the game are still being worked out and that is very frustrating to [South Sudan] because it wants US oil companies there,” he said. "There is a task force working on it and they will have something soon."

State sponsors of terrorism

Sanctions were first imposed on Sudan in 1997, when the country was included on the US’ state sponsors of terrorism list. They were tightened in 2006 and again in 2007, in response to the Sudanese government’s actions in Darfur. Sudan’s President Omar al-Bashir has since been indicted by the International Court of Justice for war crimes, crimes against humanity and genocide.

Since South Sudan formally seceded in July this year, the sanctions’ terms have made it difficult for the industry to enter the country’s under-explored and potentially rich hydrocarbons play. French firm Total, which operates Block B, in Jonglei state, has blamed uncertainty over sanctions for delaying its work in South Sudan. Because of sanctions, Chinese, Indian and Malaysian firms dominate both Sudanese oil plays.

South Sudan took 75% of Sudan’s 500,000 barrels a day of oil production when it declared independence. But the south relies on refineries, pipelines and other infrastructure in Sudan to deliver its output to market. Negotiations between South Sudan and Sudan over tariffs for pipeline access are continuing.

Earlier this year, the Office of Foreign Assets Control (Ofac), which oversees US sanctions, said the measures in place apply only to Sudan, not South Sudan. But it admitted sanctions may affect South Sudan if properties or interests held by the Sudanese state are involved.

It is likely that sending oil produced in South Sudan to Khartoum for refining, and from there to Port Sudan through the country’s export pipeline contravenes sanctions, whether revenues are shared with the north or if South Sudan pays a transport tariff.

The government in Khartoum is lobbying for de-listing from the state sponsors of terrorism blacklist, so far unsuccessfully. Sources in Washington say that that Sudan must resolve a number of “outstanding issues” and that violence in South Kordofan and Blue Nile states must cease before removal from the list can be considered.

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