VZCZCXRO8225
RR RUEHROV RUEHTRO
DE RUEHKH #1195/01 2961203
ZNR UUUUU ZZH
R 231203Z OCT 09
FM AMEMBASSY KHARTOUM
TO RUEHC/SECSTATE WASHDC 4616
INFO RUCNIAD/IGAD COLLECTIVE
RUEHGG/UN SECURITY COUNCIL COLLECTIVE
RHMFISS/CJTF HOA

UNCLAS SECTION 01 OF 02 KHARTOUM 001195 
 
NSC FOR MGAVIN, LETIM 
DEPT PLS PASS USAID FOR AFR/SUDAN 
ADDIS ABABA ALSO FOR USAU 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL ECON EFIN EPET ENRG SU
SUBJECT: Sudan: AEC October 2009 Wealth Sharing Working Group Holds 
Long-Awaited Meeting 
 
¶1. (SBU) Summary:  U.S. Charge' D'Affaires Robert Whitehead, as 
coordinator of the Assessment and Evaluation Commission's Wealth 
Sharing Working Group (WSWG), chaired a meeting with the ruling 
National Congress Party (NCP), Sudan People's Liberation Movement 
(SPLM) and representatives of donor nations on October 13 to review 
the status of the Wealth-Sharing Protocol of the Comprehensive Peace 
Agreement.  Among the unresolved wealth-sharing issues facing the 
two parties are the National Petroleum Commission's audit of the oil 
sector and the International Monetary Fund (IMF) review of the 
banking system.  Both sides claimed the other had not honored its 
commitment to make unity attractive.  The SPLM claimed that the NCP 
had not acted on land reform, employment for southerners in the 
Civil Service and in providing appropriate oversight and funding to 
the Bank of Southern Sudan (BoSS).  The NCP countered with the claim 
that the South does not have the technical expertise to manage its 
share of the oil reserves, and that the SPLM's desire to allow the 
BoSS to act independently of the Central Bank runs counter to 
provisions in the 2005 Comprehensive Peace Agreement (CPA) and at 
variance with international banking practice regarding central 
control of foreign exchange assets. End Summary 
 
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Management of Foreign Reserves Key Issue 
---------------------------------------- 
 
¶2. (SBU) In his opening remarks, NCP representative Under Secretary 
of the Ministry of Finance El Fatih Siddig agreed that the WS 
Protocol is among the most successful working groups in the AEC 
although, according to the mid-term review, much remains to be 
accomplished.  Among the most prominent challenges in the current 
banking system is the management of foreign reserves, which Siddig 
claimed to be the sole responsibility of the Central Bank (CBoS). 
One of the duties of the CBoS, he said, is to ensure a stable 
exchange rate, and to do that, the bank must control foreign 
exchange reserves.  The SPLM representative, State Minister for the 
Ministry of Finance Dr. Lual Deng, argued that the Bank of Southern 
Sudan (BoSS) should have the right to control oil revenue generated 
in the South, with which Siddig disagreed, saying that all 
disbursement of the funds must be the responsibility of the Central 
Bank.  The BoSS is a subsidiary branch of the Central Bank of Sudan, 
Siddig maintained. 
 
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NCP: One Country, Two Banks Unworkable 
-------------------------------------- 
 
¶3. (SBU) Siddig claimed that while the South wanted access to the 
funds, it lacked the capacity to develop a conventional banking 
system, and did not have the monetary instruments needed to collect 
revenue, including personal income taxes.  To have one country with 
two banking systems was a problem, he told the working group, and 
added that the parties must discuss unity of the instruments to 
avoid neglecting overall monetary policy and creating a long-term 
dilemma.   Siddig noted that the alleged discrepancy in oil revenue 
reporting claimed in a study by British non-governmental 
organization (NGO) Global Witness resulted from reporting the gross 
amount of oil produced, not net production after "cost oil" is 
deducted.  He suggested that definitions must be clarified regarding 
price and intake. 
 
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SPLM PowerPoint Outlines NCP Failures 
------------------------------------- 
 
¶4. (SBU) SPLM representative Deng presented the working group with a 
power-point briefing outlining the key components of the CPA wealth 
sharing provisions and commenting on those commitments to which the 
SPLM believed the NCP had failed to live up to its side of the 
agreement.  Such alleged NCP lapses included on land reform, oil 
sector management, non-oil revenues, banking sector development and 
the Multi-Donor Trust Fund (MDTF). 
 
¶5. (SBU) Elaborating, Deng said that the National Land Commission 
had not yet been established, and the Government of National Unity 
(GNU) has done nothing to incorporate in existing law customary laws 
and practices, local heritage and international trends related to 
land.  He also stated that the NCP had not kept its obligation to 
manage the development of the petroleum sector in the national 
interest or in the interest of those in affected states or regions. 
He further claimed that the GOS had failed to honor agreed-upon 
environmental policies.  The National Petroleum Commission (NPC), he 
said, should promote productive policies that encourage foreign 
direct-investment, support a stable economic environment, ensure 
that local populations benefit from oil resources and development, 
and assure that local populations are consulted on oil exploration 
 
KHARTOUM 00001195  002 OF 002 
 
 
and development projects.  Dr. Deng concluded that the NPC had not 
been functioning as envisioned in the CPA, and must establish a unit 
within the NPC Secretariat to publish daily oil production by well 
and block, quantities going to local refineries, exported quantities 
by well and block, importing country, and actual export price.  With 
regard to the Global Witness report, Deng recommended that the IMF 
be allowed to verify the validity of the report and that the GOS 
allow the IMF access to all information pertaining to the oil 
sector, so as to ensure transparency and minimize mistrust on oil 
sector management.  He proposed that there be a one-two day seminar 
in Khartoum, following the outside audit, at which Global Witness 
representatives would present their findings on oil revenue 
distribution and two parties, plus technical experts, would discuss 
them. 
 
--------------------------------------------- ----- 
Customs Appointments for Southerners Still Pending 
--------------------------------------------- ----- 
 
¶6. (SBU) Dr. Deng said that GoSS's performance has been poor due to 
lack of qualified staff.  Nonetheless, some 400 Southern Sudanese 
had been identified through a comprehensive interview process for 
federal civil service jobs.  However, the national Presidency had 
not yet approved their appointments into the National Customs 
Administration, he said. 
 
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BoSS Still Operating Without Legislation 
---------------------------------------- 
 
¶7. (SBU) Deng maintained the CBoS had not been restructured to 
assure a dual banking system.  Although the need for conventional 
banking facilities in the South was clear, that system had not been 
developed.  In addition, although the BoSS had been established, no 
legislation had been passed to govern it.  Deng questioned why the 
GOS would not allow the BoSS to manage its own reserves and 
resources generated in the south; as a part of the Central Bank, 
BoSS should have that right, he said.  He admitted that the GoSS 
shared some responsibility for the problems but needed a BoSS in 
Juba to manage internal problems.  Dr. Deng told the group that the 
Multi-Donor Trust Fund (MDTF) to support urgent recurrent and 
investment budget costs for both partners had not yet been 
established.  Despite 90 percent implementation of the CPA's 
wealth-sharing provisions, key problems remained, he concluded. 
 
----------------------------------- 
Wealth Sharing Main Sticking Points 
----------------------------------- 
 
¶8. (SBU) CDA Whitehead noted that, during the U.S.-led trilateral 
process, the United States had brought together high-level 
delegations from the parties and requested that they identify 
sticking points in implementation of the CPA.  They focused on five 
points of which two have been resolved.  These included the GNU's 
transfer of the full share of oil revenues to the South, and the 
GNU's payback of GoSS deductions for the national elections. 
Remaining issues were collection of national non-oil revenues in 
South Sudan, banking system-related issues, and a required National 
Petroleum Commission audit.  CDA Whitehead added that on September 
14, the BoSS had sent a letter to the International Monetary Fund 
(IMF) requesting a visit from an IMF technical assistance mission. 
He also asked for recommendations for an outside entity to conduct 
the oil audit on which both sides have reached agreement. 
 
¶9. (SBU) The meeting concluded with a listing of next steps on which 
consensus/agreement between the two parties had been reached.  These 
included:  the need for an independent audit in consultation with 
the NPC on oil production; finding mechanisms to insure better 
reporting of and access to oil data to reduce mistrust that has 
developed.  The United States offered to work with the parties 
through provision of de technical assistance on the issue of the two 
banking systems and how they might be structured.  It was agreed 
that more discussions was needed on civil service employment in the 
Customs Service and on the collection of tax revenue in the south, 
and focusing on ways to make unity attractive in the next 14 months. 
The proposal of a donors meeting would be reviewed and include the 
U.S. Agency for International Development's transition from 
humanitarian assistance to development assistance.  The parties 
would consider Norway's offer of technical assistance to make the 
NPC more efficient.  Finally, the parties agreed that there should 
be a donors meeting after the independent audit was completed to 
review prioritization of ongoing international assistance. 
 
WHITEHEAD