Sudan, South Sudan resume oil talks for first time since border fighting - Reuters

The two countries face sanctions from the U.N. Security Council unless they thrash out a comprehensive deal resolving all their conflicts by August 2.

Tensions escalated in April when their armies fought for weeks along the disputed border, the worst violence since South Sudan became independent a year ago under a 2005 peace agreement.

African Union-sponsored talks, led by former South African President Thabo Mbeki, have been hampered by sharp disagreements over where to mark the disputed border and how much landlocked South Sudan should pay to export oil through northern pipelines.

In January, South Sudan shut down its 350,000 barrels per day oil output after Khartoum started taking oil for what it called unpaid fees. Both crumbling economies badly need the oil to flow through, bringing them each vital foreign cash.

"Negotiations on oil fees started today," said Atif Kiir, spokesman for South Sudan's negotiations team in the Ethiopian capital. He did not elaborate at the start of the round.

Sudan hopes both countries will find a solution to allow southern oil exports through the north, Sudan's state news agency SUNA quoted the head of its delegation, Mutrif Siddiq, as saying.

"The government of Sudan wants to continue the flow of oil through Sudan," he said according to SUNA.

South Sudan said on Monday it was willing to pay $9.10 and $7.26 per barrel to transport oil through two pipelines crossing Sudan, alongside a $3.2 billion dollar package to compensate for the loss of most oil reserves to the north.

This offer is higher than before but still well below Sudan's last demand of $36 a barrel for both pipelines.

Both sides are also at loggerheads over Khartoum accusations that South Sudan supports its rebels in two southern border states and the Darfur region, a claim that many diplomats find credible despite denials from Juba.

South Sudan itself accuses its neighbor of bombing its territory. Sudan routinely denies these claims but Reuters reporters have witnessed several air strikes.

(Editing by Ulf Laessing)