SOUTHERN SUDAN: MEETING WITH THE MINISTER OF

UNCLAS SECTION 01 OF 02 KHARTOUM 000407

SIPDIS

SIPDIS, SENSITIVE

E.O. 12958: N/A
TAGS: PGOV EFIN EPET ECON EAIR EWWT EAID SU
SUBJECT: SOUTHERN SUDAN: MEETING WITH THE MINISTER OF
FINANCE AND ECONOMIC PLANNING



1. (U) Summary: On February 15, CG Juba met with
Government of Southern Sudan (GoSS) Minister of Finance
and Economic Planning Arthur Akuin Chol. Chol discussed
the upcoming GoSS USD 1.5 billion budget, funded mostly
through oil revenues, and the priorities for spending,
beginning with the development of Juba, state capitals,
and transportation infrastructure. Chol then weighed in
on the Total Oil controversy, saying that the block
assigned to the firm was too large, and that Total should
have lost its rights when it abandoned it in the 1980s.
Chol also said that U.S. sanctions are hurting the
development of Southern Sudan, as was the shift in focus
to the ongoing conflict in Darfur. End summary.

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A Budget Built on Oil and Priorities
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2. (U) Chol said that he had prepared the 2006 budget,
which would soon become a public document. He observed
that, on the GoSS side, revenues came almost entirely
from oil receipts. The budget projected USD 1.3 billion
in petrol revenues, but only USD 4 million from all other
sources. An additional USD 200 million brought the total
budget to USD 1.5 billion.


3. (U) He listed priority areas of spending for the GoSS,
beginning with the rehabilitation of Juba. He scoffed at
ongoing work on ministry offices as touch up, and said
that total renovation and refurnishing is needed. In
addition, urgent repairs to the water supply and electric
generation/distribution systems are foreseen. Sixty
kilometers of road in Juba town will be repaved: in his
speech the previous day President Bashir had promised
enough bitumen to do 20 kilometers, and the GoSS would
come up with the rest. Renovation of the ten state
capitals would take place next, including an upgrade of
information technology that would link the capitals to
Juba by a system of VSATs. Finally, he concluded, the
GoSS would emphasize mine clearance and the upgrade of
main roads linking the major towns of the South. He said
the Multi-Donor Trust Fund would provide USD 750 million
over a three-year period in support of these
infrastructure priorities.


4. (U) Chol expressed appreciation for USAID assistance
in helping to shape the budget through its BearingPoint
contractor. A workshop scheduled for next week would
convene ministers of finance from the ten states to train
them in preparing budgets at the state level, setting
financial ceilings through which the various front line
ministries would prioritize and set funding levels. In
response to the CG's question on which GoSS ministries
would get the largest slices of the pie, Chol ticked off
the list in descending order: infrastructure (multiple
ministries),education, health, housing, and the
military.

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Fretting Over Petroleum
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5. (SBU) Chol echoed the concern of virtually everyone in
the GoSS about the lack of Government of National Unity
(GNU) transparency about petroleum revenues, both the
amount produced and the terms of payment under existing
contracts. He added that the failure to agree on the
border was also critical, since the CPA did not require
the North to share revenues from oil produced on its
territory. Chol said that the oil rich area around
Heglig in particular is an issue, since it had been part
of the South at independence in 1956, but was now claimed
by the North as its territory.


6. (SBU) Chol admitted that the GNU had recently improved
its performance in transferring oil revenues to the
South, although the North had still not fully paid up.
Like other GoSS officials, he would not provide an exact
figure. (Note: We have heard that the GNU has
transferred approximately USD 900 million so far. End
note.) Chol was vague on how new finds in the South
would be handled in terms of revenue sharing, stating
only that the CPA was not totally clear on this point.
He spoke briefly on the Total/While Nile controversy
(septel),insisting that the normal maximum petroleum
zone granted worldwide was no more than 500 square
kilometers, and that Total should have lost contractual
rights during the long hiatus after it pulled out of
Block B, the Central "super block" encompassing 120,000
square kilometers.

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KHARTOUM 00000407 002 OF 002


Developing Other Revenue Streams
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7. (U) The Minister frankly admitted that customs and
income tax were the only areas from which the GoSS would
derive additional revenue, plus some new taxes on tent
camps and other foreign businesses now in South Sudan to
cater to NGOs, et al. Chol said that the GNU planned to
train southern customs officials and upgrade
communications between the border, Juba, and Khartoum.
In return, the GoSS would equally share revenues with the
GNU, which in turn would share a percentage of the
customs revenues it generated in the North with the
South.

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Sanctions Pinch Both Sides
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8. (U) Chol said that U.S. economic sanctions were
punitive for the South. He described a pre-interim
period donor fund established for the SPLM, but
controlled by UNICEF. Twice Deutsche Bank had blocked
the movement of funds from New York to the SPLM's bank in
East Africa. More recently, transfer payments for
petroleum had been held up in the banking circuit. Chol
listed sanctions on spare parts for airplanes and
locomotives as another measure that punished the South
for the actions of the North. He added that at least
President Bashir had been entirely clear in his speech in
Juba the previous day that the North would accept a
decision by the South to go its own way six years hence.

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The Darfur Blues
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9. (SBU) Chol lamented the negative impact of Darfur on
the reconstruction of the South. He complained that
attention had shifted away from the South and that
resources that rightly would have gone to southern
reconstruction were now diverted to IDP camps in Darfur.
CG pointed out that it is thus clearly in the self-
interest of the GoSS to do its utmost to support a
negotiated solution in Darfur, and that it is in the
interest of the SPLM to use its position to promote
political transformation throughout Sudan and assure a
secure future for the entire country, whatever CPA option
the people of the South might ultimately choose.

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Bio Data
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10. (SBU) Chol is a Dinka from Aweil, probably in his mid-
60s. He was a refugee in Kinshasa for two years in the
1960s, and did pre-university studies at Louvanium before
receiving a scholarship to Fribourg Catholic University
in Switzerland. He completed an M.A. in economics over
six years and worked for a private firm in Basel. Chol
returned to Sudan in 1982 and worked for the government
of Sadiq al Mahdi. Chol was sent to Cairo as the
Sudanese representative on a multilateral maritime body,
and served as al Mahdi's emissary to various sub-Saharan
African countries in support of peace negotiations with
the South. When Bashir seized power, the GOS canceled
Chol's passport and pressed Egypt for his return. Chol
traveled to Nairobi in 1992 and joined the SPLM, where in
1993 he became SPLM Minister for Humanitarian Affairs,
the precursor of the SRRC. Garang appointed him Minister
of Finance in 1997, a position he has held since.

STEINFELD