* South starts cuts after Khartoum decides to block its oil exports
* Recent output has been 200,000 bpd, cuts already begun this week
* Tension surrounds rebels operating across the shared border
By Andrew Green
JUBA, July 19 South Sudan will slash its oil output to 100,000 barrels a day over the weekend as it moves toward a full shutdown, its foreign ministry said, after Sudan decided to block its exports in a row over rebels operating across their shared border.
Sudan, the sole conduit for South Sudan's oil exports, said a month ago it would close two cross-border oil pipelines within two months and insisted oil production be shut by Aug. 7 unless South Sudan gave up support for the rebels.
South Sudan's government in Juba denies providing such support.
Oil and foreign grants are the main source for South Sudan's budget. Diplomats worry that turning off oil wells will undermine stability in the African country, which seceded from Sudan in 2011.
They point to recent looting of aid agencies by soldiers as a sign that Juba is struggling to pay salaries.
The shutdown is also grave news for Sudan, which has been struggling with turmoil since losing most oil reserves with South Sudan's secession. Oil fees from Juba are essential to bring down soaring inflation, which stokes dissent.
The dispute threatens to disrupt oil sales of China National Petroleum Corp, Malaysia's Petronas and Indian firm ONGC Videsh which operate the fields in the South.
The neighbouring countries, which fought one of Africa's longest civil wars ended in 2005, came close to war in April 2012 when tensions over pipeline fees and disputed territory escalated.
Landlocked South Sudan, which depends on a Sudanese Red Sea port to export its crude, said on Thursday it had started shutting output to 160,000 bpd, down from 200,000 bpd.
"It should go down to 100,000 over the weekend, and then next week it will continue to go down from there," Mawien Makol Arik, a foreign ministry spokesman in Juba, said on Friday.
Sudan has not commented on Juba's decision to reduce its oil flows. Reuters has been unable to reach the oil and foreign ministry in Khartoum since Thursday.
South Sudan had only resumed oil production in April, after turning off wells pumping around 300,000 bpd in January 2012 when both sides failed to agree on pipeline fees.
Sudan has allowed the sale of oil that had already reached its territory before notifying Juba of the pipeline closure.
Sudan and South Sudan had agreed several times since last year to resume oil flows and put an end to hostilities plaguing them since their messy divorce. But mutual mistrust runs deep.
Khartoum accuses Juba of supporting the "Sudanese Revolutionary Front" (SRF), a rebel alliance, which complains of neglect at the hands of the wealthy Khartoum elites. The SRF in April staged an attack on central Sudan, embarrassing the army on whose support President Omar Hassan al-Bashir depends.
South Sudan in turn accuses Sudan of backing rebels in its eastern Jonglei state, where fighting is making it impossible to realise government plans to search for oil with the help of France's Total and U.S. Exxon Mobil.
Human Rights Watch said South Sudan's army was fuelling dissent in Jonglei by killing and abusing civilians during a state disarmament plan to end tribal violence.
"Witnesses reported a number of killings of civilians, including women and children, by soldiers in December, January, March, April, and May in or around the town of Pibor," HRW said in a report. There has been also "verbal and physical abuse and looting of civilian property by soldiers" especially in mid-May.
South Sudan's army spokesman Philip Aguer denied the army had killed any unarmed civilians. "Categorically, the army has been fighting only the insurgents," he told Reuters.
The fighting has cut off aid to 100,000 people in the vast state, the United Nations said on Wednesday.