The UN has proposed Yemen's Huthi rebels withdraw from Hodeida as part of a ceasefire deal placing the flashpoint port city under joint control, according to a document seen by AFP Monday.
The area would then be put under the control of a joint committee and supervised by the United Nations. The document does not propose the deployment of UN peacekeeping troops.
The government was expected to issue a formal response to the proposal "soon", state representative Hadi Haig told AFP.
"The special envoy's paper is under study. The response will come soon, God willing," Haig said on the sidelines of the talks.
Huthi representative Salim al-Moughaless said the rebels would only consider a withdrawal as part of a full political solution to the conflict.
"The discussion is long and ongoing," Moughaless told AFP.
A UN official in Rimbo was not immediately reachable for comment.
Yemen's Saudi-backed government and the rebels, linked to Riyadh's arch-rival Iran, convened in the rural village of Rimbo, Sweden on Thursday for what is expected to be a week of talks on a war that has killed upwards of 10,000 people in less than four years.
The Hodeida proposal is a significant step closer to the demands of President Abedrabbo Mansour Hadi, whose government was driven out of the capital in a rebel takeover in 2014 that included the seizure of Hodeida -- the most valuable port in a country now on the brink of famine.
The Red Sea city has since June been at the heart of a government offensive to drive the rebels out. The destruction of the port city would worsen the humanitarian crisis in Yemen, where the UN estimates 14 million people face starvation.
Shipments to Hodeida, including humanitarian aid, have been severely restricted by the coalition. Huthi fighters are now ensconced in residential neighbourhoods to hold off government forces.
The UN has regularly urged the Saudi-led coalition to suspend operations in the densely-populated city, home to 150,000 people and a vital conduit for aid across Yemen.
The government accuses the rebels of smuggling arms from Iran through Hodeida and has demanded the rebels withdraw unilaterally from the area. The Huthis refuse. Both parties have said they would accept UN supervision of the port if it were under their sole control.
Speaking on condition of anonymity, a UN official in Rimbo on Saturday said Hodeida had proved the "most difficult" issue at the meetings, the first since more than three months of talks collapsed in 2016.
Among the other issues under discussion are humanitarian corridors, a prisoner swap and the reopening of the defunct Sanaa international airport.
The Huthi takeover of Hodeida, a traditional conduit for 90 percent of food imports to impoverished Yemen, sparked the intervention of Saudi Arabia and allies on behalf of the government the following year.
The 2015 intervention is widely seen as a turning point in the war, the trigger of what the UN calls the world's worst humanitarian crisis.
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