Sudanese President Omar al-Bashir and South Sudanese President Salva Kiirr met late Saturday in the capital, Addis Ababa, after meeting with other African heads of state.

"The two leaders are taking a new strategic approach to finding a comprehensive solution to all outstanding issues between the two countries", said Pagan Aman, South Sudan's chief negotiator, in an interview.

"They have agreed in principle on all issues."

For three hours the two leaders negotiated by themselves independent of mediation teams "to achieve peace and mutual viability of the two states."

The two presidents have subsequently instructed their negotiating teams to resolve all outstanding issues before an August 2 deadline set by the United Nations.

The UN Security Council announced that deadline in May and threatened sanctions if the two countries had failed to reach any agreement by that time.

The two countries are currently involved in peace talks in Bahir Dar, Ethiopia, under the supervision of African Union mediators. The two sides will be negotiating solidly until August 2.

African Union-led negotiations between the two countries have been continuing since the oil rich south gained independence from the north a year ago.

The two sides have so far been unable to reach an agreement on oil transit fees, the status of citizens, border demarcation, and the final status of the disputed Abyei territory.

Despite claims from the south of a recent aerial bombing last week in Northern Bahr al-Ghazal, Pagan maintains that South Sudan "has chosen to resume negotiations and to engage with the government of Sudan unconditionally".

The South has 75 percent of the region's oil, but Juba still depends on the north's pipeline and the Red Sea port to export its crude.

Addressing the disagreement over oil transit fees, Pagan insisted that the two states would reach a solution that is "fair and based on international practice".

Sudanese President Oman-Al-Bashir, who is wanted for war crimes by the International Criminal Court, arrived in Ethiopia on Friday to attend the 19th African Union summit.

Al-Bashir joined other African heads of state including Kiir for the AU Peace and Security meeting on Saturday where the conflict between the two countries was high on the agenda.

After the day-long meeting, the Commissioner for Peace and Security of the African Union, Ramtane Lamamra, expressed confidence that the two countries "have agreed to never again resort to force to resolve their differences, and to respect the sovereignty and territorial integrity of each other."

The last time the two leaders met was during the AU summit in January.