China's Diplomacy Juggle in Sudan-South Sudan Oil Crisis

As former foes Sudan and South Sudan try to break a long running deadlock over a furious oil dispute, economic giant China is forced into a difficult juggling of allegiances between the rivals.

While Juba and Khartoum resumed talks this week to resolve a bitter row some fear risks tipping them back into war, Beijing is balancing support to both old ally Sudan and newly independent South Sudan, source of five percent of its oil.

Tellingly, Sudanese Foreign Minister Ali Karti last week went to see longstanding ally Beijing before the latest round of African Union-mediated negotiations began.

Chinese Vice President Xi Jinping has cautiously called on Khartoum and Juba "to continue to keep patient and properly handle the relevant dispute at an early date."

It is a statement that reveals "the delicate balancing act" China has been forced to tread, said Laura Barber of the London School of Economics.

"Unlike other international actors keen on a resolution, China does have leverage on both sides," Barber added.

The two countries have been at loggerheads since the South split from the north in July, threatening to reignite conflict between the two former civil war foes.

Oil has been a major sticking point in the talks, since Juba took 75 percent of oil at independence but Khartoum controls processing and export facilities.

Key issues also include border demarcation and the future of the contested Abyei region, claimed by both sides but occupied by Khartoum's army.

Juba took the drastic decision to halt production in January, despite oil making up 98 percent of its revenue, after Sudan started seizing the crude in lieu of a deal on transit fees.

China, a key ally and largest economic partner of diplomatically isolated Sudan, helped Khartoum to become a major exporter of oil.

It has also supported Khartoum militarily, during its two decade long fight against the then southern rebel Sudan People's Liberation Movement (SPLM), now the party in power in Juba.

But since a 2005 peace deal which paved the way for South Sudan's independence referendum and final separation last July, China has been careful to also curry favour with the Southerners.

"Beijing is in a precarious position, caught between an old friend, the North, and a new friend, the South," said Stephanie Kleine-Ahlbrandt, of the International Crisis Group thinktank.

"Although the majority of its oil and its economic interests are now in the South, Beijing does not give up easily longtime friends," the China specialist added.

Tensions are high between the rivals, with both accusing the other of backing proxy rebel forces against the other, while Juba has said Khartoum has bombed oil fields along their volatile and disputed border, claims Sudan denies.

"Sudan was one of China's first focuses in its "go out" campaign and is one of China's military allies," Kleine-Ahlbrandt added, referring to Beijing's push to invest abroad during the 1990s.

"Therefore, despite the bleak economic outlook in the North, Sudan will likely continue to hold an important place in Beijing."

But its influence and economic clout in Juba is strong too.

"Five percent of China's oil imports came from Sudan in 2008," said Matthew Bell of Frontier Economics institute, with that oil now owned by South Sudan sincer independence, a daily output of some 350,000 barrels.

"The China National Petroleum Corporation is the biggest equity partner in all but one of the fields producing before the shut-down."

The brief kidnapping of 29 Chinese workers in Sudan's South Kordofan in January, followed in February by the expulsion of the Chinese head in Juba of the Chinese-Malaysian oil company Petrodar, illustrated the challenges it faces.

China must also weigh up whether or not to finance a pipeline to export South Sudan's oil via Kenya — a project likely to provoke angry reaction from Khartoum.

"Beijing is highly unlikely to abandon its involvement in the two Sudans, but some Chinese analysts are questioning the degree of that involvement," Kleine-Ahlbrandt said.