Sudan, South Sudan reach oil deal, will hold border talks

By Aaron Maasho

ADDIS ABABA (Reuters) - Sudan said on Saturday it had reached a deal with South Sudan on oil transit fees, a first step towards ending a dispute which had brought the hostile neighbors close to war, but also said it wanted a border security agreement before oil flows resumed.

The shareout of oil revenues was one of the biggest issues left unresolved when South Sudan became independent in July last year, under a 2005 agreement that ended decades of civil war, and fighting along the ill-defined border pushed them close to war in April.

U.S. Secretary of State Hillary Clinton said the oil agreement showed a "new spirit of compromise on both sides," and U.S. President Barack Obama said Sudan and South Sudan should build on the momentum to resolve their remaining border and security issues.

"This agreement opens the door to a future of greater prosperity for the people of both countries," he said in a statement released by the White House.

The two sides, deeply mistrustful of each other, have often not implemented previous agreements and still need to mark their 1,800-km (1,200-mile) border and resolve charges both have made of supporting rebels in the other's territory.

The U.N. Security Council had given the two states until Thursday to resolve all conflicts left over from South Sudan's secession, taking with it the bulk of former Sudan's oil reserves.

Landlocked South Sudan threw both economies into turmoil when it shut down its output of 350,000 barrels a day in January after Sudan started seizing oil going through its pipelines to make up for what it called unpaid transit fees.

African Union mediator Thabo Mbeki said the neighbors would now start talks to get southern oil exports moving.