GOSS MINISTER ACCUSES NCP OF WITHHOLDING OIL

C O N F I D E N T I A L SECTION 01 OF 02 KHARTOUM 001608 SIPDIS DEPT FOR AF A/S FRAZER, SE WILLIAMSON, AF/SPG, AF/C, EAP/CM NSC FOR PITTMAN AND HUDSON DEPT PLS PASS USAID FOR AFR/SUDAN PEPT PLS PASS TREASURY FOR OIA ADDIS ABABA ALSDO FOR USAU E.O. 12958: DECL: 10/31/2013 TAGS: PGOV PREL EFIN ASEC KPKO UNSC SU CH CFG SUBJECT: GOSS MINISTER ACCUSES NCP OF WITHHOLDING OIL REVENUE TO STRONGARM THEM TO GIVE UP HARD CURRENCY RESERVES, SAYS CHINESE HOSTAGES DIED IN A FAILED RESCUE ATTEMPT, AND SUSPECTS KHARTOUM OF RESUPPLYING THE LRA REF: KHARTOUM 1578 Classified By: DCM Mark Asquino for reasons 1.4 (b) and (d) ¶1. (SBU) Summary: In an October 31 meeting, GOSS Minister for Presidential Affairs Luka Biong Deng told ConGen Juba that the NCP has reneged on an agreement to settle the hard currency dispute between the GOSS and Khartoum (reftel),and is withholding oil revenue to pressure the GOSS to turn over GOSS hard currency reserves to the Central Bank. Deng said that five of the nine Chinese oil field workers recently taken hostage in Southern Kordofan died in the crossfire when the SAF attacked the hostage takers in a failed rescue attempt. On the Lord,s Resistance Army (LRA),Deng said he had heard reports of helicopters landing in the DRC to re-supply the LRA, and that one had landed in the wrong area and was captured. It was said to be carrying ammunition, farm tools, beans and rice. End Summary HARD CURRENCY DISPUTE BACK ON THE FRONT BURNER -------------- - ¶2. (SBU) The conflict between the GOSS and the NCP over hard currency reserves held in the South has re-emerged, despite an earlier agreement to allow an independent technical team to examine the issue and determine how best to settle the dispute (the GOSS maintains it has the right to hold its hard currency reserves in the South, and Khartoum argues all hard currency reserves must be held by the Central Bank in the North). Deng said that in order to force the South to turn over its reserves to the Central Bank, Khartoum has essentially cut off sending the South its share of oil revenue income (i.e., 50 percent of revenues from oil produced in the South),which is critical to the continuing operation of the GOSS. (Note: The oil revenues account for close to 100 pecent of GOSS income. End note.) According to Deng, the GOSS is furious with the NCP for once again reneging on an agreement. In his view, this action places the finances of the Southern government in a very precarious state that cannot be sustained. �00A;SAF AMBUSH KILLED THE CHINESE OIL WORKERS -------------- ¶3. (C) Turning to the recent murder of five Chinese oil workers kidnapped in Southern Kordofan, Deng said they were not executed by their captors, but rather died in the crossfire when SAF forces attacked the hostage takers. He said the Chinese government is furious because they were in negotiations to pay a ransom to get the workders released, but the NCP didn't want ransom paid for fear it would fund the rebels. This led to the disastrous SAF rescue attempt. Deng said he had information that two of the hostages still in rebel possession were wounded in the firefight, but are doing well. He added that the SPLM would do what it could to try and contact the rebels to get the wounded released. In the confusion of the fight, two other hostages went missing, and Deng said no one knows what has happened to them. WHO IS SUPPLING THE LRA? -------------- ¶4. (C) On the Lord,s Resistance Army (LRA),Deng said that due to an upsurge in LRA activity in the DRC, 5,000 refugees have come into Western Equitoria from the DRC, and more are expected. He had heard reports, he said, of helicopters landing in the DRC to re-supply the LRA, and that one had accidentally landed in the wrong area and was captured. It was said to be carrying ammunition, farm tools, beans and rice. Deng said the report indicated the helicopter was destroyed, but the two pilots are now supposedly in the hands of the DRC. If true, Deng said the SPLM would very much like to know for whom they were working. COMMENT -------------- ¶5. (C) This latest move by the NCP to cut off oil revenue to the GOSS until it surrenders its foreign currency reserves will certainly escalate tensions between the two parties. That the NCP has once again reneged on an agreement KHARTOUM 00001608 002 OF 002 reinforces the SPLM view that the NCP is not a partner it can work with or trust. While the NCP,s legal argument regarding foreign exchange is technically more convincing, cutting off oil revenues is a major escalation in this dispute. It also indicates that the NCP is trying to restrict what the GOSS is able to purchase on the international market, in the context of the pirated vessel Faina with tanks destined for South Sudan. ¶6. (C) The rumor in Juba is that the Chinese were willing to pay a $30 million ransom to free their kidnapped oil workers, and had even made a good faith down payment of $30,000. That the SAF moved to prevent the ransom from being paid is sure to strain Bashir,s relations with that government. Meanwhile, if the GOSS is able to negotiate the release of the two wounded hostages still in rebel hands, it might raise the standing of the GOSS with the Chinese. ¶7. (C) Deng seemed to imply that the NCP was backing Kony, although he did not say this outright. If it is true that the NCP is fully engaged in the business of re-supplying the LRA, and this can be proven, even Bashir,s international backers will have problems defending him. FERNANDEZ