By Patricia Zengerle

WASHINGTON (Reuters) - The United States does not believe South Sudan's former Deputy President Riek Machar should return to his former position in its government, given continuing instability in the country, Washington's special envoy for South Sudan said on Wednesday.

Nearly three years ago political rivalry between South Sudanese President Salva Kiir, an ethnic Dinka, and his former deputy Machar, a Nuer, sparked a civil war that has often followed ethnic lines.

The pair signed a shaky peace deal a year ago but fighting continues, including attacks on South Sudanese and foreign civilians. Machar has fled the country.

"Given all that has happened, we do not believe it would be wise for Machar to return to his previous position in Juba," Special Envoy Donald Booth told a U.S. House of Representatives hearing.

"But this cannot become a justification for President Kiir to monopolize power and stifle dissenting political voices," Booth testified to the House Foreign Affairs Committee's Africa subcommittee.

Continuing instability and violence in the African country, which gained independence from Sudan in 2011, has angered U.S. lawmakers. During the hearing, several U.S. lawmakers called for international sanctions to be imposed on individuals blamed for the ongoing violence.

"There must be consequences for those who are found guilty," said Representative Chris Smith, the subcommittee's chairman.

Booth described growing anti-American sentiment in South Sudan. But he said it was not clear that an attack on U.S. Embassy vehicles on July 7 had targeted Americans.

A two-vehicle embassy convoy taking U.S. personnel to their residential compound passed the South Sudan's presidential palace in Juba about 9 p.m. that evening, just an hour after a clash between forces loyal to Machar and President Kiir, the State Department told reporters on Wednesday.

Some soldiers of the South Sudan army approached the U.S. Embassy vehicles outside the palace and attempted to open the door, State Department spokesman Mark Toner said. Feeling threatened, the convoy accelerated away and the soldiers fired on the cars, which were armored so no U.S. personnel were hurt.

Toner said the soldiers were "very tense, and if I could say it, a little trigger happy." One of the embassy vehicles became disabled following the shooting and a contingent of U.S. Marines from the embassy were sent to pick them up and escort them home.

U.S. Ambassador Mary Phee met the following day with Kiir and demanded the government investigate the incident, find those responsible for the shooting and hold them accountable, Toner said. Kiir agreed and the investigation is ongoing, he said.

Toner said the department did not believe U.S. Embassy personnel had been deliberately targeted and it was not clear whether the troops realized they were firing at an embassy vehicle, despite a laminated flag and diplomatic plates.

"We're not forgiving it and we're certainly not overlooking it," Toner said. "They opened fire on an embassy convoy and that is inexcusable. But ... there had been an altercation, fighting, in the run-up to this convoy passing and ... they were very tense."

Booth said Kiir and Machar would not work together to implement a peace agreement or set up security arrangements to prevent a return to fighting, and both lost control of their forces.

Booth was also questioned about the possibility of a U.N. arms embargo against South Sudan.

On Sunday, the government of South Sudan agreed to accept 4,000 extra peacekeepers in a bid to avoid an arms embargo threatened by the United Nations Security Council.

(Reporting by Patricia Zengerle and David Alexander; Editing by Frances Kerry and Diane Craft)