By Aaron Maasho
ADDIS ABABA (Reuters) - Sudan and South Sudan late on Friday broke off talks to end hostilities after failing to end their disputes on border security and oil payments despite Khartoum making some oil price concessions, officials said.
The U.N. Security Council had given the neighbours until Thursday to resolve their conflicts or face sanctions. The African Union (AU), which is hosting talks, is now expected to extend the deadline to try bridge the differences, diplomats said.
The two nations came to the brink of a full war in April after border fighting escalated, the worst violence since South Sudan became independent in July last year under a 2005 agreement that ended decades of civil war with Khartoum.
The messy divorce failed to mark the disputed border and to define how much landlocked South Sudan should pay to export its oil through the north. Oil is the lifeline of both economies.
The rivals appeared to make headway in the past few days with both sides making concessions to end the oil dispute, which saw Juba shut down its production in January after Sudan took millions of barrels for what it said was unpaid fees.
South Sudan said last week it was willing to pay $9.10 and $7.26 per barrel to export oil through two pipelines crossing Sudan, alongside a $3.2-billion (2.045 billion pounds)-dollar package to compensate for the loss of most oil reserves to the South. It had previously offered $2.6 billion.
Sudan itself lowered its demand to $15 a barrel per pipeline, down from $32 a barrel, officials from both sides said. It had until last week insisted on $36 a barrel.
But South Sudan's top negotiator Pagan Amum said Khartoum was still demanding too much.
"Sudan has been attempting to extort, to take advantage of South Sudan as a landlocked country. Sudan has attempted to impose very exorbitant transit fees," Amum told reporters late on Friday in Addis Ababa where talks take place.
Both sides have also failed to agree set up a demilitarized buffer zone as a first step to improve border security.
Amum said international arbitration was now the best way to find a solution for the disputed border regions.
"Also, we expect the (AU) to recommend that all the remaining disputed and claimed areas be referred to international arbitration," Pagan said.
Sudanese officials confirmed talks had been broken off until the African Union decided on further steps.
Sudan insists on a border security agreement first, before agreeing on oil. Khartoum accuses South Sudan of supporting rebels in two of its southern border states, claims some diplomats find credible despite Juba's denials.
South Sudan itself accuses Khartoum of often bombing its side of the border. Although Khartoum denies this, Reuters reporters have witnessed several such aerial attacks.
On Friday, U.S. Secretary of State Hillary Clinton urged both sides to reach first a deal on oil to end hostilities.
(Editing by Ulf Laessing and Eric Walsh)
