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Sudan's warning shots as oil crisis talks with South resume
by Staff Writers
El Nar, South Sudan (AFP) March 6, 2012


It is a sight the South Sudanese hoped had gone for good: twisted metal shards embedded in thigh-deep bomb craters left by an airstrike blamed on former foes in neighbouring Sudan.

Officials from Juba and Khartoum are due to resume on Tuesday African Union-mediated talks to resolve a furious row over oil transit fees, which many fear risks tipping the bitter rivals back into bloody war.

The jet strikes last week at El Nar, an oilfield in South Sudan's Unity state, are a grim reminder of what is at risk if talks in the Ethiopian capital Addis Ababa fail again, Southerners and experts warn.

"It is sending a signal before the talks," said Mohamed Lino Benjamin, director general of the South's petroleum and mining ministry, standing at the lip of the craters, some 20 kilometres (12 miles) from the border with Sudan.

Sudan denied any involvement with the bombing and lodged its fourth complaint with the UN Security Council, accusing the breakaway fledgling nation of funding rebels in two border states and carrying out joint attacks on contested territory.

South Sudan split from Khartoum last July after decades of civil war, taking with it three-quarters of the oil -- but all pipeline and export facilities are controlled by Sudan.

It took the drastic decision to halt production in January, despite oil making up 98 percent of its revenue, after Sudan started seizing the crude in lieu of a deal on transit fees.

"With high rhetoric, continued cross-border tensions restrict the space necessary to advance the talks in a meaningful way," International Crisis Group analyst Zach Vertin told AFP.

"Both sides need a deal on the export of oil, but every provocation hardens attitudes in an environment where trust is already thin."

The crisis between the two nations has become a major threat to regional peace and security, United Nations chief Ban Ki-moon warned in January.

At El Nar, people climbed in and out of the craters, picking up metal fragments as though searching for a reason why this vast expanse of cracked black earth was targeted.

"The planes were very fast and kept turning on their sides... two bombs fell and killed a number of cows," said village chief Miakol Lual, pointing northeast towards Sudan when asked where they came from.

Chom Juaj, Vice President of the Greater Nile Petroleum Operating Company (GNPOC) that manages these fields, thinks it was a warning message from Sudan, keen to flex its muscles over the South's oil fields but not show "its full weight".

Juaj thinks Khartoum bombed the fields out of "frustration" over the shutdown that dealt its oil-reliant economy a second blow -- after losing 350,000 barrels a day production when the South split away last year.

The strikes, the latest in a string of attacks, missed a large processing facility about a kilometre (mile) away, but Juaj doubts a stronger message will follow if Sudan is "wise."

It has a vested interest in Southern facilities and strong links with major investor China, which depended on the South for some five percent of its oil, while attacks could even trigger explosions in Sudan's connected facilities.

"It sounds like it's more of a message than a deliberate attempt, but it will just drive them one step closer to a war in which both sides will lose massively," said an international observer close to the talks.

South Sudan already saw itself as a victim and the attack was "like prodding a hornet's nest," while Sudan is already fighting rebels on three fronts, and could not afford another war, he said.

Requesting anonymity, he said that diplomats have long mooted what would happen in this scenario.

"If the north attacked the oil fields, which is an option they have as they have superior air power, that's a signal that we've ratcheted up tensions," the observer added.

"On a scale of 1-10, where 10 is war... we've reached about seven or eight," he said.

The South's oil is key to paying its bloated ex-rebel army, which continues to absorb militia forces as part of peace deals to stem multiple rebellions in the new nation.

But Juba appears confident of surviving without oil revenues, which although key for government salaries have far less impact on the majority rural population, with many basic services already funded by donors.

Khartoum -- itself beset by a weakening economy -- has also been angered by Juba's efforts to ensure its "economic independence," including recent agreements with Kenya and Ethiopia for alternative oil pipelines.

"The game changed when (South Sudan President) Salva Kiir said 'I'm not going to continue with interdependence' -- which is what the international community wanted," the international observer said.

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Oil prices mixed as Iran risks weigh
Singapore (AFP) March 6, 2012 - Oil prices were mixed in Asian trade Tuesday as traders weighed geopolitical tensions over crude producer Iran's nuclear programme and weak economic data from Europe and China.

New York's main contract, light sweet crude for delivery in April, gained four cents to $106.76, while Brent North Sea crude for April was down 17 cents to $123.63 in the afternoon.

Phillip Futures in a market commentary said oil prices were "in tug-of-war trading as supply risks and tensions over Iran's nuclear programme provided support, but concerns about global economic growth limited gains."

Prime Minister Benjamin Netanyahu on Monday told US President Barack Obama that Israel must remain the "master of its fate" in a firm defence of his right to mount a unilateral strike on Iran.

Israeli leaders are worried that despite their potency, increasingly tough US and European sanctions on Iran and its central bank and vital petroleum industry will not convince Tehran to renounce a nuclear arsenal.

Israel is eager to move quickly and decisively using a military strike before Tehran reaches a point when it could quickly produce weapons-grade uranium.

Iran has so far insisted that its nuclear programme is solely for peaceful civilian purposes.

Traders are also keeping a close watch on economic data indicating weakening growth in Europe and China, analysts said.

Chinese Premier Wen Jiabao said on Monday that the country was targeting growth of 7.5 percent in 2012, a third straight reduction as the world's number two economy is buffeted by ongoing troubles in the West and high oil prices.

In Europe, a composite purchasing manager's index compiled by research firm Markit showed eurozone private sector activity falling in February after returning to growth in January underlining predictions of recession.

The index fell to 49.3 points in February from 50.4 points in January but was still up from 48.3 points in December.

Any score above 50 points indicates growth, while a score below indicates contraction.

"Much of the policy emphasis in Europe has been on capping fiscal deficits and the growth outlook there remains notably weak for that reason," DBS Bank said in a note.

"Growth in the periphery... where budgets are contracting much more severely, will be far worse. Greece is headed for a third year of sharply negative growth and whether it stays in the euro remains an open question," it said.



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Britain's defence chief during the Falklands War accused the French of being "duplicitous" after a BBC probe aired on Monday revealed that Paris knew a French technical team was in Argentina during the conflict. The team, which mainly worked for a company 51 percent owned by the French government, helped Argentina fix faulty missile launchers, group leader Herve Colin admitted in 1982, but F ... read more


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