By Ulf Laessing

KHARTOUM (Reuters) - Germany will host a Sudan investment conference this month which was postponed after its embassy in Khartoum was stormed last year, officials and diplomats said on Monday.

Sudan is trying to attract more investment to overcome a severe economic crisis after losing most oil reserves to South Sudan when it became independent in 2011. Most Western companies shun the country due to a U.S. trade embargo.

The Berlin conference, planned for January 29, will be also attended by officials from South Sudan, who are also eager for Western firms to develop their country, ravaged by decades of civil war.

Germany, one of the few Western countries with good relations with Sudan, had originally planned the forum for October but shelved it after thousands of people stormed and set ablaze its embassy in protest against an anti-Islam film.

The Sudanese government had criticized Germany before the storming for allowing small protests by right-wing activists in August showing cartoons of the Prophet Mohammed. It also criticized Chancellor Angela Merkel for giving an award in 2010 to a Danish cartoonist who depicted the prophet in 2005.

Protesters in Khartoum also attacked the British and U.S. embassies over the film which was posted on the Internet.

Germany agreed to reschedule the forum after Sudanese Foreign Minister Ali Ahmed Karti apologized and provided land free of charge to rebuild the embassy, diplomats said.

Germany's foreign ministry declined to comment but diplomats and Sudan's foreign ministry said Karti would attend the Berlin conference.

German companies are among the few in Europe ignoring the U.S. trade embargo. Engineering group Lahmeyer just helped expanding a major dam in the southeast of the country.

Most Western countries have only limited ties to Sudan, whose President Omar Hassan al-Bashir faces charges of war crimes in Darfur at the International Criminal Court.

Diplomats said Germany was planning the conference on its own, so it would not have to rely on other Western powers which often criticize Khartoum for its human rights record. In March, Norway and Turkey called off similar events after the United States signaled it would not attend.

South Sudan seceded from Sudan under a peace deal that ended the civil war but left tensions and border issues unresolved. The neighbors agreed in September to restart cross-border oil flows but still need to secure their border first.

(Additional reporting by Alexandra Hudson in Berlin; Editing by Robin Pomeroy)