Anti-government rebels in South Sudan launched an attack on the key town of Bor on yesterday, ignoring a deadline set by regional powers to stop fighting and hoi d peace talks.

Renewed battles in Bor, capital of the powderkeg Jonglei state and situated just 200 kilometres (125 miles) north of the capital Juba, is a major blow to government troops who celebrated the town's recapture from rebel forces only last week.

"There is fighting this morning in Bor town," army spokesman Philip Aguertold AFP.

A UN spokesman in Juba, Joe Contreras, said fighting started before dawn and involved tanks, rockets and small arms. He said the airstrip in Bor was also closed and that it was unclear who was in control of the town.

Thousands of people are feared to have been killed in over two weeks of fighting pitching army units loyal to President Salva Kiir against a loose alliance of ethnic militia forces and mutinous army commanders nominally headed by ex-vice president Riek Machar.

Despite a heavy army presence, thousands have fled in recent days from Bor in fear of an impending counter-attack by rebels - including an ethnic militia force dubbed the "White Army", reported to have been marching on the dusty town for days.

The world’s youngest nation plunged into chaos on December 15 when Kiir accused his former deputy Machar of mounting a coup. Machar in turn has accused the president of using a clash between army units as a pretext to carry out a violent purge.

Regional leaders at the Inter-Governmental Authority on Development (IGAD), an East African grouping, had demanded Machar agree to a ceasefire and hold face-to-face talks with Kiir by yesterday - but there appeared to be little chance ofthat deadline beingmet.

The United States, which was a key backer of South Sudan’s independence struggle, has warned of a "very complicated, tenuous situation" and has sent a special envoy in a bid to kickstart negotiations.

The conflict has fanned ethnic differences between Kiir's Dinkagroup and Machar's Nuerclan.

Fierce battles have been reported in strategic oil-producing areas - with rebels controlling Bentiu, state capital of the key state of Unity, as well parts of the oil-rich Upper Nile State.

African Union 'dismay1

There have also been grim reports of massacres, rapes and killings, prompting the African Union to threaten "targeted sanctions" over the conflict

The AU expressed "Africa's dismay and disappointment that the continent's newest nation should descend so quickly into civil strife", warning of its potential to deteriorate into "full-fledged civil war" - even though many observers say this has already happened.

Kiir has described the war as "senseless", but ruled out power sharing with the rebels.

"What power sharing? It is not an option. This man has rebelled. If you want power, you don’t rebel so that you are awarded with the power," Kiir said in an interview broadcast on the BBC yesterday.

"You go through the process. When I came here 1 did not come through a military coup, I came because 1 was elected by the people," he said.

Ugandan President Yoweri Museveni had warned that Machar must comply with the ceasefire deal by yesterday or face action by regional nations. He said if Machar does not respond "we shall have to go for him," without clarifyingif his threat involved military action.

A key rebel demand has been the release of several top level political leaders arrested hours after the fighting began, but Kiir said they must follow the court process.