Yemen's internationally recognised government on Tuesday (local time) signed a Saudi-brokered power-sharing deal with the southern separatists aiming to quell a new front to end the country's civil war.
The signing was broadcast on Saudi Arabia's state TV, which did not reveal any details of the agreement, Voice of America News reported.
"This agreement will open a new period of stability in Yemen. The kingdom of Saudi Arabia stands with you," Saudi Crown Prince Mohammed bin Salman said during the signing ceremony in Riyadh.
Both the government and the separatists are part of a Saudi-led coalition fighting Yemen's Houthi rebel group.
The warring factions in recent weeks held indirect talks mediated by Saudi Arabia in the kingdom's western city of Jeddah, which culminated in the deal signed in Riyadh.
Both Yemen's President Abedrabbo Mansour Hadi and STC leader Aidarous al-Zoubeidi attended the ceremony.
The United Arab Emirates which backed the southern separatists has been a key member of the anti-Houthi coalition. Its support for the separatists had threatened to further complicate the dangerous situation throughout the war-ravaged country.
The UN special envoy for Yemen, Martin Griffiths, congratulated the two sides on the deal which he said would propel efforts to end the wider civil war that has devastated the country.
"The signing of this agreement is an important step for our collective efforts to advance a peaceful settlement to the conflict in Yemen," he said in a statement.
"Listening to southern stakeholders is important to the political efforts to achieve peace in the country," he added.
The Houthis seized the Yemeni capital in 2014, followed by Saudi-led coalition airstrikes against the rebels. The strikes have obliterated entire civilian neighbourhoods, killing thousands and aggravating what was already a humanitarian crisis in one of the world's poorest nations.
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