UNITED NATIONS, July 5 (Reuters) - The U.N. Security Council renewed a peacekeeping mission in South Sudan for second year on Thursday as U.N. chief Ban Ki-moon warned the future of the year-old state was tied to developing good relations with former civil war foe Sudan.
The U.N. mission in South Sudan, known as UNMISS, was created after South Sudan seceded from Sudan in July 2011, six months after a referendum agreed under a 2005 peace deal that ended decades of civil war that killed some 2 million people.
Border clashes between the neighbors earlier this year, which culminated with Juba briefly seizing a disputed oil field, threatened to spiral into war until the U.N. Security Council threatened the pair with sanctions in a May 2 resolution.
Ban said in a report to the 15-member Security Council that most of the challenges faced by South Sudan, already one of the world's poorest countries, were "linked in one way or another to the need to cultivate constructive relations with the Sudan."
"South Sudan and the Sudan currently stand at a crossroads and this is a defining moment for both countries," the secretary-general said. "The establishment of good neighborly relations with Khartoum would make it easier for South Sudan to deal with its challenges more effectively."
Sudan and South Sudan are at loggerheads over the position of their border, how much the landlocked south should pay to transport its oil through Sudan, and the division of national debt, among other issues.
Sudan lost 98 percent of its income when it shut down oil production in January after it failed to agree a deal with Sudan to use its pipelines and facilities and Ban said this had led to a looming economic crisis.
Analysts have long said tensions between the neighbors could erupt into a full-blown war and disrupt the surrounding region, which includes some of Africa's most promising economies.
(Reporting by Michelle Nichols; Editing by Doina Chiacu)