China Cancels Sudan Electricity Project Loan on Lack of Oil Collateral

The Chinese government has canceled funding for an electricity project in Sudan as it has lost collateral for the loan, which is in the form of oil supply, following the separation of Sudan and South Sudan last year, Sudan President Omer al-Bashir said, according to media reports Monday.

Sudan's total oil resources have decreased 75% after the separation with oil-rich South Sudan.

Sudan Tribune cited the president as saying that Sudan was now in talks with the government of Qatar and had extended up to 250,000 acres of land to encourage the country to take up the stalled project of extending an electric grid. China had agreed to provide the loan for extending the electric grid for an agricultural project.

Ties between China and Sudan have been deteriorating since July last year after South Sudan became an independent state, taking at least 350,000 b/d of oil. Both the south and north were exporting around 200,000 b/d of the total 350,000 b/d to China, though it is not indicated if this figure worked as collateral.

After the separation, the two countries failed to agree on sharing of both oil revenues and boundaries for oil regions. The two issues have pushed the two countries nearly to a war lately.

South Sudan in January halted all oil production after it accused the north of stealing $815 million worth of its crude oil by detaining crude tankers at Port Sudan. While the south has most of the oil, the north had controlled the pipeline and has access to the sea.

China has made unsuccessful attempts to convince the two countries to settle their differences through negotiations and reverse the decisions they made on oil, however, the two rounds of talks in Ethiopian capital Addis Abba have failed to resolve the conflict.

Qatar promised Sudan at least $2 billion in the form of treasury bills and investments in several sectors of the economy, the Sudan Tribune reported.

The third round of talks mediated by African Union is ongoing in Ethiopia.