KHARTOUM/JUBA, March 4 (Reuters) - Sudan and South Sudan are deadlocked over a long list of disputes stemming from their split in 2011, blocking the cross-border oil flows vital to both their struggling economies.
The two African countries have failed to settle the ownership of large areas of land or agree on how to secure their shared border. Both accuse the other of backing rebels operating either side of the boundary and their armies came close to full-blown war during skirmishes close to the line in April last year.
Following are some factors to watch:
TENSIONS ON THE BORDER
Khartoum and Juba agreed in September to restart oil exports from the landlocked South through the north. But neither side has withdrawn its army from the border - a condition of the resumption - and the oil has not started flowing.
What to watch:
- Continuing negotiations. The worst situations in the past few years came about whenever the two sides stopped talking. Will talks hosted by the African Union lead to any progress? Will both sides step up rhetoric against each other or build up troops at the joint border?
- Will both sides set up a demilitarised border zone, a condition to resume cross-border oil flows ? Oil flows would give both economies a boost and an incentive to keep talking.
- Insurgents have taken up arms in Sudan's Blue Nile and South Kordofan border states. Will Sudan agree to political talks with rebels of the SPLM-North as demanded by the African Union? Continued fighting would undermine border security as the rebels control part of the border to South Sudan.
SUDAN'S ECONOMIC CRISIS
The oil shutdown by South Sudan has worsened an economic crisis in Sudan, where oil used to be the main source of revenue as well as foreign currency needed for imports.
Small protests have become more frequent as people fret about rising prices and corruption. Annual inflation hit 43.6 percent in February, up from 15 percent in June 2011, before South Sudan seceded.
Sudanese President Omar Hassan al-Bashir also faces dissent from within his ruling circle.
What to watch:
- Will the Sudanese pound fall further, hitting Sudan's ability to import? Will food inflation rise further?
- Any signs of bigger protests. Will the weak opposition be able to unite and mobilise larger groups? Any signs of dissent inside the ruling circles after the government unveiled a coup attempt against Bashir last year?
SOUTH SUDAN'S STABILITY
South Sudan's economy is showing signs of strain due to the loss of oil revenues, which made up 98 percent of state income until the shutdown. Juba says the situation is under control thanks to tax increases and reserves, but analysts estimate the central bank could run out of money soon.
What to watch:
- How long can the South survive without oil? Will essential food items and fuel get scarce? Will the South Sudanese pound lose further ground on the black market? (Reporting by Ulf Laessing and Hereward Holland; Editing by Michael Roddy)