The power-sharing deal would see the secessionist Southern Transitional Council (STC) handed a number of ministries, and the government return to the main southern city of Aden, say officials.
The UAE, which had already in June scaled down its military presence in Yemen, says it will continue fighting "terrorist organisations" in southern provinces and other areas.
Russia's Vladimir Putin may seize an opening in the Gulf to exert his influence as regional and global alliances fray around the edges.
Talks between Saudi-backed government and UAE-backed separatist rebels reach a dead-end as both sides gather troops to prepare for further battles deepening rift between Riyadh and its ally Abu Dhabi.
The deepening rift between the UAE and Saudi Arabia in Yemen threatens to make the war in Yemen even messier.
The Saudi-led coalition says it attacked an area in Aden that allegedly poses a "direct threat" to the Saudi-backed government of Abd Rabbu Mansour Hadi. The separatists began withdrawing shortly after.
Reports about a military drawdown come at a time when the UAE is deeply involved in the complex conflict and faces global scrutiny over its role.
Yemen's prime minister is reportedly preparing to flee to Saudi Arabia. Separatists have seized much of the interim capital Aden in the last few days. Here's a look at what's been happening in the war-ravaged country.
Tension has been running high in Aden since the separatist Southern Transitional Council (STC) called for sacking the government of Prime Minister Ahmed bin Daghr. The STC has accused the government of pushing the country to the verge of famine.
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