VZCZCXRO1219
OO RUEHGI RUEHMA RUEHROV
DE RUEHKH #1566 2960917
ZNR UUUUU ZZH
O 220917Z OCT 08
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2146
INFO RUCNFUR/DARFUR COLLECTIVE
RUCNIAD/IGAD COLLECTIVE
RHMFISS/CJTF HOA

UNCLAS KHARTOUM 001566 
 
DEPT FOR A/S FRAZER, SE WILLIAMSON, AF/SPG, AND EEB/IFD 
NSC FOR PITTMAN AND HUDSON 
ADDIS ABABA FOR USAU 
DEPT PLS PASS USAID FOR AFR/SUDAN 
DEPT PLS PASS TREASURY FOR OIA, USED IMF AND USED WORLD BANK 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EFIN EAGR EAID PGOV PREL PINR IBRD SU
SUBJECT: GOSS FINANCE MINISTER MAWIEN DECLARES INTERIM TRUCE OVER 
FOREIGN EXCHANGE RESERVE DISPUTE 
 
REF: KHARTOUM 1436 
 
¶1. (SBU) SUMMARY:  On October 21, GOSS Minister of Finance Kuol 
Athian Mawien told CDA Fernandez that he has reached a interim 
solution to the dispute over management of foreign exchange reserves 
with GNU Minister of Finance and National Economy Dr. Awad Ahmed 
Aljaz. Both sides have agreed to revert to "pre-crisis" behavior and 
refrain from further antagonism until the end of the year, when 
hired international experts brought in by each will convene to 
examine the issue and offer recommendations, he said. Mawien 
reiterated the GOSS position that all foreign exchange generated in 
South Sudan should be held and managed by the Bank of Southern Sudan 
(BOSS), adding that the South has now accumulated over USD 500 
million in reserves and has no intention of transferring these to 
Khartoum. END SUMMARY. 
 
¶2. (SBU) Mawien stated that in his visit to Khartoum this week he 
had quarreled intensely with CBOS Governor Dr. Sabir Mohamed Hassan 
over control and management of national foreign exchange reserves 
(reftel), but subsequently had reached an interim truce with GNU 
Minister of Finance and National Economy Dr. Awad Ahmed Aljaz to 
create some breathing room by reverting to "pre-crisis" behavior and 
essentially putting off the dispute until the end of the year. At 
that time he said, Khartoum and Juba will each select a team of 
international experts to convene and offer recommendations. He noted 
that the GOSS had recently engaged the Addis Ababa-based Horn 
Economic and Social Policy Institute to conduct a preliminary 
assessment, which indicated the feasibility of the BOSS taking a 
lead role in reserves management for the conventional window in 
accordance with the Wealth Sharing Agreement under the CPA.  (Note: 
Separately, the Assessment and Evaluation Commission (AEC) for the 
CPA told us that they plan to draft a legal opinion on the foreign 
exchange issue, to share with the parties and commissioners 
informally in an effort to resolve the issue.  End note.) 
 
¶3. (SBU) Mawien said that the South has now accumulated over USD 500 
million in reserves and has no intention of transferring these to 
Khartoum, arguing that these reserves are an integral part of a 
process of wealth creation and management for the benefits of the 
economy of Southern Sudan. The BOSS must keep and manage foreign 
exchange reserves that it accrues in order to promote the 
development of the South Sudan economy and banking system, he said, 
and the GOSS believes it is empowered to do so under Article 14.3 of 
the Wealth Sharing Agreement of the CPA. 
 
¶4. (SBU) Mawien also called for the completion of restructuring of 
the CBOS in accordance with Article 14.3 of the Wealth Sharing 
Agreement, arguing only a partial restructuring was done by 
establishing the BOSS.  CBOS had just converted itself into both the 
head office and the Islamic window, he said, and further 
reorganization of the CBOS is needed to draw a clear line of 
demarcation between the two.  He also criticized the fact that Dr. 
Sabir serves simultaneously as CBOS Governor and head of the 
Management Committee.  "[Sabir] is accountable only to himself" in 
managing the Bank, Mawein said. 
 
¶5. (SBU) Comment: A problem delayed is a problem half solved in 
Sudan, and while the decision to pursue a future negotiated 
settlement with the involvement of international experts is 
laudable, the current dispute leaves little room for compromise.  As 
noted in reftel, foreign currency reserves would be integral to GOSS 
financial independence in a post-2011 environment, making it 
unlikely to budge on this issue.  However, the CPA specifically 
states (Article 14.2) that the BOSS is a branch of the CBOS, which 
will implement "the same national monetary policy in Southern 
Sudan," (Article 14.3) suggesting that control of foreign currency 
reserves is a CBOS (Khartoum) prerogative - making this an issue 
that is unlikely to go away anytime soon, and adding to the list of 
items that could provoke a constant, simmering crisis between the 
two CPA partners.  For now the NCP is more focused on ICC issues, 
however, and needs the SPLM's support, but could well be tempted at 
some future date to cut off the proceeds of oil sales to South Sudan 
until these funds are "repaid". Such a fateful step, would take the 
crisis from simmer to boil. 
 
FERNANDEZ