Sudan said on Friday its forces had chased South Sudanese troops out of its main oilfield as the South ordered an end to its 10-day occupation, a move which had sparked fears of a wider war.
"They started the fighting and we will announce when it will end, and our advance will never stop," Sudanese President Omar al-Bashir told a rally attended by thousands in the capital.
He dismissed a statement by his Southern counterpart Salva Kiir that the occupying troops would begin a three-day withdrawal from the Heglig area.
"There is no withdrawal. We beat them by force... Even now, their people are running," Bashir, wearing an olive army uniform, said at military headquarters.
The Southern army spokesman, Colonel Philip Aguer, said late Friday that his soldiers were still in the main oilfield.
"Khartoum is making a false celebration," he insisted.
While religious leaders in the north were calling during Friday prayers for a holy war to reclaim the territory, South Sudan's Information Minister Barnaba Marial Benjamin gave the first word that the crisis, which had sparked fierce international diplomacy to stop the conflict from spreading, was easing.
"An orderly withdrawal will commence immediately and shall be completed within three days," he said, reading a presidential statement.
Shortly afterwards, Khartoum's Defence Minister Abdelrahim Mohammed Hussein announced on state television that his soldiers "were able to liberate Heglig town by force."
The news sparked the biggest celebration in years in Khartoum, with motorists honking horns, waving flags, and shouting "Allahu Akbar!" (God is greatest).
The United States said South Sudan's decision to pull out was "good news," but it still had to be implemented.
State Department spokeswoman Victoria Nuland repeated a call for Sudan to halt cross-border attacks, "particularly the provocative aerial bombardments".
Bashir's war rhetoric has sparked concern from Washington. On Wednesday he called for the overthrow of the "insect" Juba government.
Border clashes between Sudan and South Sudan escalated last week with waves of air strikes hitting the South, and Juba seizing the Heglig oil hub on April 10.
Aguer said his soldiers beat back a Sudanese counter-attack, backed by air strikes, late on Thursday.
Until Hussein's announcement, Sudan's army had maintained silence for several days. It did not allow journalists or other observers into the area, meaning the situation has been difficult to verify.
Juba resisted calls by international powers to pull back its forces, insisting it would withdraw only after Khartoum removed its troops from the neighbouring contested region of Abyei.
On Thursday, United Nations chief Ban Ki-moon condemned the South's taking of Heglig as an "illegal act."
Juba maintained on Friday that Heglig was its territory and it asked for international arbitration.
Sudan's UN envoy said on Friday that the South Sudanese leaders act with "the mentality of guerrillas," despite having already won independence, but they must now negotiate to avoid new conflict.
The foreign ministry set four conditions for "normal" relations with the South, including an end to support for rebels inside Sudan. The South has denied such backing.
Rebels in Sudan's Blue Nile on Friday said they had killed 79 government troops and militiamen in two ambushes in the ethnically divided state.
Despite its seizure of Heglig, South Sudan maintained it wanted peace. It claimed the Heglig region was being used by Khartoum as a base to attack the South's oil-producing Unity state.
Kiir's statement said that Khartoum had to end its "air bombardments and ground incursions" into South Sudan.
Since the invasion, production at Heglig has been shut and facilities there are leaking. Each side accused the other of damaging the oil infrastructure.
The Heglig violence was the worst since South Sudan won independence in July after a 1983-2005 civil war in which some two million people died.
Tensions have gradually mounted over the disputed border and other unresolved issues.
Bashir late Friday said he would not let the South export its oil through Sudan's pipeline. The two sides have been unable to agree on how much Juba should pay to use the infrastructure.
"South Sudanese oil will not go through our land," he told a rally.
Elsewhere, peacekeepers in Sudan's Darfur expressed concern that rebels were exploiting the Sudan-South Sudan border fighting.
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