US officials said on Sunday that Washington would remove Sudan from its list of state sponsors of terrorism by July 2011 if the referendum in Abyei region was held on time on Jan. 9, when southern Sudan is due to vote on whether to become an independent nation.

Both referendums were promised under a 2005 north-south peace deal ending Africa’s longest civil war. But arrangements for the Abyei vote on whether to join north or south Sudan are hotly contested by the two former warring sides, raising fears that it would be delayed and provoke a new conflict.

The dispute centers on the Missiriya people, Arab nomads who travel through Abyei a few months a year to graze their cattle.

The northern ruling National Congress Party (NCP) believes they should vote whereas the former southern rebel Sudan People’s Liberation Movement (SPLM) says the tribe as a bloc are not resident and cannot participate in the Abyei referendum.

Ibrahim Ghandour, a senior NCP official, made clear the deadlock stands which means Abyei’s vote is unlikely to happen on time.

“No prize on earth, the terror list ... or whatever will persuade the NCP to accept that the Missiriya or any other people of Abyei be denied their rights to participate in the referendum,” he told Reuters.

Many of the Missiriya were mobilized by the NCP to fight against the south during the civil war. They are likely to vote for unity to protect their grazing rights, possibly tipping the vote in the region.

Many people fear that Abyei, a flashpoint of north-south fighting during a cease-fire violation in 2008, will provoke a new conflict if it is unresolved before the southern vote, which most analysts expect to result in secession.

The SPLM have said a settlement could be reached by annexing Abyei to the south, giving the Missiriya citizenship rights and offering a financial compensation package to the north to soften the economic blow of southern secession.

More than half of Sudan’s oil output of 470,000 barrels per day comes from the south which will want to keep the full proceeds if it becomes an independent state.

“There is no way to annexe Abyei to the south without a referendum,” Ghandour said, but he added that the NCP was open to some form of settlement if it protected the rights of all citizens of the oil-producing region.

Preparations for the southern referendum have also been delayed and the commission planning the vote has cut many corners to prepare a tight schedule with voter registration beginning on Nov. 15.

Distracted by Abyei, the two sides have largely neglected other pressing disputes over defining citizenship, demarcating the north-south border and dividing Sudan’s assets and a massive external debt of more than $36 billion.

Sudan’s north-south conflict claimed some 2 million lives mostly through hunger and disease and destabilized much of east Africa.