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Sudan's President Omar al-Bashir has reportedly offered to withdraw his troops from the disputed town of Abyei - a flashpoint as South Sudan prepares for independence next month.
Mr Bashir is reported to have made the offer to southern leader Salva Kiir at African Union talks in Ethiopia.
Some 140,000 people have fled recent clashes in Abyei and the neighbouring region of South Kordofan.
Aid workers say pro-southern groups are being ethnically cleansed.
South Sudan is due to secede as part of a peace deal which ended two decades of north-south conflict, which left some 1.5 million people dead.
There are fears that the recent fighting could reignite the conflict, although President Bashir has said he would accept the south's independence.
South Sudan's Information Minister Barnaba Marial Benjamin said the details of what would happen if northern forces withdrew were still being worked out.
Mr Bashir and Mr Kiir are continuing their talks for a second day.
Former South African President Thabo Mbeki and Ethiopia's Prime Minister Meles Zenawi are mediating the talks in the Ethiopian capital, Addis Ababa.
An AU statement said they would focus on the withdrawal of forces from the disputed town of Abyei, which the north forces seized last month.
It said the talks would discuss "the dispatch of an African-led international mission to provide security, to provide conditions for the speedy return of displaced people and steps towards a final settlement of the status of the area".
US Secretary of State Hillary Clinton, who is to arrive in Ethiopian capital on Monday in the latest leg of her Africa tour, is to meet Mr Kiir but not Mr Bashir, one of her aides told AFP news agency.
'Southerners targeted'
Human rights groups have warned that southerners are being targeted by pro-northern forces in the neighbouring South Kordofan state. Although it is in the north, it is home to many pro-south communities and has been the scene of recent clashes.
"People are being hunted down for their ethnicity," John Ashworth, an adviser with the Sudan Ecumenical Forum, told the BBC's Focus on Africa programme.
He said many areas inhabited by Nubans were being bombed and shelled by northern forces and that people had fled further into the area's hills and mountains to escape the attacks.
During the long civil war, many residents of the Nuba Mountains fought with the south.
Aid workers say that some 40,000 people have been forced from their homes in South Kordofan, on top of some 100,000 in Abyei.
Amnesty International's Tawanda Hondora told the BBC's Network Africa programme that some people had been arrested outside the UN base in the South Kordofan capital, Kadugli, and were later shot dead.
"We think this is the start of what might be ethnic cleansing of South Kordofan, Unity State and Abyei, with the precise purpose of ensuring that, come independence, the areas will not have people who are perceived to be sympathetic to the south," he said.
Aid agency offices have been looted, churches have been ransacked and buildings destroyed.
But this was denied by Rabbie Abdelattif Ebaid, an adviser to Sudan's information minister.
"The armed forces are targeting the rebels. The area has now been freed from all rebels. Everything is now quiet in the main towns," he said.
On Friday, the south accused the northern military of bombing areas in Unity State to seize oil fields from the south.
The north-south war ended with a 2005 peace deal, under which the mainly Christian and animist south held a referendum in January on whether to secede from the largely Arabic-speaking, Muslim north.
Some 99% of voters opted for independence. President Bashir said he would accept the verdict of the south, where most of Sudan's oil fields lie.
Source: BBC
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