By: Carol Jean Gallo on August 08, 2012Sudan and South Sudan reached an interim agreement on the exploitation of oil and oil payments this weekend. The issue has been a major challenge since the South’s independence in July 2011, when negotiations that had been ongoing for nearly a year failed to result in an agreement. Negotiations continued but fell apart in January this year when Khartoum admitted to unilaterally confiscating oil exports to compensate for what it claimed were unpaid transit fees. Juba subsequently suspended oil production on January 28.The two Sudans are dependent on each other in the exploitation of oil, as two-thirds of the former Sudan’s reserves are now in South Sudan and the infrastructure needed to transport, refine, and export the oil is in the north. Both economies have suffered a great deal as a result of the halt to oil production, and the dispute hasn’t helped political relations or the security situation between the two countries. Both Sudans have accused each other of supporting the others’ rebels, South Sudan has accused the north of aerial bombardments on their soil, and the two countries came close to overt war in April.The oil agreement reached this weekend includes a payment of 3 billion dollars to Khartoum for losses from the disruption in production and a per barrel fee to be paid by South Sudan for oil pumped to the north and exported. Oil production should start again in September. Other next steps for the immediate future include a timetable for the resumption of production for the oil companies, as full production cannot be achieved again overnight.David Kienzler provides a great summary of what was agreed on in terms of oil in the African Union mediated talks, and reminds us that it could be more than a year before production is back up to pre-shutdown levels.The general tone seems to be one of cautious optimism. Both sides made considerable concessions, including Khartoum’s initial demand of $36 per barrel dropping to an agreed-on $9.48. But oil exploitation is only one of a host of problematic issues the two nations are dealing with in these current talks. While this agreement is a positive step, Nico Plooijer of the European Coalition on Oil in Sudan notes that “It is too early to celebrate, especially because the deal itself has not been signed.”El Samani El Wasila, a Sudanese MP, was quoted on Al Jazeera as saying: “This agreement was not only about the oil but also demilitarisation… We want to start from now, talking about the goodwill and to be good neighbours in approaching the issues through dialogue not war, seriously and positively, with a will to reach an agreement.” South Sudan lead negotiator Pagan Amum also noted that the talks are about much more than oil, and that “We’re aiming at a comprehensive deal.”Talks on security and border demarcation are scheduled to resume at the end of August, with final agreements to be settled on by the AU deadline of September 22. This includes the disputed status of Abyei, which under the Comprehensive Peace Agreement (CPA) was supposed to hold a referendum in 2011 on whether to become part of the south or have special status within the north. The referendum never took place, however. The status of Blue Nile and Southern Kordofan states is also still contentious, although the CPA mandated popular consultations for Blue Nile began in 2010.Border security and demarcation are arguably the most sensitive issues. The Khartoum delegation has said that if an agreement on security is not reached, they will not sign the agreement — sending the Sudans back to square one, including the oil deal. Other sensitive issues include right of return for Dinka refugees to Abyei; citizenship; and migration.If the Sudans could diversify their economies enough that they weren’t so reliant on oil revenue, perhaps coming to an agreement on its exploitation wouldn’t be quite such a volatile issue. On the other hand, the mutual dependence means that both governments are compelled to work together if they are to survive. While it may be “too early to celebrate,” hopefully being forced to figure out how to cooperate on oil will help the Sudans figure out how to cooperate on other contentious matters. A lot is at stake, not just the economy.