- The Washington Times - Friday, December 9, 2011

The Treasury Department has amended economic sanctions against Sudan by allowing U.S. companies to invest in South Sudan’s oil market, which has been dominated by China, India and Malaysia.

Treasury’s Office of Foreign Assets Control on Thursday issued two general licenses that authorize “all activities and transactions” relating to the petroleum and petrochemical industries in South Sudan and related financial transactions and shipment of goods, technology, and services through Sudan to or from South Sudan.

The Clinton administration imposed economic sanctions on Sudan in 1997, citing the Khartoum government’s support for terrorism and human rights violations.

In 2007, the George W. Bush administration extended those sanctions in response to the violence in the western province of Darfur. President Obama extended the sanctions last month.

U.S. sanctions have prevented firms in the U.S., Europe and some in Asia from investing in South Sudan’s oil industry because such activity could benefit the government in Khartoum.

However, businesses in China, India and Malaysia have capitalized on the absence of U.S. competitors.

South Sudan became an independent nation on July 9, freeing itself of the sanctions regime.

However, the oil and petroleum sectors of Sudan and South Sudan are intricately linked, making it difficult to selectively lift sanctions. Most of the oil fields are located in South Sudan, but the refineries and pipelines are in Sudan.

“The nature of the country’s petroleum sector and infrastructure ties it inexorably to its northern neighbor,” said Raymond Gilpin, director of sustainable economies at the U.S. Institute of Peace. “Repealing the complex array of sanctions would be complicated and time consuming.”

Treasury announced that it is making technical changes to the Sudanese Sanctions Regulations to reflect the independence of South Sudan.

South Sudan’s ambassador in Washington, Ezekiel Lol Gatkuoth, said the Treasury’s action was “excellent news.”

“This is something we have been asking the State Department, the Treasury, the White House to do,” he said.

Mr. Gatkuoth said U.S. oil firms now should return to his country. They are “assessing, ready and interested” in returning to South Sudan but want to make sure all legal restrictions are lifted, he added.

Besides the sanctions, violence in states with oil fields has been another deterrent to foreign investors. U.S. oil giant Chevron pulled out of Sudan in 1992 at the height of the two-decade-long civil war that ended in 2005.

“[Chevron] were the ones who discovered oil, now they should come back. You cannot cook your food and let someone else eat it,” Mr. Gatkuoth said.

Among Chevron’s more significant discoveries were the oil fields in Unity state that today are some of the most productive in South Sudan.

A Chevron spokesman did not return a request for comment.

U.S. firms looking to enter South Sudan’s oil market will have to apply through the new nation’s Ministry of Petroleum and Mining.

South Sudan loses 40 percent of extracted oil because of inferior technology, according to South Sudanese officials. They say the entry of U.S. firms that use more sophisticated technology will reduce these losses.

South Sudan produces nearly 400,000 barrels of oil a day.

U.S. officials had said that they were waiting to see details of the final agreement between Sudan and South Sudan on sharing oil revenue before easing sanctions. The governments in Khartoum and Juba have yet to reach such an agreement.

The neighbors also are deadlocked over the issue of transit fees for oil passing from the south through pipelines in the north. The north has demanded $36 a barrel, which South Sudanese and Western officials say is an astronomical and unrealistic amount. The government of South Sudan has offered to pay 70 cents a barrel.

The U.S. will host a two-day conference in Washington next week to encourage investment in South Sudan. South Sudanese President Salva Kiir Mayardit and Secretary of State Hillary Rodham Clinton will participate in the conference, which opens Wednesday.

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