The latest escalation of violence along the Sudanese border is among the worst since South Sudan became independent last July. Talks between the two countries are stalled as both sides accuse the other of launching attacks in the disputed border area.
The Heglig oil region has been targeted in a series of attacks in recent weeks. Sudan described the offensive as severe, saying its Heglig oil fields were deliberately being targeted and warned the South of a full-on confrontation.
"It is not true that we want to use force to change the reality on the ground. Instead we are defending ourselves against the aggression from Khartoum."
- Atem Yah Atem, South Sudan's deputy information minister
The South Sudanese army says the town of Teshwin near Heglig was hit on Monday. But Sudan says it came under attack first.
Another hope for peace stalled last week when Khartoum called off a planned summit in Juba between Omar al-Bashir, the president of Sudan, and Salva Kiir, the president of South Sudan.
Although South Sudan gained its independence from Sudan last year, there are a number of issues between the two countries that have not been resolved. They include their shared border, which is still not clearly marked.
There is also the status of Abyei, also near the border, which was left undecided in the 2005 Comprehensive Peace Agreement.
After the split, South Sudan ended up with most of the oil fields - around 75 per cent of Sudan's total production of oil. But it has to export the oil using pipelines through ports in Sudan's territory. However, no deal has been reached on how to divide up the oil revenues.
The issue of citizenship also remains unresolved. Both sides reject dual citizenship and Sudan has said that Southerners will not enjoy citizenship rights and jobs in the country.
"I don't think either side can afford a war. I don't think either side really wants a war. But I also think that neither side knows how to stop a war."
- David Anderson, a professor of African politics
Al Jazeera's Nazanine Moshiri is in Juba, the capital of South Sudan, and says the mood there is one of great concern: "People [in Juba] are extremely concerned about the tough words they are hearing on both sides and whether this really does mean war. These people have gone through decades of civil war and this new nation really started off so positively back in July. But what has happened is they've stopped their production of oil, the country is really living off its oil reserves and also international loans, so people are deeply concerned about what all of this will mean.
"At the same time, up in Unity state where I was with an Al Jazeera crew and we came under attack by what we believe were Sudanese war planes, we were with the oil minister of South Sudan and also various South Sudanese army officials, it really is a tense and volatile situation.
"The South Sudanese, whatever they say, are stretched on the ground and they are facing a formidable force in Sudan ... [which is] superior in the air, which makes life very difficult for the South Sudanese army on the ground ....
"What's at stake is money and oil and lives. Oil ... for South Sudan makes up 98 per cent of its total revenue. And for Sudan, Heglig, the site that the South Sudanese have now gone into, makes up more than half of Sudan's oil production output. So, put those things together and you're looking at a dire economic situation for both sides. And of course [there is] the casualties that we're looking at on both sides, so [there will be] a huge human and economic cost."
So are Sudan and South Sudan heading for war? And what are the implications for both countries?
Joining Inside Story with Hazem Sika to discuss this are: Atem Yah Atem, South Sudan's deputy information minister; David Anderson, a professor of African Politics at Oxford University; and Ibrahim Ghandour, the chairman of the Foreign Relations Sector in Sudan.
|"We feel that Juba is neither acting on behalf of its people, on behalf of the interests of its country. They are acting on behalf of other actors who don't want stability for the region or stability for Africa. Some of them are looking for resources and using Juba in a proxy war which is not in the interests of both countries or both people. We look for peace but we will defend our territory."
Ibrahim Ghandour, the chairman of Sudan's Foreign Relations Sector