* EU slaps travel bans, asset freezes on two individuals
* Unnamed pair accused of atrocities, blocking peace process
* Government side says observing May ceasefire
* Rebels urges neighbours to block access to ports, pipelines (Adds government comments)
By Carl Odera
JUBA, July 10 (Reuters) - The European Union announced travel bans and asset freezes on Thursday on two South Sudanese military leaders it said were violating ceasefire agreements put in place to stop fighting that has killed thousands.
The Council of the European Union said it would name the two individuals on Friday when the sanctions come into effect. The United States has already imposed similar measures against leaders on both sides.
Fighting erupted in Juba in December, pitting the government forces of President Salva Kiir against supporters of Riek Machar, his former deputy and long-time rival. The conflict has reopened deep ethnic tensions in the world's youngest country, which only won independence from Sudan in 2011.
Peace talks between Kiir and Machar stalled after they last met in May and agreed a ceasefire. A previous truce agreed in January swiftly collapsed. The United Nations estimates more than 10,000 people have been killed since December, and about a million displaced.
"The Council today imposed sanctions against individuals obstructing the South Sudanese peace process and responsible for atrocities, as part of wider EU efforts to stop violence and avoid further instability in the region," said an EU statement.
"Two persons responsible for violating the ceasefire agreement will be targeted with a travel ban and a freeze of their assets in the European Union."
An existing EU arms embargo on South Sudan remains in place.
South Sudan's deputy foreign minister, Bashir Bandi, said government troops had observed the ceasefire.
"I don't think the government has been in violation since the signing of the May 9 agreement. The instruction of the commander-in-chief has been very clear, we are abiding (by it), if anything we are in defence position," he told Reuters.
Rebel leader Machar told Reuters in an interview on Wednesday he was not concerned by the threat of sanctions.
"If it is sanctions similar to what the Americans did - sanctions on property - I don't own property. None of these countries will say I have something that could be used as leverage," he said.
Machar urged member countries of the Intergovernmental Agency for Development (IGAD) - the East African bloc brokering the peace talks - to restrict South Sudan's access to ports and pipelines.
"If Sudan, as a member of IGAD, was to say 'we are going to stop the (crude oil) flow' then Juba would listen," he said.
"If Kenya were to say they are closing the port, Juba would listen. These are the only true sanctions that can contribute to pushing the peace process forward."
In May, the United States imposed sanctions on Peter Gadet, an army commander loyal to Machar, and Major-General Marial Chanuong, head of Kiir's presidential guard, freezing any assets they might hold in the United States, and blocked U.S. citizens or companies from dealing with them.
Last month, IGAD threatened to impose sanctions on the warring sides unless they stopped all military operations. (Additional reporting and writing by George Obulutsa in Nairobi, Aaron Maasho in Addis Ababa; Editing by Robin Pomeroy)