Sudan and S. Sudan leaders try to resolve oil row

ADDIS ABABA (Reuters) - The presidents of Sudan and South Sudan tried on Friday to resolve a dispute over oil exports that has pushed South Sudan to shut off hundreds of thousands of barrels per day of output.

Sudanese President Omar al-Bashir, using a walking stick, and South Sudan's President Salva Kiir, talked on the sidelines of a meeting in Ethiopia.

"Kiir and Bashir met face-to-face for an hour, and that at least is a development. Talks have moved but we'll see how it goes at the end of the day," a Western diplomat who attended the meeting told Reuters.

South Sudan became independent in July under a 2005 peace deal that ended decades of civil war, leaving the new nation with about 75 percent of roughly 500,000 barrels per day of oil production.

Both countries depend heavily on oil and have failed to agree how much South Sudan should pay to export its oil through pipelines running through Sudan to a Red Sea port.

The dispute heated up this month when Sudan said it was confiscating some oil exports from South Sudan to make up for what it called unpaid fees. In response, South Sudan said on January 20 it was shutting down its output.

Representatives from both countries are meeting in the Ethiopian capital of Addis Ababa in an attempt to address the crisis.

Ethiopian Prime Minister Meles Zenawi said oil talks were on the agenda at the Intergovernmental Authority on Development (IGAD) meeting which also included the leaders of Somalia, Kenya and Ethiopia.

"We have a number of key issues to discuss. We had informal discussions this morning to deal with the current crisis between the Republic of South Sudan and the Republic of Sudan," he said.

According to oil industry sources, Sudan has already sold at least one cargo of crude seized from South Sudan at millions of dollars discount, and is offering more.

Sudan's civil war was fought for most years from 1955 to 2005 over issues of ethnicity, religion, ideology and oil. An estimated 2 million people died in the conflict.

Southerners voted overwhelmingly to secede in a referendum held last year in January.