Sudanese war planes bombed a market in the capital of South Sudan's oil-producing Unity State Monday, residents and officials said, an attack the southern army called a declaration of war.
Sudan denied carrying out any air raids, but a Reuters journalist saw aircraft dropping two bombs near a bridge linking two areas of Unity's capital Bentiu, although it was not possible to verify the planes' affiliation. He saw market stalls ablaze and the body of one child.
U.N. Secretary-General Ban Ki-moon condemned the bombardment.
Ban called on "the government of Sudan to cease all hostilities immediately," the BBC reported, saying there could be "no military solution" to the two countries' simmering border dispute.
Earlier, Sudanese President Omar al-Bashir ruled out talks with South Sudan. Bashir was visiting the oil field and border town of Heglig, which South Sudanese troops had occupied for nearly two weeks.
South Sudan says its forces withdrew from Heglig, but Sudan says it expelled them, killing 1,000 soldiers.
"We will not negotiate with the South's government, because they don't understand anything but the language of the gun and ammunition," Reuters quoted Bashir as telling troops on his arrival in Heglig.
Ban called on Bashir and South Sudanese President Salva Kiir "to stop the slide toward further confrontation and... to return to dialogue as a matter of urgency".
U.S. President Barack Obama has said both countries "must have the courage" to return to the negotiating table and resolve their differences peacefully.
Sudanese military commander Kamal Marouf said 1,000 soldiers of the south's Sudan People's Liberation Army had been killed during the fighting for Heglig, reports the AFP news agency, whose correspondent saw an "uncountable" number of dead bodies wearing South Sudanese military uniforms.
The casualty figures were rejected by South Sudan's Information Minister, Barnaba Marial Benjamin, who told the BBC that "not even a single SPLA soldier have they killed."
The two territories went their separate ways last year without settling a list of bitter disputes over the position of their shared border, the ownership of key territories and how much the landlocked South should pay to transport its oil through Sudan.
The disputes have already halted nearly all the oil production that underpins both struggling economies.
"Bashir is declaring war on South Sudan. It's something obvious," SPLA spokesman Philip Aguer said after the Bentiu bombing.
Aguer and the United Nations Mission in South Sudan said two people were killed in the air strike in Unity state where the Greater Nile Petroleum Operating Co. operates blocks. China's CNPC leads the consortium, along with Malaysia's Petronas and India's ONGC Videsh.
Sudan denied carrying out any air attacks in the area. "We have no relation to what happened in Unity state, and we absolutely did not bomb anywhere in South Sudan," the country's military spokesman, Al-Sawarmi Khalid, said.
In the worst fighting since the split, South Sudan earlier this month seized the disputed oil-producing territory of Heglig - then announced it had started withdrawing on Friday, following sharp criticism from the U.N. Secretary-General.
Bashir, dressed in military uniform, visited the Heglig region on Monday, descending from his plane to shouts of "Allahu akbar" - "God is greatest" - from soldiers and officials gathered on the tarmac.
Speaking to Sudanese army troops, he vowed not to negotiate with South Sudan after it had occupied the region.
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