Senior officials in President Abd-Rabbu Mansour Hadi's government said the move undermined diplomatic efforts to end a devastating civil war that has drawn in a Saudi-led Arab coalition and caused a humanitarian crisis.

"The Houthi and Saleh declaration today is a message to the world that they are not ready for peace and are not ready to spare Yemen more destruction," Hadi's deputy prime minister, Abdel-Aziz al-Jubari, told Dubai-based al-Hadath TV.

The announcement by the Iranian-allied Houthis and Saleh's General Peoples' Congress Party (GPC) could unravel an already shaky ceasefire that took effect in April and had reduced the intensity of the conflict.

The talks under way in Kuwait had shown no sign of headway on U.N. peace proposals including a Houthi withdrawal from cities including the capital Sanaa captured since 2014 and the creation of an inclusive, more democratic government.

A statement carried by the Houthi-run sabanews.net news agency said the new council would entail a rotating leadership including a president and a deputy from each ally.

It said the deal was signed by GPC deputy head Sadeq Abu Ras and the Houthis' Ansarullah political council chief, Saleh al-Samad, and outlined a basis for running the country and managing state affairs on the basis of the existing constitution.

Houthi forces and Saleh loyalists now hold most of Yemen's northern half while Hadi's forces share control of the rest with southern separatists and various tribes, with al Qaeda-affiliated militants operating in parts of the country.

The accord as quoted by the sabanews.net cited what it called the international community's failure to rein in the "arrogance of the Saudi aggression" as an important factor in the decision to ditch the peace talks.

Saudi Arabia has said it intervened in the war to try to restore Hadi to power after Houthi forces began advancing on his temporary base in the southern port city of Aden last year, and to roll back Houthi gains. The Houthis say Saudi-led air strikes have devastated Yemen and blame them for most civilian deaths.

The war has killed more than 6,400 people, nearly half of them civilians, and displaced more than 2.5 million.

The Houthis had been overseeing regions they controlled via a so-called Revolutionary Committee with GPC participation.

It would now be replaced by a "High Political Council" comprising 10 members equally divided between the Houthis and GPC to "manage the country's affairs" in all political, military, economic and administrative spheres. Its presidency and vice-presidency would be rotated between the two allies. 

-Reuters