Sudan’s insistence that South Sudan is still supporting rebels in the warring Southern Kordofan and Blue Nile states has taken the two sides back to the drawing board.
Sudan has notified Juba that it will shut down the oil pipeline that runs through her territory on August 7, unless South Sudan provides convincing evidence that it had severed ties with her former allies in the north.
In response, South Sudan said it had scaled down oil production from 200,000 to 160,000 barrels per day as of Thursday, to avoid the damage of facilities as a result of abrupt and unprocedural shutdown.
“We have received a letter from Khartoum that says they are going ahead to stop oil from flowing through their country,” said Mawien Makol Arik, the South Sudan foreign ministry spokesman.
“Production has to go down until it stops. It is Sudan shutting the production not us,” he added.
South Sudan has consistently denied any links with the Sudanese rebels, and instead accused Sudan of sponsoring militias and rebels across the border to oust the Juba government.
Military spokesman Philip Aguer Panyang had said Sudan was behind the insurgency in Jonglei State, where violence has displaced about 120,000 people.
South Sudan shut down oil production in January 2012, protesting alleged theft and diversion of its oil consignments by Sudan. Khartoum admitted the claim, but said it was paying itself in kind for previous unpaid transit fees. Juba denied any transit fee arrears.
Production resumed in April, after the signing of nine co-operation agreements in Addis Ababa last September on oil flow, border demarcation, the status of the disputed Abyei region, security, citizenship, among others.
So far, only three cargoes of the crude worth $330m have been sold on the international market; 28 per cent of the earnings go to Sudan for transit fees and financial compensation for the secession of South Sudan, according to Petroleum Minister Stephen Dhieu Dau.
Mr Mawien said South Sudan remains committed to the co-operation agreements.
The continuation of oil flow will depend on the investigation of an AU team tasked with verifying the claims of rebel support on both sides.
At independence on July 9, South Sudan took over about 75 per cent of the crude oil Sudan used to export.
But Juba still needs the pipeline that runs through the north to export its oil. A possible shutdown could hamper growth in both struggling economies.
South Sudan received 98 per cent of its revenues from oil before the shutdown in January 2012, and is already hard hit by the austerity measures.
Although it has scaled up non-oil revenues from South Sudanese pounds seven million to 100 million (about $33 million) per month, South Sudan needs the hard currency from oil to import basic items such as food and medicine.
The country currently operates under austerity measures that have seen a budget cut of 43 per cent, resulting in a halt of development projects such as roads.