Clinton takes message of reconciliation to South Sudan - Reuters

On an 11-nation African tour, Clinton will be the most senior U.S. since independence last year, warning that bitter divisions over territory and oil threaten to wreck the economies of two nations.

"We're encouraging both sides, South Sudan and Sudan, to meet and negotiate the differences between them as expeditiously as possible," a senior U.S. official said, briefing reporters travelling with Clinton, who arrived in Uganda on Thursday.

Clinton will underline U.S. support for the government of South Sudan, which Washington helped guide through years of negotiations with Khartoum that finally led to independence following a decades-long civil war.

But Washington has been dismayed by disputes over border demarcations and oil that at times appeared close to tipping the countries back into war.

"Both countries are in a downward economic spiral as a result of their sharp political differences," the official said. Washington wants South Sudan's President Salva Kiir and Sudan's President Omar Hassan al-Bashir to "meet urgently on an on-going basis until all of these issues are resolved," he said.

U.N. SANCTIONS THREAT

Clinton's trip to South Sudan's ramshackle capital of Juba comes one day after the expiry of an August 2 deadline set by the U.N. Security Council for progress in resolving problems between Khartoum and Juba.

Failure to meet this goal could leave both exposed to possible future sanctions.

U.S. officials said that with scant progress, Clinton's message would be clear: it is time to put the disputes in the past or risk the fragile gains of independence.

Landlocked South Sudan, dependent on oil for about 98 percent of its state revenues, halted output in January in a row with Khartoum over how much it should pay to export via pipelines in Sudan.

The sudden shortfall of state revenues and foreign exchange caused South Sudan's currency to weaken sharply on the black market and jacked up the prices of food and other commodities in the import-dependent nation.

Khartoum, similarly deprived of oil income, faces its own economic crisis and has devalued its currency and scaled back fuel subsidies as annual inflation more than doubled to almost 40 percent, triggering protests against the government.

Clinton will meet Kiir during her brief visit to Juba and will repeat U.S. pledges to help the young nation, one of the world's poorest, find its economic feet, the officials said.

Clinton will then return to Uganda later on Friday for talks with President Yoweri Museveni - a U.S. security ally who nevertheless faces criticism for authoritarian policies at home.

Clinton will thank Museveni for helping in Somalia, where Ugandan troops form the backbone of an African Union peacekeeping force battling to restore order to the Horn of Africa nation overrun by al Shabaab Islamist insurgents.

Officials said she would also press Museveni to allow greater political freedoms, and urge respect for rights for all citizens including homosexuals, who have been targeted by conservative religious and political leaders.

(Reporting By Andrew Quinn; Editing by Robin Pomeroy)