* Crisis between president and deputy long festered
* Bush war tactics trumping statesmanship
* Fighting exposes failure of national reconciliation
* Generous donors find limited traction over rivals
By Carl Odera and Edmund Blair
JUBA/NAIROBI, Dec 24 (Reuters) - At a well-attended investor  conference in South Sudan's capital just three weeks ago,  President Salva Kiir declared that the world's newest country  was "at last safe" and open for business.
It was a bold assertion from a nation that only gained  independence from Sudan in 2011 after decades mired in conflict.  It suggested the moment had come to cap a huge international  effort to build a state. But it proved spectacularly ill-timed.
On Dec. 15, fighting erupted in Juba that has swiftly spread  beyond the capital along ethnic faultlines, exposing the failure  of national reconciliation efforts, the limited influence of  generous foreign sponsors and the reluctance of rebel  fighters-turned-statesmen to give up the tactics of bush  conflict.
Whether South Sudan tips into a broader ethnic war or draws  back from the brink largely depends on two men who have long  tussled for power: the president from the dominant Dinka tribe  and the ambitious deputy he sacked in July, Riek Machar, a Nuer.
Both ethnic groups, spurred on by their leaders, have  clashed in the past, giving the latest spiral of violence an air  of depressing inevitability for many South Sudanese, desperate  for development in one of the poorest places in Africa.
"Neither cares much about their people," said Chuo, who  repairs motorbikes in Juba. "Instead, they are focusing too much  on personal grudges - the left-overs from their old days."
The United States and other Western backers of the new  nation are scrambling with regional African states to broker  talks, but have limited leverage to end fighting that has killed  hundreds of people and driven 40,000 to U.N. bases for shelter.
Failure to halt the escalation could have wider fallout in  an already volatile region. Sudan may be drawn in if there is a  threat to oil fields from which it derives vital fees from  pumping crude across its land. And other neighbours fret about a  descent into chaos. Uganda has already sent troops to Juba.
Both leaders say they are ready to talk. But old habits die  hard. Kiir said he was the target of a "foiled coup" and rounded  up rivals. Machar slipped away and has mustered militia forces.
"I am in the bush, and I am trying my best to have a better  negotiating position," Machar, 61, who holds a doctorate from  Britain's University of Bradford, told Reuters on a crackly  mobile phone line from an undisclosed location.
MISSED OPPORTUNITIES
The international community has poured in billions of  dollars of aid and sent in a myriad of advisers to build the new  state. But it has been unable to fix the dysfunction that has  festered at the top of government and which came to a head in  the summer when 62-year-old Kiir dismissed his vice president.
"Opportunities were certainly missed to engage in more  robust preventive diplomacy over the past few months as the  political crisis began gathering momentum," said John  Prendergast, member of a U.S. group of intellectuals that  cajoled Washington to back South Sudan's split from Sudan.
In spite of Kiir's confident comments launching the Dec. 4-5  investment conference, a showdown had long been brewing with  Machar, who has made no secret of his presidential ambitions.
For almost a year before Machar's dismissal, the two men's  relationship in office was defined by "miscommunication or  mistrust or silence", said former culture ministry  undersecretary Jok Madut Jok, who left his post in April.
The powerplay caused stasis in government, and most  worryingly derailed crucial efforts to build a programme of  national reconciliation between bigger ethnic groups, such as  Dinka and Nuer, and the dozens of others that have long clashed  over control of the south's scant resources.
Jok, now chairman of the Sudd Institute think-tank,  described how Machar formed a committee to draw up a "practical,  scientific" plan to rebuild ethnic relations, only to have it  disbanded by Kiir, who put church leaders in charge to "focus on  praying away the woes of South Sudan and nothing more."
Those who know the two men give similar accounts of the two  characters on whose shoulders so much rests.
Kiir, largely educated in the bush, has patched up militia  rivalries to hold together the brittle SPLM/SPLA that fought  Sudan and now runs the south. But they say he lacks the vision  of his predecessor, John Garang, who died in a helicopter crash  in 2005, the year a peace deal was signed with Sudan.
Machar, his acquaintances say, is a highly intelligent rival  whose political ambitions tend to trump any national agenda. He  led a splinter SPLA group in 1991 and his Nuer troops massacred  Dinkas in Bor town that year. In 1997, he signed a unilateral  deal with Khartoum that gave him an official post in Sudan.
"Anything short of the two men sitting down and trying to  work it out will not work," said Jok.
But bringing the two together for now has hit deadlock.  Kiir's government has refused to release the group of rival  politicians he detained. Machar says they must be freed as they  are the ones who will handle any negotiations.
SHIFTING LOYALTIES
Much may depend on Kiir's reputation as a conciliator, often  bringing in rival militias even though it could mean putting  political influence before competence in government.
"Kiir has always said that he doesn't want his people to  turn back again to war," said Foreign Minister Barnaba Marial  Benjamin, citing the president's past talks with opponents. "We  talked to them and they were absorbed into our government."
Eric Reeves, a fellow American activist for South Sudan with  Prendergast, said Machar needed to be convinced that prolonging  any ethnic conflict would mean he would lose U.S. or other  Western support. "But there is no real leverage," he said.
The United Nations plans to beef up its peacekeeping force  in South Sudan, where the Akobo U.N. base was overrun and looted  by Nuers who are blamed for killing 11 Dinkas sheltering there.
But the patchwork nature of the SPLA army and shifting  loyalties means there is little chance of turning the UNMISS  force into a robust intervention brigade like the one that  quelled a rebellion in next door Democractic Republic of Congo.
"If you don't know where your enemy is coming from, or who  your enemy is, it doesn't really matter how heavily armed you  are," said Reeves.
U.S. President Barack Obama said on Saturday that any  military effort to seize power would end U.S. backing. His  envoy, Donald Booth, was in Juba on Monday talking with Kiir.
Fighting has already reached oil fields, near Sudan's  border, cutting output by 45,000 barrels per day (bpd) to  200,000 bpd. That hurts flows that are the source of 98 percent  of land-locked South Sudan's revenues.
It is also vital to Sudan, which lost the fields when the  south seceded but relies on fees from oil going through its  pipeline to the Red Sea. A row over undefined borders, oil fees  and security brought the new neighbours close to war last year.
A South Sudanese academic, who asked not to be named, said  Sudan could move on the fields if the fall in revenues started  to bite and would worry about the deployment of troops from  Uganda, which supported the south's SPLA in the war with  Khartoum. Ugandan army sources said the troops would help secure  Juba.
Jok said Washington and its allies might have steered South  Sudan on a safer course if a pell-mell rush to support the new  nation had come with more state-building conditions earlier.
"You might even say they (the international community) did  too much to let these leaders off the hook from their  responsibility to steer their country to stability," he said.
But like others, he said the blame largely lies with the  leaders, who have failed to make the transition from liberation  warrior to politician, squandering international goodwill.
"We thought our troubles were over after we won our freedom  from Sudan," said Peter, a Nuer who gave only his first name as  he sheltered in a U.N. base in Juba. "It's now a problem of  South Sudanese people killing their fellow South Sudanese."     (Additional reporting by Aaron Maasho in Juba and Drazen Jorgic  in Nairobi; Writing by Edmund Blair; Editing by Peter Graff)
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Reuters | Posted: 12/24/2013 6:05 am EST | Updated: 12/24/2013 1:55 pm EST