JUBA - South Sudanese rebels seized control of parts of the strategically key town of Bor on Tuesday as a deadline set by neighbouring countries for an end to hostilities and peace talks neared.
Unrest in the world's youngest country has killed more than a thousand people in the past two weeks and displaced close to 200,000, raising the spectre of civil war and unnerving oil markets.
The African Union threatened sanctions late on Monday against those inciting the violence and hampering international efforts to negotiate an end to the fighting, which risks drawing in other countries in eastern Africa.
"The town is still partly in our hands and partly in the hands of the rebels," Mayor Nhial Majak Nhial told Reuters by phone from the government's military headquarters inside Bor, 190 km (120 miles) to the north of the capital, Juba, by road.
He said the national Sudan People's Liberation Army was outnumbered by militia fighters the government says belong to the feared "White Army", which has in the past sided with rebel leader Riek Machar.
Information Minister Michael Makuei added: "This morning (the rebels) advanced to the centre. The fighting is still taking place."
South Sudan's neighbours have given the warring sides until Tuesday to lay down their arms and begin talks - but there has been no sign of the hostilities ending. The precise moment the deadline expires is not clear.
The clashes erupted on Dec. 15 with fighting among a group of soldiers in Juba. The violence quickly spread to half of the country's ten states, cleaving the nation along the ethnic faultline of Machar's Nuer group and President Salva Kiir's Dinka.
Ugandan President Yoweri Museveni said on Monday east African nations had agreed to move in and defeat former Vice President Machar if he rejected a government ceasefire offer. There was no immediate confirmation of the pact from other nations.
But Museveni's words demonstrated the scale of regional worry over the fighting which has reached some of South Sudan's oil fields, forcing a cut in output.
The scene of an ethnic massacre of Dinka in 1991 by Nuer fighters loyal to Machar, Bor was briefly seized by the rebels early in the conflict before being retaken by government troops after several days of heavy fighting.
A spokesman for the government of South Sudan's Unity state, controlled by forces loyal to Machar, previously denied Machar was in control of the White Army fighters, raising the prospect that the violence was spreading beyond the control of widely recognised ethnic leaders.
About 70,000 civilians have fled Bor and sought refuge in the town of Awerial in neighbouring Lakes state, with no access to food, clean water or shelter, medical charity Medecins Sans Frontieres (MSF) said. Others were hiding in swamps.
"Living conditions are verging on the catastrophic," MSF said.
Fighting across the country has displaced at least 180,000 people, including 75,000 seeking refuge inside different U.N. bases, according to U.N. figures.
At a meeting on Monday in Gambia in West Africa, the AU said it was dismayed and disappointed by the bloodletting that comes two years after South Sudan won independence from its northern neighbour, Sudan.
"(Council) expresses its intention to take appropriate measures, including targeted sanctions, against all those who incite violence, including along ethnic lines, continue hostilities (and) undermine the envisaged inclusive dialogue," the AU's Peace and Security Council said.