VZCZCXRO1299
OO RUEHROV
DE RUEHKH #1608/01 3080554
ZNY CCCCC ZZH
O 030554Z NOV 08
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC IMMEDIATE 2219
INFO RUCNFUR/DARFUR COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 0075
RUEHKI/AMEMBASSY KINSHASA 0090
RHMFISS/CJTF HOA

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. 
 
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