KHARTOUM (Reuters) – Sudan has released four foreigners who were detained three weeks ago near the border with South Sudan following weeks of heavy clashes between the two African neighbors, officials said on Sunday.

Sudan accused the four – a Briton, a Norwegian, a South African and a South Sudanese – of entering an oil-producing border area illegally to spy for South Sudan.

South Sudanese officials had denied Sudan’s allegations, saying the men were working with the United Nations and aid groups clearing mines, and had got lost in the remote territory.

The four seemed to be in good health when they appeared on Sunday in civilian clothes at a brief ceremony in a defense ministry reception hall in the capital Khartoum.

They looked relieved but none of them spoke about the allegations nor touched soft drinks and water laid out on tables in front of them.

Norwegian John Sorbo only said in a brief statement authorities had treated them “very well” during their detention in military facilities in the Sudanese capital Khartoum.

“I’d just like to use the opportunity to thank (Sudanese officials) for the way they looked after us,” he said.

KHARTOUM, May 18 (Reuters) – Sudan will allow foreign exchange bureaux and banks to trade dollars at a level close to the black market rate, effectively devaluing the pound, a senior banking official said on Friday.

Sudan’s economy has been battered since the country lost three-quarters of its oil production to South Sudan when the latter became independent in July. Even though the pipelines are in Sudan, the two have been unable to agree on how much the South should pay to transport its oil.

South Sudan shut down its output of 350,000 barrels a day in January after Sudan started seizing oil for what the latter calls unpaid fees.

The loss of oil revenues, the main source of state income and dollar inflows, has hit the Sudanese pound hard. One dollar bought 5.5 pounds on the black market on Friday, way above the official rate of around 2.7. The rate hit 6.2 during a military confrontation with South Sudan last month.

To close the gap the central bank will allow foreign exchange bureaux and banks to use rates close to the black market, said Abdel-Moneim Nur al-Din, deputy head of Sudan’s association of foreign exchange bureaux.

“From Monday on, foreign exchange bureaux can trade dollars at a rate of 5.2,” he told Reuters, adding that banks could set a rate of 4.9.

“We expect the situation to stabilise. We have eight million Sudanese living abroad whose money goes to the black market. With the (new) rate we can attract Sudanese workers to send their money to families through banks and official organisations,” he said.

KHARTOUM/JUBA (Reuters) – Sultan Kwaje’s problems started when his country disappeared from under him.

He was born in the southern part of Sudan but has lived in the north for more than three decades. When South Sudan broke away as an independent country from Sudan in July, Kwaje was left on the northern side of the border, a foreigner.

The Sudanese government, he said, fired him from his job in the civil service.

Tens of thousands of South Sudanese in the north lost their jobs after the split. About 500,000 are now technically illegal because they lack official residency papers.

“I just want to leave,” said Kwaje who lives in Wad al-Bashir camp, one of several slums on the outskirts of Sudan’s capital Khartoum. “I am still owed all my severance rights but I just want to leave now. Life is bad. We don’t have jobs, no food, don’t get medical treatment.”

As border fighting between Sudan and South Sudan has threatened to turn into all-out war over the past three weeks, much of the attention has focused on the countries’ unresolved disputes over oil revenues.

But the crisis has also shone a light on the plight of the of hundreds of thousands of people who found themselves on the wrong side of the border at independence and are now treated as foreigners.

KHARTOUM (Reuters) – Sudan said it had arrested a Briton, a Norwegian and a South African on Saturday, accusing them of illegally entering a disputed oil-producing border area to help its enemy South Sudan.

South Sudan’s army denied the foreigners were helping its forces and said the men had been on a U.N. vehicle that had got lost in the area.

Sudanese army spokesman al-Sawarmi Khalid said the foreigners had been arrested with a South Sudanese soldier in Heglig – the scene of recent fighting between Sudan and South Sudan – travelling in vehicles that contained military equipment.

“It is now confirmed without any doubt that South Sudan used the help of foreigners in their attack on Heglig. These foreigners were doing military work such as spying out the areas …. They had military equipment … They have a military background,” Sawarmi said.

The group had been flown to Khartoum, he added.

A Reuters witness saw four men arriving on a civilian plane at Khartoum’s military airport.

One of the men, a Westerner, was wearing a t-shirt that said “Norwegian People’s Aid. Mine Action South Africa”. Reporters were not allowed to talk to the men who were swiftly driven away in an unmarked white van.

JUBA/KHARTOUM (Reuters) – When petrol started running low in South Sudan’s capital this month, Peter Bashir Gbandi sensed a sinister force at work.

Rather than blaming a severe shortage of dollars, which the newly-independent country needs to buy imported fuel, the lawmaker pointed to arch rival Sudan – likely in league with Horn of Africa immigrants running filling stations, he said.

A few days later, a member of Sudan’s parliament railed against the hundreds of thousands of ethnic southerners living in Khartoum, many of whom do not hold passports and have never been to the South, demanding the “fifth column” be expelled.

Breaking old habits is always hard, and in the case of Sudan and South Sudan – whose leaders fought one of Africa’s longest and deadliest civil wars until 2005, before the countries split from each other last July – it is proving nearly impossible.

The longtime foes have clashed repeatedly in their contested oil-producing borderlands, and deep-rooted animosities mean they will probably keep at it until one of them collapses.

The two edged dangerously close to resuming full-blown war this month when South Sudan seized the Heglig oil region from Sudan before withdrawing on Friday in the face of international pressure and, Khartoum says, a military drubbing.

The South’s withdrawal from Heglig eased the immediate crisis, but the aftermath of the incursion makes it less likely the two will be able to transcend the grim logic of their decades-long conflict and resolve disputed issues any time soon.

JUBA/KHARTOUM (Reuters) – When petrol started running low in South Sudan’s capital this month, Peter Bashir Gbandi sensed a sinister force at work.

Rather than blaming a severe shortage of dollars, which the newly-independent country needs to buy imported fuel, the lawmaker pointed to arch rival Sudan – likely in league with Horn of Africa immigrants running filling stations, he said.

A few days later, a member of Sudan’s parliament railed against the hundreds of thousands of ethnic southerners living in Khartoum, many of whom do not hold passports and have never been to the South, demanding the “fifth column” be expelled.

Breaking old habits is always hard, and in the case of Sudan and South Sudan – whose leaders fought one of Africa’s longest and deadliest civil wars until 2005, before the countries split from each other last July – it is proving nearly impossible.

The longtime foes have clashed repeatedly in their contested oil-producing borderlands, and deep-rooted animosities mean they will probably keep at it until one of them collapses.

The two edged dangerously close to resuming full-blown war this month when South Sudan seized the Heglig oil region from Sudan before withdrawing on Friday in the face of international pressure and, Khartoum says, a military drubbing.

The South’s withdrawal from Heglig eased the immediate crisis, but the political and economic aftermath of the incursion makes it less likely the two will be able to transcend the grim logic of their decades-long conflict and resolve disputed issues any time soon.

JUBA/KHARTOUM (Reuters) – South Sudan said on Friday it would withdraw its troops from the disputed Heglig oil region more than a week after seizing it from Sudan, pulling the countries back from the brink of a full-blown war.

Sudan quickly declared victory, saying its armed forces had “liberated” the area by force as thousands of people poured onto the streets of Khartoum cheering, dancing, honking car horns and waving flags.

South Sudan’s seizure of the territory had raised the prospect of two sovereign African states waging war against each other openly for the first time since Ethiopia fought newly independent Eritrea in 1998-2000.

Tensions have been rising since South Sudan split away from Sudan as an independent country in July, under the terms of a 2005 settlement, taking with it most of the country’s known oil reserves.

The countries are still at loggerheads over the position of their shared border and other disputes have already halted nearly all the oil production that underpins both economies.

South Sudan’s President Salva Kiir ordered the withdrawal of his troops within three days, the country’s information minister told reporters in the southern capital Juba.

“The Republic of South Sudan announces that SPLA (southern army) troops have been ordered to withdraw from Panthou (Heglig),” Barnaba Marial Benjamin said.

KHARTOUM/JUBA (Reuters) – Sudan’s President Omar Hassan al-Bashir all but declared war against his newly-independent neighbor on Thursday, vowing to teach South Sudan a “final lesson by force” after it occupied a disputed oil field.

South Sudan accused Bashir of planning “genocide” and said it would fight to protect its people.

Mounting violence since Sudan split into two countries last year has raised the prospect of two sovereign African states waging war against each other openly for the first time since Ethiopia fought newly-independent Eritrea in 1998-2000.

Both are poor countries – South Sudan is one of the poorest in the world – and the dispute between them has already halted nearly all the oil production that underpins both economies.

Appearing in medal-spangled military uniform at a large rally, Bashir danced side-to-side, waved his walking stick in the air and made blistering threats against the leadership of the South, which broke off last year after decades of civil war.

“These people don’t understand, and we will give them the final lesson by force,” the burly military ruler told the rally in El-Obeid, capital of the North Kordofan state. “We will not give them an inch of our country, and whoever extends his hand on Sudan, we will cut it off.”

China, a major investor in the oil industry in both countries, expressed “serious concern” about the increase of tensions and called on both sides to stop fighting, “maintain calm and exercise maximum restraint”.

KHARTOUM/JUBA (Reuters) – Sudanese President Omar Hassan al-Bashir vowed on Wednesday to “liberate” South Sudan from its ruling party, a sharp escalation of rhetoric after fierce border clashes that edged the African neighbors closer to all-out war.

There has been growing alarm over the worst violence seen since South Sudan split away from Sudan as an independent country in July under the terms of a 2005 peace settlement. Global powers have urged the two sides to end the fighting.

South Sudan seized the contested oil-producing Heglig region last week, prompting Sudan’s parliament to brand its former civil war foe an “enemy” on Monday and to call for a swift recapture of the flat savanna region.

In a fiery speech to members of the ruling National Congress Party (NCP) singing military songs, Bashir repeatedly referred to the South’s ruling Sudan People’s Liberation Movement (SPLM) as “insects”, a play on their Arabic name.

“Our main goal is liberation of the southern citizens from the SPLM,” Bashir said. “This is our responsibility before the Southern people.”

He went on to predict “good news” from Heglig within a few hours, but also suggested tensions would not end until the South’s ruling party collapsed. He did not specify how that might happen.

“The story began in Heglig, but it will end in Khartoum or Juba,” Bashir said.

By Alexander Dziadosz and Ulf Laessing

(Reuters) – The outcome of the dramatically escalating border fighting between Sudan and South Sudan is more likely to be determined by which of the two faltering economies collapses first than by relative military prowess.

South Sudan, which seceded from Sudan in July, seized the disputed Heglig oilfield on Tuesday, edging the two former civil war foes closer to full-blown conflict than any time since the South gained independence.

But rather than sparking an all-out military confrontation, each side’s aim may now be to target one another’s oil facilities and wait for their opponent to crumble under armed insurgencies, popular unrest and fuel shortages.

“It is a question of which side can maintain the basic governance and military structures longer,” a Sudan expert with government contacts said, speaking on condition of anonymity.

The two countries have already driven their economies to the brink of implosion since the South split away, cleaving the vital oil industry in two.

Squabbling over oil payments and border fighting has withered combined crude output – previously the main source of foreign currency and state revenues for both countries – from around 500,000 barrels a day before partition to just over a tenth of that.