The long-running dispute between Starbucks and Ethiopia looked headed for a resolution today after the two sides said they had reached an outline agreement that recognises Ethiopia's ownership of its premium coffee brands.

The announcement is potentially a major victory for the impoverished East African country which had been thwarted by the Seattle-based coffee giant in its attempts to gain a higher price for its premium coffees, bringing its coffee farmers tens of millions of dollars extra each year.

Officials from both parties said that after two days of talks they had agreed in principle to sign a licensing, distribution and marketing agreement that recognises the importance and integrity of Ethiopia's specialty coffee names - Harar, Sidamo and Yirgacheffe.

This agreement would help expand their ongoing collaboration to market and sell Ethiopia's exceptionally high quality coffees, they said.

Details, including the price Starbucks will pay for Ethiopian coffee, will be revealed later this month.

"Ethiopia is firmly committed to work in partnership with all international specialty coffee companies and distributors of its fine coffees, including Harar, Sidamo and Yirgacheffe," said Getachew Mengistie, head of the Ethiopian Intellectual Property Office.

"We realise our approach to trademarking and licensing these coffee brands that originate in and represent the best of Ethiopia's coffee heritage is a new approach that not only meets the needs of small Ethiopian fine coffee farmers and traders but also the coffee roasting and distributing companies and their customers.

Starbucks chairman Howard Schultz said: "Ethiopia is recognized as the historic birthplace of coffee and the source of some of the finest coffee in the world.

"We're extremely excited to continue to deepen our relationship with the government of Ethiopia."

Oxfam, which launched a campaign against Starbucks last October because of its effective blocking of Ethiopia's attempts to trademark its premium coffee beans in the US, welcomed the news.

Phil Bloomer, director of campaigns, said: "In just seven months, more than 93,000 people worldwide have joined us in calling on Starbucks to sign this agreement.

"They will be joining us in waiting for the final agreement to be signed and in examining the details to make sure it offers the best possible deal for Ethiopia's coffee producers.

"This action by Starbucks could represent a huge step towards a real positive change for the 15 million Ethiopians who depend on coffee for their livelihood.

"The eyes of Africa will be on this agreement, which could even set a precedent for further deals beyond Ethiopia in the future."

Ethiopia has already managed to license the trademarks of its premium coffees in Canada, the European Union, and Japan.

A marketing plan aimed at further raising the profile of the Sidamo, Harar and Yirgacheffe brands on the international market is also underway.

The goal of the trademarking initiative is to help Ethiopia's coffee sector - including farmer cooperatives - earn more from its valuable coffee brands, increase its negotiation leverage through control of the marks, and ultimately increase the price received for its best coffees.

Oxfam estimated last year that the trademarking initiative could earn Ethiopian coffee farmers up to an extra £47m a year.

Ethiopia will be able to protect the valuable reputation of its coffees and enable poor growers to capture a greater share of the retail price.

Ethiopian farmers currently receive about $1.10 (55p) per pound of coffee they grow. Coffee retailers can make 52 espressos from a pound of the same coffee, worth up to $160.