* Washington promises to expedite major gesture to Sudan
* Sudan must recognise result of south's independence vote
* Oil-producing south Sudan set to secede on July 9
By Opheera McDoom
KHARTOUM, Jan 14 (Reuters) - Sudan could be removed from the U.S. list of state sponsors of terrorism by July if the north accepts the results of the south's independence referendum, the U.S. special envoy to the region said on Friday.
After decades of north-south civil war, the oil-producing south of Africa's largest country looks set to secede, a move most hope will end the continent's longest conflict for good. The new nation would likely celebrate independence on July 9.
A senior north Sudanese official told Reuters on Friday that the referendum was "broadly" largely fair and his ruling party would accept the outcome. His remark was the most conciliatory gesture to date from Khartoum and allayed concerns the result could rekindle general conflict in Sudan. [ID:nLDE434588]
The Obama administration had promised Sudan would be removed from the list if the referendum went ahead peacefully and the results were recognised. U.S. envoy Scott Scott Gration said in Khartoum that offer still stood.
"We have told both the north and the south that if the referendum does go smoothly then the president (Barack Obama) will initiate those actions," he told reporters.
But he said the procedures could take some time.
"We are not going to shortcut the statutory obligations of removing somebody," he said. "If everything goes smoothly it could be done by the end of the interim period ... We will do everything from our side to expedite this process," he added.
The interim period refers to the time frame of the 2005 deal which ended the war. It finishes on July 9.
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For a story on the peace process click on [nMCD238256]
For an analysis on the south click on [nHEA155011]
For more on the referendum click on [nLDE70708L]
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Sudan was placed on the U.S. list in 1993 for harbouring "international terrorists". Sudan has hosted prominent militants including Osama bin Laden and Carlos the Jackal.
While removal from the list would not affect U.S. trade and economic sanctions first imposed on Sudan in 1997, it may reduce some of the stigma attached to doing business with Khartoum for non-U.S. companies or investors.
NOTABLE ECONOMIC GROWTH
Sanctions have not overtly affected Sudan's economy, which managed to achieve impressive growth rates of more than 10 percent in 2006 and 2007 as it looked to Asian and Gulf investors to extract its oil and for foreign investment.
Most Sudanese believe the embargo has affected the people more than the government, as local traders and entrepreneurs are almost totally isolated from international financial markets or institutions.
Sudan is entering a serious economic crisis with rising inflation, a devalued currency and foreign exchange shortages. Price rises have already sparked protests which, coupled with the south's vote to secede, makes Khartoum politically and economically vulnerable.
However Washington has made it clear that any lifting of sanctions would be linked to progress on resolving Sudan's other major conflict in its western Darfur region. Peace talks there have faltered, with the government withdrawing its delegation last year, and fighting has resumed with the only insurgent group to have signed an accord with Khartoum.
Gration had an optimistic view on the Qatar-hosted talks, where two rebel groups remain alone at the negotiating table.
"They are in a position to help bring about a ceasefire," he said of the joint U.N.-African Union mediation, adding the talks would likely remain in Qatar.
"The government has withdrawn physically from Doha," he said. "(But) I don't think the government has totally withdrawn...In fact, the parties don't necessarily have to be in the same location... The talks are still ongoing."
But a major obstacle to international engagement with the north after the south's secession will be the standing warrant for President Omar Hassan al-Bashir's arrest issued by the International Criminal Court for war crimes and genocide in Darfur. Bashir denies the charges.
The United Nations estimates some 300,000 people have died in the remote west since mostly non-Arab rebels took up arms demanding more of a share of wealth and power from the centre.
Khartoum puts the death toll at 10,000 and accuses the Western media of exaggerating the conflict.
(Editing by Mark Heinrich)
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