to cope with the oil shutdown but foreign experts say this will be impossible as no other industries exist.
Juba said it had contracted oil sales worth around $3 billion before the shutdown. "It's very hard to say how much money they have. I think much of the oil revenues has been spent so they need the oil flows," said a senior banking executive.
The shutdown by South Sudan cut off crude supplies to China National Petroleum Corp, Malaysia's Petronas and India's Oil & Natural Gas Corp. China and Japan scrambled to find alternative supplies after South Sudan closed down its 350,000 bpd. Its heavy sweet grades - Nile and Dar Blend - are liked in Asia.
DOLLARS DWINDLE
The oil shutdown and the drying up of revenues could have alarming consequences on South Sudan's economy. The central bank in Juba was unlikely to have dollar reserves lasting more than three to five months, diplomats say.
South Sudan hopes to borrow funds from international markets using oil reserves as collateral, but bankers are sceptical while the oil cannot be sold. Western aid cannot replace oil.
To end dependency on Khartoum, South Sudan wants to build an alternative pipeline to the Kenyan port of Lamu, but most analysts do not expect the project to see the light of day.
"Costs are very high, the terrain is very difficult, and security is a major issue," said Harry Verhoeven, a Sudan expert and researcher at Oxford University.
Sudan heavily pumped the oil fields while it was in charge. Oil output is now expected to fall to 200,000 bpd by 2016, to 160,000 bpd by 2018 and further after that, according to a study by the European Coalition on Oil in Sudan.
To cut the umbilical cord with the north, Juba would need to build new processing plants in Upper Nile and Unity state to halt reliance on those on the northern side of the border.
"Many Western donors tell Kiir that the Kenyan pipeline won't work," said a foreign expert with close ties to Western donors. "They tried talking him out of the oil shutdown."
GAME OF BRINKSMANSHIP
Emboldened by Western criticism of Bashir following his indictment by the war crimes court, South Sudan officials feel they can be tough in the deadlocked oil talks, which are sponsored by the African Union.
Kiir and Bashir met on the sidelines of an AU summit in Addis Ababa to discuss an interim deal that "would have frozen the situation and reversed the unilateral actions that had been taken by both", a source close to the talks said.
But, the source said, talks broke down when Kiir pulled out.
"The Arab Spring has reinjected life into that old idea that Khartoum is about to fall," Verhoeven said, adding that some in Kiir's SPLM believed "the likelihood of a revolution in Khartoum has increased and therefore they are more intransigent".
A Western diplomat agreed: "There is a belief in the SPLM that Bashir might be gone soon so they can sit him out with an oil deal. But Bashir might actually stay. You never know."
Bashir is facing an economic crisis and high food inflation after losing the southern oil fields. The north's remaining output of 115,000 bpd serves only domestic consumption.
Sudan is also taking a hard line with Juba and demanding not just concessions on the pipeline fee but also on the issues of sharing debt and giving financial aid, diplomats say.
POWER AND PRIVILEGE
Setting up a fledgling state in South Sudan and disentangling the two oil industries was a big enough headache, but corruption and cronyism has also severely hindered development, particularly in rural areas.
Juba bustles with gleaming Toyota Land Cruisers and Hummers parked in front of ministries or expensive restaurants on the banks of the Nile, ostentatious signs of status and power.
Kiir's cabinet is mainly made up of ex-guerilla commanders and senior SPLM members, who led the civil war with the dominant Dinka tribe holding the key levers of power.
"They don't use the potential of many South Sudanese who studied abroad and are well-educated," a foreign executive said.
"If you don't have ties to the SPLM you struggle to get a senior job," he said in Juba. "Some even look down on people who stayed abroad during the war as traitors."
Euphoria that erupted across the south over independence also masked deep tribal and ethnic splits that grew in the vast Jonglei state where the government hopes for big oil finds.
The Lou Nuer tribe marched on rival Murle settlements in December killing hundreds of people and sparking bloody revenge attacks. Tribal violence started out as revenge for cattle raiding, but critics say years of administrative neglect in Jonglei, the same size as England, are also to blame.
"They never used to kill women and children. Something has gone very wrong. Maybe our politicians are to blame," said Mary Buyoi, a famous singer and peace ambassador for the Murle tribe.
BORDER WARS
With the money expected to be exhausted within the next few months, Juba will have no choice but to restart oil production to maintain cohesion even if no deal is reached with Khartoum.
Flexing their muscle, Sudan's officials say they will carry on helping themselves to oil from South Sudan that arrives at Port Sudan as long as the dispute is unresolved.
"The shutdown is their decision. But as long as they don't sign, we will continue lifting what we think is our right," Sudan's Foreign Minister Ali Ahmed Karti said.
Sudan and South Sudan have broadened the oil talks by linking them to a bigger deal to end violence in the border area and find a solution for the disputed border region of Abyei.
Abyei was meant to have a referendum like South Sudan, as agreed under the 2005 peace deal. But the prospect of a vote was dashed after Khartoum took Abyei in May just before Juba's independence, forcing tens of thousands to flee to South Sudan.
Shops and homes were looted, and residents said that their huts were burned down, raising fears of a fresh north-south conflict. Kiir condemned the seizure of the border region but at the time refused to be drawn into war.
But with both sides daggers drawn over the crucial oil revenue-sharing, several Africa watchers see another war as a distinct possibility.
Verhoeven, at Oxford University, said both would try to reach a deal but he saw a 20 percent chance that the tensions would lead to conflict.
"I think there's a real chance this could go too far and there could be a border war," he said. (additional reporting by Alexander Dziadosz; Writing by Ulf Laessing, editing by Peter Millership)
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