Sudan's defence minister, who is wanted for alleged war crimes in Darfur, said on Wednesday that improving relations with South Sudan will help to "end" a decade-old rebellion in the western region.

"The implementation of the cooperation agreements with South Sudan will affect security in Darfur," Defence Minister Abdelrahim Mohammed Hussein said in a national security briefing to parliament.

"It will give us a chance to surround the insurgents and help us to end the rebellion."

Ethnic minority rebels in Darfur rose up against the Arab-dominated Khartoum government in 2003.

While the worst of the violence has long passed, rebel-government battles continue but instability has been complicated by inter-Arab fighting, kidnappings, carjackings and other crimes, many of them suspected to be the work of government-linked militia and paramilitary groups.

Hussein said government troops expect to move soon against rebels who have made a rare occupation of two towns in South Darfur.

The African Union-United Nations Mission in Darfur (UNAMID) has confirmed that insurgents on Saturday "attacked and seized" Muhagiriya and Labado, about 100 kilometres (62 miles) east of the South Darfur state capital Nyala.

Peacekeepers also reported "several possible air strikes" in the area.

The fighting may have uprooted more than 20,000 people, a humanitarian source told AFP.

In February, a United Nations panel of experts reported that, despite government denials, "aerial bombardment continues to be used on civilian areas and/or to indiscriminately affect civilians" in Darfur, violating UN resolutions.

An extended rebel occupation of an area is unusual as they normally stage hit-and-run attacks.

"Now our troops are 25 kilometres from Muhagiriya and in the coming days there will be good news," Hussein said. "We are preparing for our battle with the rebels."

Abdullah Moursal, spokesman for the Sudan Liberation Army's Minni Minnawi faction, confirmed his forces still held the towns on Wednesday.

He called it a "strategic area" and said the rebels were preparing for "the second step" which he did not specify.

The defence minister said rebels were able to take over Muhagiriya and Labado because the military has since February been securing convoys of fuel and goods to the state capital.

"Yesterday the last convoy arrived in Nyala," he said.

There have been fuel shortages in the town for about three weeks, and prices of food are high, a Nyala resident told AFP.

The Hague-based International Criminal Court issued a warrant for Hussein's arrest in March last year on 13 counts of crimes against humanity and war crimes.

South Sudan became independent from the north two years ago following a near-unanimous referendum vote for separation after a 1983-2005 civil war.

Independence left key issues unresolved, and the two nations battled on their undemarcated border one year ago, raising fears of wider war, until tensions began to ease last month following agreements reached in Ethiopia.

The deals include a demilitarised border buffer zone, aiming to cut cross-border rebel support.

The UN's expert panel said it had "clear and compelling evidence" that rebels from Darfur's Justice and Equality Movement (JEM) last year used a base in South Sudan.

JEM called the accusation false.

In a briefing paper released on Wednesday the Small Arms Survey, a Swiss-based independent research project, said Darfur's conflict had been increasingly complicated by tensions along the border with South Sudan.

An alliance of rebel splinter groups, and a faction of JEM, have signed a Darfur peace deal with the government but the main insurgents reject the pact.

"After more than a decade of turmoil, resolution of the Darfur conflict remains a distant prospect," Small Arms Survey said.