(Adds U.S. and EU comment, paragraphs 4-6)
By Hereward Holland
JUBA, June 10 South Sudan continues to export oil to Sudan despite a threat from its African neighbor to stop cross-border flows in a row over alleged support for rebels, its oil minister said on Monday.
Sudan said on Sunday it would close the two export pipelines with the African neighbor within two months unless Juba gave up any support for insurgents operating across the shared border.
The row, the latest in a series of problems between the former civil war foes, threatens to hit supplies to Asian buyers such as China National Petroleum Corp (CNPC), India's ONCG Videsh and Malaysia's Petronas, which run the oilfields in both countries.
The United States called on Khartoum to reconsider.
"We deplore this action and urge Sudan to reverse this decision," State Department spokeswoman Jen Psaki told reporters. If carried out, she said, such action would violate an agreement that says any shutdown can only occur after a 60-day notice period, and only for economic or technical reasons.
The EU's foreign policy chief, Catherine Ashton, expressed concern and warned that such a move "would have serious consequences for the viability of the two states, relations between them, and the wider region".
The landlocked South, which has to use Sudan's pipelines and port facilities to sell its crude, has piped around 7 million barrels of crude to its neighbor since resuming production in April, Oil Minister Stephen Dhieu Dau told reporters.
"This is increasing every day. This is not the final figure because producing is still on, we have not received any official communication from the government of Sudan so we are still producing," he said in the capital Juba.
He gave no production figure but officials said last month the country was pumping around 200,000 barrels a day from its main Palouge Field in Upper Nile state.
An industry source also said oil was flowing "normally" to Sudan.
South Sudan used to pump 300,000 bpd before it turned off wells last year in a row with Sudan over fees. But oil sources say it is unlikely to produce more than 230,000 bpd until year-end as some facilities were damaged during fighting between the two countries in April 2012.
KIIR STRIKES BACK
On Saturday, Sudan's President Omar Hassan al-Bashir accused the neighbor of backing rebels of the Sudanese Revolutionary Front (SRF), which launched a major attack on towns in central Sudan in April, a shock to many ordinary Sudanese.
But South Sudan's President Salva Kiir rejected the claims and said Bashir was only upset because his army struggled to contain the rebels.
"Instead of admitting they have failed to repulse or push back the rebels they say it is South Sudan which is fighting them," Kiir told reporters. "President Bashir is declaring war indirectly without saying it. We are not for war."
He said Sudan was supporting rebels in South Sudan's Jonglei state, where the government wants to search for oil with France's Total and U.S. major Exxon.
"He slapped me and he cried and ran and accused me. This is what Bashir is doing," Kiir said of Bashir's alleged support for insurgents in South Sudan.
Sudan said it would allow the export of the oil which has already arrived on its soil. CNPC last week said it had already sold 1.2 million barrels of South Sudanese oil.
Dau said any shutdown would be done gradually in coordination with Sudan and the oil companies. "It will not be done in one day, it will be done in 60 days gradually until you reach zero production," he said.
A confirmed closure of the pipelines would be devastating for both underdeveloped economies which have been struggling without oil, the main source for dollars to fund imports. (Reporting by Hereward Holland; Writing by Ulf Laessing; Editing by Anthony Barker, William Hardy, Chris Reese and Jim Marshall)