By Alexander Dziadosz and Khalid Abdelaziz
KHARTOUM (Reuters) - Sudan and South Sudan accused each other of launching attacks on a new front near their contested border, stoking fears of a return to all-out war in the oil-producing region.
The reports of the fresh fighting south of the Sudanese town of Mairem late on Tuesday came as the U.N. Security Council discussed imposing sanctions on the African neighbors if they did not stop the escalating border clashes.
There has been growing alarm over the worst violence seen since South Sudan split away from Sudan as an independent country in July under the terms of a 2005 peace settlement.
South Sudan seized the contested oil-producing Heglig region last week, prompting Sudan's parliament to brand its former civil war foe an "enemy" on Monday and to call for a swift recapture of the flat savanna region.
Both countries are highly dependent on oil. Any protracted fighting would severely damage their economies and disrupt the surrounding region.
Distrust runs deep between the neighbors, who are at loggerheads over the position of their border, how much the landlocked South should pay to transport its oil through Sudan and the division of national debt, among other issues.
Sudan said it had repulsed an attack on Tuesday by South Sudan's armed forces (SPLA) near the Bahr al-Arab river, known as the Kiir River in the south.
"Limited forces from the SPLA carried out an attack on the area to divert the efforts of the armed forces working to liberate the Heglig region," the state-linked Sudanese Media Centre quoted a local military official as saying.
The report said the fighting took place 62 km (39 miles) south of Mairem which, maps show, is on the boundary between the Sudanese regions of South Kordofan and Darfur, the scene of a separate insurgency against the Khartoum government.
South Sudan's military spokesman Philip Aguer confirmed the clashes took place, but said the SPLA had not tried to enter Sudan's territory. The fighting broke out after southern troops were shelled while trying to collect water, he said.
"They reacted, and fighting erupted between them," Aguer said. "Our forces crossed the river, crossed the bridge briefly, but the command recalled them back."
In a sign rebel groups in Sudan may be trying to take advantage of the tensions, insurgents based in Darfur said late on Tuesday they had destroyed a Sudanese military base and take control of a town.
The reports from a faction of the Sudan Liberation Army (SLA) loyal to Minni Minnawi - one of the three most prominent rebel groups in the region - could not be independently verified, and Sudan's army spokesman was not immediately available to comment.
The 15-nation Security Council on Tuesday reiterated its call for Sudan to stop air strikes and South Sudan to withdraw from Heglig.
"Council members discussed ways to leverage the influence of the council to press the parties to take these steps, and included in that a discussion potentially of sanctions," U.S. Ambassador to the United Nations Susan Rice told reporters.
Rice, who is the Security Council president for April, gave no further details on possible sanctions that could be imposed.
On another diplomatic front, South Sudan's President Salva Kiir is due to make a state visit to China - a major investor in both Sudan and South Sudan - before the end of the month.
South Sudan's Information Minister Barnaba Marial Benjamin said Kiir would discuss "strengthening bilateral relations - political, economic, everything" and that the Heglig crisis would also be on the table.
"I think they (China) have influence, and so their role is important," he said.
South Sudan has accused Sudan of launching air strikes on some of its major oilfields. Sudan has denied launching air strikes but said its ground forces had attacked southern artillery positions that had fired on the north.
South Sudan seceded from Sudan in July, six months after a referendum agreed under a 2005 peace deal that ended decades of civil war that killed more than 2 million people.
(Additional reporting by Michelle Nichols at the United Nations; Editing by Andrew Heavens)