KHARTOUM (Reuters) - U.S. Sudan envoy Scott Gration began crisis talks with political leaders in Khartoum on Thursday after the withdrawal of a presidential candidate threatened to undermine the credibility of coming elections.

Yasir Arman, the candidate for the south's dominant Sudan People's Liberation Movement (SPLM) pulled out of the race late on Wednesday, less than two weeks before voting, citing concerns over election fraud and insecurity in Darfur.

Opposition parties were due to meet later on Thursday to discuss whether to unite in boycotting the vote, a move that would seriously undermine what were supposed to be Sudan's first multi-party elections in 24 years.

The presidential, parliamentary and gubernatorial elections are central to a 2005 peace deal that ended more than two decades of civil war between Sudan's Muslim north and the South, where most follow Christianity or traditional beliefs.

As part of the 2005 peace accord, the SPLM joined incumbent president Omar Hassan al-Bashir's National Congress Party (NCP) in a fragile national coalition government.

The SPLM also said it would boycott all voting in Darfur, the scene of a seven-year conflict, going back on an earlier threat to pull out of the whole vote in the north in solidarity with opposition parties.

Analysts said Arman's withdrawal effectively handed the presidential race to Bashir and could be part of a deal with his northern NCP to guarantee a referendum on southern independence also promised under the peace deal.

NO DEAL WITH BASHIR

But Arman denied any deal, saying there was no point in participating in the April elections and that the NCP had already rigged them for Bashir to win. He urged the opposition to take the same stance as his SPLM party.

"I will encourage them (the opposition) not to give legitimacy to Bashir - to boycott the election especially in Darfur and the presidential election," he told Reuters.

He added the SPLM may still consider a full boycott in the rest of the north if the opposition decided to do so.

If the opposition also decided to boycott the presidential vote, it would derail any claim by Bashir to have been elected in a fully democratic process.

But continued participation in the parliamentary vote could give them some say over the passage of laws or any constitutional changes if they won a fair percentage of the 450 seat national assembly.

U.S. officials, speaking on condition of anonymity, confirmed Gration had flown to Khartoum in reaction to the SPLM move and was planning to shuttle between meetings with leading opposition and government figures.

On Wednesday a joint statement by Washington, Britain and Norway said they were "deeply concerned by reports of continued administrative and logistical (electoral) challenges, as well as restrictions on political freedoms".

But they said "irrespective of the outcome of elections", it was essential the January 2011 referendum go ahead on time.

Sudan's north-south civil war killed 2 million people and destabilised much of east Africa. Darfur's separate conflict has claimed an estimated 300,000 lives in violence Washington has called genocide.

Last year the International Criminal Court issued an arrest warrant for Bashir for war crimes in Darfur. He hopes to defy the court and legitimise his rule with a win in April's polls.