* South Sudan shut down 350,000 bpd output in January
* Both sides agreed in September to resume exports
* Khartoum now says no oil flows until Juba cuts rebel ties (Adds background)
By Aaron Maasho
ADDIS ABABA, Dec 18 (Reuters) - Border security talks between Sudan and South Sudan are deadlocked, the top southern negotiator said on Tuesday, raising the prospect of an impasse that could prolong a shutdown of oil exports and push both economies closer to collapse.
The countries came close to all-out war in April after troops clashed along their shared border in the worst violence since South Sudan declared independence from Sudan last year.
They agreed in September to end hostilities, pull troops from the border and restart the transportation of southern oil across the boundary through Sudanese pipelines. But South Sudan negotiator Pagan Amum told Reuters talks in Addis Ababa on how to put those promises into practice had now stalled.
"The talks now are deadlocked and, essentially, I see these talks as having collapsed because Sudan has taken a new strategic position opposing the development of cooperation between the two states," he said in an interview.
"I am not seeing any point of continuing these talks. I think it is now time for the leadership of South Sudan to refocus their attention," Amum added.
Sudan's Defence Minister Abdel Raheem Mohammed Hussein told Reuters the negotiations in Addis Ababa were continuing, but declined to give further details.
A collapse in talks and further delays in re-starting the crude flow would be a serious blow to the two countries' already struggling economies.
Crude exports were the main source of their state revenues as well as for the dollars they need to pay for key imports. Their currencies have dropped sharply in value and inflation has soared since the oil stopped.
Landlocked South Sudan inherited three-quarters of Sudan's oil production when it broke away under the terms of a 2005 peace deal that ended decades of north-south civil war.
The South had to continue transporting its oil through Sudanese pipelines, as they provided its only route to the sea.
But the new nation shut down its 350,000 barrel-a-day output in January after tensions escalated over transit and other fees - depriving Sudan of those fees, but also cutting off the source of 98 percent of its own state income.
Amum had suggested earlier this month they could restart the oil flow by the end of the year.
But hopes production would quickly resume were dampened this month when Sudan said it would not allow South Sudanese oil exports to pass through its territory until Juba cut links with Sudanese insurgents and expelled their leaders.
Amum said Khartoum's position meant resuming oil exports through Sudan was now unlikely.
"The only way out of this is to abandon all ideas about oil flowing through Sudan and build refineries inside South Sudan and build alternative pipelines to the Indian Ocean," Pagan said.
The South had suggested building alternate pipelines in the past, but analysts have said such a scheme would take years to construct and cost billions of dollars.
The African Union last week urged Sudanese President Omar Hassan al-Bashir to meet his southern counterpart Salva Kiir "in the shortest possible time".
Any full breakdown of relations between the two countries would raise fears of a return to fighting.
An estimated two million people died in their last major conflict. Mostly Muslim Sudan fought rebels in the south, where most follow Christianity and traditional beliefs, for all but a few years from the 1950s in civil wars fueled by ethnicity, religion, oil and ideology. (Writing by Aaron Maasho; Editing by Alexander Dziadosz and Andrew Heavens)