Yemen's Saudi-backed government and southern separatists are close to a deal that would end a power struggle in the southern port of Aden and see Saudi forces take temporary control of the city, three sources familiar with the negotiations said.
Saudi Arabia, leader of an Arab coalition battling Yemen's Houthi movement, has been hosting indirect talks for a month between the government of Abd-Rabbu Mansour Hadi and the Southern Transitional Council (STC) to end the stand-off that had opened a new front in the multi-faceted war.
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STC is part of the Sunni Muslim alliance that intervened in Yemen in March 2015 to restore Hadi's government after it was ousted from power in the capital, Sanaa, by the Houthis. But the separatists, who seek self-rule in the south, turned on the government in August and seized its interim seat of Aden.
STC forces, which are armed and trained by Riyadh's main coalition partner, the United Arab Emirates, tried to extend their reach in the south, clashing with government forces in violence that risked further fragmenting the Arabian Peninsula nation and complicating United Nations peace efforts.
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Two Yemeni government officials told Reuters that Saudi Arabia submitted a proposal to include STC in Hadi's government, while Saudi troops would deploy in Aden to oversee formation of a neutral security force in the city.
"There is progress in the Jeddah talks. The conversation is still ongoing and it is about bringing STC into the government, de-escalating tensions and redeployment of forces," a third source familiar with the talks said on Monday.
The STC's Security Belt forces tweeted on Monday that an agreement could be signed in Jeddah in the next few days.
The third source said resolving the Aden stand-off, which had fractured the Western-backed coalition, was needed before the coalition officially responded to a Houthi offer to halt missile and drone attacks on Saudi cities if the alliance did the same.
The Iran-aligned Houthi group, which controls Sanaa and most big urban centres, extended the offer last month after claiming responsibility for attacks on Saudi oil facilities on Sept. 14 that Riyadh blamed on Iran, a charge Tehran denies.
Riyadh has said it views the truce offer "positively".
Easing Saudi-Houthi tensions and resolving the Aden crisis would bolster U.N. efforts to pave the way for peace talks on a political framework to end the war that has killed tens of thousands and pushed millions to the brink of famine.
The UAE in June reduced its military involvement in Yemen as Western criticism of the war mounted and as heightened tensions with Iran raised security concerns closer to home, saddling Riyadh with the conflict that is widely seen in the region as a proxy war between Saudi Arabia and Iran.
Abu Dhabi, though, retains influence via tens of thousands of Yemeni forces, including southern separatists, it helped build to fight the Houthis and Islamist militant groups in Yemen.
Hadi's government has repeatedly asked Abu Dhabi to stop supporting the STC, which accuses the government of mismanagement and wants a say in Yemen's future.
The UAE, which launched air strikes on government forces when they tried to retake Aden, distrusts an Islamist party allied to Hadi and criticised his government as "ineffective".
The war, which has been in military stalemate for years, has revived old strains between north and south Yemen, separate countries that united into a single state in 1990.
The Houthis, who say they are fighting a corrupt system, point to Aden as proof that Hadi is unfit to rule.