VZCZCXRO9229
RR RUEHROV
DE RUEHKH #0407/01 0470917
ZNR UUUUU ZZH
R 160917Z FEB 06
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC 1489
INFO RUCNIAD/IGAD COLLECTIVE

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. 
 
------------------------------------ 
A Budget Built on Oil and Priorities 
------------------------------------ 
 
¶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. 
 
----------------------- 
Fretting Over Petroleum 
----------------------- 
 
¶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 
-------------------------------- 
 
¶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. 
 
-------------------------- 
Sanctions Pinch Both Sides 
-------------------------- 
 
¶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. 
 
---------------- 
The Darfur Blues 
---------------- 
 
¶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. 
 
-------- 
Bio Data 
-------- 
 
¶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