KAMPALA, Uganda—South Sudan's plans to resume oil exports have hit a snag after African Union-mediated negotiations failed to yield a deal on the creation of a demilitarized zone along its border with former civil-war foe Sudan, the AU said Sunday.

The stalemate is the latest setback to hit the world's newest nation, whose oil exports have been suspended since January 2012 amid a simmering border conflict with Sudan.

 

After a week of negotiations in Addis Ababa, the Ethiopian capital, security and defense officials from both countries failed to agree on a plan on creating the demilitarized zone along the 1,120-mile common border, a condition for the resumption of oil exports.

"The Parties...will have further discussions on...the key issue when oil exports could resume and under what circumstances," the AU said in a statement. "The forthcoming African Union Summit at the end of January will present a further opportunity for the two Presidents to make further progress in resolving the outstanding issues."

South Sudan and Sudan came close to war early last year following a spate of deadly clashes over contested oil-rich regions, which straddle their poorly marked common border.

In September 2012, the presidents of the two countries bowed to international pressure and signed a number deals to normalize relations and resume oil shipments. Deep-rooted mistrust and a history of broken agreements continue to hinder the implementation of the deals, observers say.

South Sudan inherited around 75% of the oil fields from Sudan following its secession in July 2011 after a two-decade civil war. However, the landlocked nation relies on pipelines that pass through Sudan to export its crude. Since 2011, the AU, as well as the U.S. and China, have unsuccessfully pressed the two nations to normalize relations and resume oil shipments to heal their battered economies.

Last week, South Sudan announced plans to pull troops from the border to create a 6.25-milebuffer zone. However, Philip Aguer, the country's military spokesman, said the pullout would start only after there is a "commitment" from Sudan to move its own troops.

South Sudan had hoped to start exporting around 200,000 barrels a day of crude in November last year, but the plans were shelved after the government in Khartoum, Sudan's capital, demanded the government in Juba, the South Sudanese capital, first disarm rebels of the Sudan People's Liberation Movement North, who are currently operating in Sudan's border states of South Kordofan and Blue Nile. The SPLMN rebels fought alongside the South Sudan army during the civil war with Sudan.

South Sudan says it has since severed ties with the rebel group, despite Sudanese accusations that it continues to support them.

Jerome Tubiana, a Sudanese analyst with the International Crisis Group, described Khartoum's demands as "not realistic." According to Mr. Tubiana, the demands were "most probably a delaying tactic on behalf of Khartoum," at a time President Omar al-Bashir was facing serious internal divisions in his ruling party coalition.