South Sudan, Sudan trade fresh accusations - Reuters

The release of 14 Sudanese soldiers on Wednesday under a deal mediated by Egypt had been expected to ease tensions between the two countries, where disputes over oil revenues and border demarcation have threatened to escalate into all-out war.

But in a fresh slew of accusations and counter-accusations on Thursday, Philip Aguer, the spokesman for South Sudan's army, said Sudan had bombed the village of Chotchara on Wednesday. "Two MiGs, one Antonov and two gunships dropped four bombs near the cattle camps," he told Reuters.

Unity state has borne the brunt of aerial bombing after disputes simmering since South Sudan gained independence in July boiled over into border fighting three weeks ago. Two people were killed on Monday in Unity state's capital, Bentiu, some 80 km (50 miles) from the contested border.

Khartoum has denied bombing South Sudan and on Thursday its army spokesman, al-Sawarmi Khalid, reiterated that denial.

Meanwhile a Sudanese soldier, one of 14 prisoners handed over by South Sudan to Egypt - which flew them to Cairo and from there to Khartoum - said the group had been beaten and insulted during their detention.

"We were subject to all kinds of insults and beatings during our stay there," Lieutenant Khalid Hassan Ahmed, a doctor in the Sudanese army, told reporters at Khartoum airport.

South Sudan denied it had mistreated the soldiers and urged Khartoum to release all southern soldiers held prisoner.

The tensions between the two countries have halted all oil production, choking their largely oil-dependent economies and causing nationwide fuel shortages.

China, which has significant business and oil interests in both countries, has said it would send its special envoy for African affairs to Sudan and South Sudan soon to encourage talks. It has yet to give dates for envoy Zhong Jianhua's visit.

China is one of Sudanese President Omar Hassan al-Bashir's strongest allies. South Sudanese President Salva Kiir has also just been on an official trip to Beijing.

AFRICAN UNION MEDIATION

The African Union has demanded Sudan and South Sudan resume talks within two weeks, warning that it would issue its own binding rulings on their disputes if they failed to reach agreement within three months.

Bashir, who has ruled Sudan since 1989, has refused to negotiate with South Sudan's government, saying it only understood the language of the gun. But Sudanese Foreign Minister Ali Ahmed Karti said he was willing to talk on security issues.

South Sudan Information Minister Barnaba Benjamin said the AU's efforts were a step in the right direction. "But they should direct this to Bashir who refuses to have any dialogue," Barnaba told Reuters.

Talks brokered by the AU and led by former South African President Thabo Mbeki collapsed last month after Khartoum asked for time to review recommendations.

South Sudan then seized the disputed Heglig oilfield, on which Sudan is largely dependent for oil production, but after finding itself isolated, withdrew its forces last week.

Benjamin said for AU mediation to work, more international engagement was needed, calling on the United Nations Security Council and other international organizations to support it.

Sudan and southern Sudanese fought a protracted civil war until a 2005 peace agreement, which opened the way to South Sudan eventually declaring independence.

The latest tensions are affecting humanitarian aid. World Vision, which says it is one of the few remaining humanitarian groups in the border area, said it was relocating some of its staff. "It is already incredibly difficult to deliver humanitarian assistance in South Sudan and if widespread conflict breaks out, it will make it almost impossible," Edwin Asante, the director for South Sudan, said.

(Writing by Yara Bayoumy and Ulf Laessing; Editing by Myra MacDonald)