28 January 2012 Last updated at 08:48 ET

South Sudan oil row: Sudan to release shipments

Landlocked South Sudan currently uses facilities owned by Khartoum to get its oil to market

Sudan says it will release detained crude oil shipments belonging to South Sudan to help end a bitter dispute.

The laden vessels would be allowed to leave Port Sudan as soon as possible, a Khartoum negotiator said.

The move followed South Sudan's threat to halt production, as talks on the row over oil transit fees broke down.

The newly independent state currently has to use Sudan's infrastructure to export its oil, but halting production would hurt the economies of both.

South Sudan seceded in July 2011, taking with it the lion's share of Sudan's oil - but without agreement on oil transit fees.

The BBC's James Copnall in Khartoum says Sudan needs these oil transit fees to cover the gap in its budget caused by South Sudan's secession.

It has started seizing oil in lieu of the fees.

Three ships carrying 2.2 million barrels of oil have been detained, AFP news agency says.

South Sudan has accused Khartoum of taking oil worth $815m (£518m) in total.

'Stealing'

"President Bashir is ready to make this gesture. Sudan is going to release the vessels detained in Port Sudan," Sayed el Khatib told a news conference in the Ethiopian capital, where talks have been taking place.

Mr Khatib said releasing the ships should open the way for what he called a "cover agreement" between the two countries to be signed - and that Khartoum was ready to do this by the end of Saturday.

There was no immediate reaction from South Sudan.

Late on Friday, South Sudan's lead negotiator, Pagan Amum, said a deal had fallen through because Sudan was "stealing" his country's oil.

He also said the shutdown of South Sudan's oil production would be complete by the end of Saturday.

Oil accounts for an estimated 98% of landlocked South Sudan's budget - but it currently has to use Sudan's pipelines and export terminal to export the oil.

Reuters news agency cited industry sources as saying Sudan had already sold at least one cargo of crude oil seized from South Sudan at a discount of millions of dollars, and was offering more.

Sudan's President Omar al-Bashir and his South Sudanese counterpart, Salva Kiir, have been holding talks in Addis Ababa, brokered by the leaders of Djibouti, Ethiopia, Kenya and Somalia.

Observers say the oil row has created the greatest crisis between the two states since South Sudan became independent, and has stoked fears of a return to war.