Simon Kitra's back garden looks out over the world's second-largest freshwater lake. His front lawn opens onto the world's longest river. If the 20-year-old Ugandan fisherman needs reminding of where his tiny island is, he can look up to the pink obelisk on the hillside, marking where the British explorer John Hanning Speke, sextant in hand, stood in 1862 to ascertain the point where Lake Victoria begins to empty — the source of the Nile.

The water that sustains Kitra – he drinks it, bathes in it, and eats and sells the fish which swim in it — slips gently and quietly past his canoe on its three-month, 3,470-mile journey to the Mediterranean. But at night, when he listens to his radio before casting his nets, news of the Nile's future is all anger and recriminations, stretching from its most remote headwaters in Burundi all the way to Egypt.

For a decade the nine states in the Nile basin have been negotiating on how best to share and protect the river in a time of changing climates, environmental threats and exploding populations. Now, with an agreement put on the table, talks have broken down in acrimony. On one side are the seven states that supply virtually all the Nile's flow. On the other are Egypt and Sudan, whose desert climates make the Nile's water their lifeblood. "This is serious," said Henriette Ndombe, executive director of the intergovernmental Nile Basin Initiative , established in 1999 to oversee the negotiation process and enhance co-operation. "This could be the beginning of a conflict."

The sticking point between the two groups is a question going back to colonial times: who owns the Nile's water? Kitra's answer – "It is for all of us" – might seem obvious. But Egypt and Sudan claim to have the law on their side. Treaties in 1929 and 1959, when Britain controlled much of the region, granted the two states "full utilisation of the Nile waters" – and the power to veto any water development projects in the catchment area in east Africa. The upstream states, including Ethiopia, source of the Blue Nile, which merges with the White Nile at Khartoum, and supplies 86% of the river's eventual flow, were allocated nothing.

However debatable its claim under international law, Egypt strongly defends it, sometimes with threats of military action. For decades it had an engineer posted at Uganda's Owen Falls dam on the Nile, close to Kitra's island, monitoring the outflow.

But in a sign of the growing discord, Uganda stopped supplying the engineer with data two years ago, according to Callist Tindimugaya, its commissioner for water resources regulation. And when Egypt and Sudan refused to sign the agreement in April on "equitable and reasonable" use of the Nile unless it protected their "historic rights" the other states lost patience. Isaac Musumba, Uganda's state minister for regional affairs, and its Nile representative, said: "We were saying: 'This is crazy! You cannot claim these rights without obligations'." Minelik Alemu Getahun, one of Ethiopia's negotiators, said all the upstream states saw the move by Egypt (Sudan has a more passive role) as "tantamount to an insult".

Ugandans endorse this stance. Ronald Kassamba, 24, scything grass along the banks of the Nile near Jinja, 50 miles from the capital Kampala, said: "Egypt is being very unfair. We have the source, so we should also be able to use the water."

Convinced that from their point of view there was no purpose in more talks, Uganda, Ethiopia, Rwanda and Tanzania signed a "River Nile Basin Co-operative Framework" agreement in May. Kenya followed, and Burundi and the Democratic Republic of Congo look likely to do so – causing alarm and anger in Egypt. When parliaments in six states ratify the deal, a permanent commission to decide on water allocation will be set up – without the two states that need the river most.

Opposition by the upstream states to the colonial treaties is not new. Ethiopia was never colonised, and rejected the 1959 bilateral agreement that gave Egypt three-quarters of the Nile's annual flow (55.5bn cubic metres) and Sudan a quarter, even before it was signed. Most of the east African states also refused to recognise it, and earlier Nile treaties agreed by Britain on their behalf, when they became independent in the 1960s.

A combination of factors, including instability, poor governance, financial constraints and the availability of other water sources, meant the matter remained dormant. It was in the 1990s that various governments seriously started to consider using their Nile Basin waters to generate energy and irrigate crops. But when funding applications were made to the World Bank and others, problems arose. "Our development partners would always ask what other countries on the Nile were saying," said John Rao Nyaoro, Kenya's director of water resources. "We needed a clearing house for these projects," which will be a function of the Nile commission.

Officials in Kenya, Uganda and Ethiopia, which all have significant, if increasingly unreliable, rainfall, do acknowledge Egypt's huge dependence on the Nile and its right to a large part of its flow. But they say it is unreasonable to ask them to leave a valuable resource untouched, as the demand increases due to the changing climate and, especially, population growth. Egypt's population of 79 million is expected to reach 122 million by 2050, according to the Population Reference Bureau . But in the upstream states the growth is even faster. There are 83 million Ethiopians today, but in 40 years there will be 150 million. In Uganda, where the average number of children per woman is 6.7, one of the highest in the world, the population is due to more than triple over the same period to 97 million. For Uganda, the priority for now is electricity, and it wants to build more dams.

Ethiopia has begun a hydropower development, opening a dam at Lake Tana, the Blue Nile's source, and is in talks with Egypt and Sudan to build several more dams on the river. The electricity will be shared among the states – the mutual benefit envisaged when the Nile Basin Initiative was established. But Ethiopia also plans large irrigation schemes, which it says are essential for food. Tanzania has also talked of tapping Lake Victoria to supply dry villages in its north-west.

Under the agreement signed by five countries, each state's share of the Nile Basin water will depend on variables such as population, contribution to the river's flow, climate, social and economic needs, and, crucially, current and potential uses of the water – a factor which will heavily favour Egypt and Sudan.

The disputed article, in which Egypt and Sudan want their historic rights guaranteed and the other governments prefer to a clause where each nation agrees "not to significantly affect the water security of any country" – has been left out of the agreement, for further discussion.

This, the upstream states hope, leaves the door open for Egypt and Sudan to join them before the one-year signing period closes.

"Diplomacy will help us navigate this issue," said Musumba, the Ugandan minister, playing down any talk of conflict.

"What it is Egypt going to do – bomb us all?"

Water treaties

Agreements over the Nile's water date back to the late 19th century when Britain, which controlled Egypt and Sudan, signed deals with other colonial powers and with Ethiopia to guarantee the river's unimpeded flow. But, in 1929, a bilateral treaty went further. Egypt, which by then enjoyed nominal independence, and Britain, acting on behalf of Sudan and its other colonies around Lake Victoria, signed an agreement on water rights. It reserved the entire dry season flow of the Nile for Egypt and allowed Cairo to veto any water development project in the Nile basin .

In 1959, Egypt and the newly independent Sudan signed a deal that gave them "full utilisation of the Nile waters". Using the river's annual average flow of 84bn cubic metres of water, it was agreed that Egypt had the right to use 55.5bn cubic metres a year, with Sudan's share at 18.5bn cubic metres. The other 10bn cubic metres was reserved for seepage losses and evaporation in Lake Nasser, behind the Aswan dam. Upstream countries were not allocated a share.