Although the story recorded here is not found in the Pāḷi Canon, nor to my knowldege, anywhere in the Canonical texts of the other schools, it has a certain verisimilitude that gives it some authenticity. At the very least it is hard to think that it has been made up by fablers.
It is found in several places in the Pāḷi Commentarial texts. It forms the basis for the Story of the Cuckoo, which is what is translated here; then it is told in more or less the same words as the Introduction to the Mahāsamayasutta of the Dīghanikāya (also in the Commentary to a shorter version of that Discourse found in Sagāthavagga, SN 1.37); and in abbreviated form in the Dhammapada Commentary to verse 197, which opens the Sukhavagga.
The story, which is of resource shortages is, in our days, very topical. There is a river dividing two clans, one of whom is the Buddha’s own Sākiyan clan. The supply of water from the river is drying up at the end of the Hot Season, and the two clans, who normally have enough to share the water, start to argue and want to keep all the remaining water for themselves alone.
The Buddha sees what is happening and out of compassion decides to go and tell some moral stories to the potential protagonists, pointing out the disastrous consequences of conflict and the benefits of harmony. Although the two sides are angry with each other as soon as they see the Buddha they give up the fight; and after he has instructed them they are even more convinced and offer their sons up to the Sangha.
It wouldn’t be hard to substitute ‘oil’ for ‘water’, and ‘nations’ for ‘clans’ and we would have a turned an old tale into a modern drama. One of the main morals of the story, and one that cuts deep, is that water is never worth more than blood; and nor is oil, of course, a lesson that would be well-learned if it were applied today.
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Between Kapilavatthu and Koliya, the capital cities of the Sākiyans and the Koliyans,  it seems, there was a river named the Rohiṇī. Having bound the river in with a dike  they grew their crops. Then in the month of Jeṭṭha,  when the crops were withering away, the workers from both cities assembled together.
There those who dwelt in Koliya city said: “This water is not enough for both you and us to carry away, but our crops will mature with a single watering, therefore give us this water.”
Those who dwelt in Kapilavatthu city said: “After you have filled your stores, taken our red gold, blue jewels and black coins, we will not be able, with hand-baskets and sacks in our hands, to wander to the doors of your houses, but our crops will mature with a single watering, therefore give us this water.”
“We will not give!”
“We will not give either!”
After the quarrel had grown one of them rose up and gave another a blow, and he gave a blow to another, thus after striking one another, and offending against the birth of the Kingly families, the quarrel grew, and the Koliyan workers said: “Having siezed you people of Kapilavatthu, sons of the Sākiyans, you can roar away! Like dogs and jackals and others you have cohabited with your own sisters!  What will they do to us with their elephants and horses, their shields and swords?”
The Sākiyan workers also said: “Now having siezed you sons of lepers, you can roar away! Like helpless and miserable animals they dwelt in Jujube trees! What will they do to us with their elephants and horses, their shields and swords?”
Having left that place they related all that was done to the appointed councillors, and they related it to the ministers of the Kingly family. Then the Sākiyans said: “We will show them the power and strength of those who cohabited with their sisters!” and that day they went out to fight.
The Koliyans also said: “We will show them the power and strength of those who dwell in Jujube trees!” and that day they went out to fight.
Now other teachers say: “Slaves of the Sākiyans and Koliyans, after going to the river for water, and placing their head-rolls  on the ground, sat around having a pleasant conversation. One of them took another’s head-roll, thinking it her own, and because of this, saying: This is my head-roll, this is your head-roll, gradually a quarrel broke out between the slave-workers who dwelt in both cities, and also between the servants, headmen, ministers and princes, and that day they all went out to fight.” But the former explanation has come down in many of the ancient Commentaries, and it is considered suitable to uphold it.
And so that day in the evening time they will go out to fight.
* * *
Then at that time the Gracious One was living near Sāvatthī, and towards the time of dawn he was looking around the world and saw these groups going out to battle that day. Having seen it, considering: “With my going there will this quarrel be pacified or will it not?” he knew: “Having gone there for the purpose of pacifying the quarrel, I will relate three Stories and the quarrel will be pacified through that. Then for the purpose of illustrating the benefits of concord, after relating two Stories I will teach the Discourse on Taking up a Stick. Then having heard that teaching, those people who dwell in both cities will give two-hundred and fifty young men each, I will make them go forth, and there will be a Great Assembly,” at the conclusion.
Then, after taking care of his body in the morning, and entering Sāvatthī for alms, he returned after the alms round. In the evening time, after leaving the Perfumed Cottage without having told anyone, taking his robe and bowl, in the sky between the two armies, after folding his legs crosswise, to make it dark during the day, for the purpose of giving them spiritual anxiety, he sat there emitting rays from his dark-coloured hair. Then seeing their minds were anxious he emitted the six-coloured Buddha rays.
Having seen the Gracious One those who resided at Kapilavatthu, after thinking: “The Teacher, our foremost relative has come, has he seen the reason for our dispute?” understood: “It is not possible, now the Teacher has come to attack the bodies of others with spears, let the people dwelling in Koliya kill or capture us!” and they threw aside their weapons. The people dwelling in Koliya also did the same.
Then the Gracious One, having descended from the sky in that delightful place, sat down on the appointed noble Buddha seat in a sandy bed, with his unmatched Buddha-glory shining. Those Kings, having worshipped the Gracious One, sat down.
Then the Teacher, knowingly, asked: “Why have you come, Great Kings?”
“Not for seeing the river, venerable Sir, not for play, but having got ready for battle in this place, we have come.”
“This dispute is on account of what, Great Kings?”
“On account of water, venerable Sir.”
“What is water worth, Great Kings?”
“It has little worth, venerable Sir.”
“And what is earth worth, Great Kings?”
“It is priceless, venerable Sir.”
“What are Nobles worth, Great Kings?”
“Nobles are also priceless, venerable Sir.”
“Why would you destroy Nobles, Great Kings? There is certainly no satisfaction in this quarrel. Because of a quarrel, Great Kings, a certain tree god and a black lion were bound by anger reaching through the whole aeon,” and having said that, he related the Phandana Tree Story. 
[Summary: A branch of a tree falls on a lion while he is lying under it, and he blames the tree spirit. He finds a cartwright looking for wood and guides him to the tree which he starts to chop down. The tree spirit convinces the wright that the skin of a lion is good for the rim, and he kills the lion. That way they both die.]
After that he said: “There should certainly not be, Great Kings, this relying on the word of another. Having relied on another, through the tale of one hare, a great crowd of four-footed animals stretching three thousand leagues have jumped into the great ocean, therefore one shouldn’t rely on the word of another,” and having said that, he related the Thud Story.
[Summary: A wood-apple fruit  falls near where a hare is resting and he thinks an earthquake is coming, so he runs away. Other animals see him fleeing and asking why, learn that an earthquake is coming, so they all flee too, but all that happened, as the Bodhisatta shows, it that a fruit fell!]
After that he said: “Sometimes the one who is weak, Great Kings, sees the strong one’s fault; sometimes the strong one sees the weak one’s fault, therefore a quail bird once slaughtered a Nāga elephant,” and having said that, he related the Quail Story. 
[Summary: A quail pleads with an elephant to be careful of her brood, but the elephant stomps on them and charges off. The quail befriends a crow, a fly and a frog. The first pecks out the elephant’s eyes, the second lays maggots in them and the third croaks and thereby deceives the elephant into falling over a precipice.]
Thus having related three Stories to pacify the quarrel, to illustrate the value of concord he related two Stories. “There is no one able to find fault in concord, Great Kings,” and having said that, he related the Righteous Tree Story. 
[Summary: Tree spirits are given the chance to relocate their residences. Some stay in groups in the forests, other choose to live solitary near to villages and towns where they can get good offerings. When storms rage over the land the solitary trees are destroyed, while the communal ones survive.]
After that he said: “Nobody was able, Great Kings, to find an opening when there was concord. But when a dispute had arisen amongst one another, then one hunter’s son, having destroyed their lives, took them away. There is certainly no satisfaction in disputes,” and having said that, he related the Quail Story. 
[Summary: A hunter is always catching quails, one of whom has the bright idea that when the nets are thrown they should put their necks through the holes and all fly off together. All goes well and they escape the hunter, until one day they fall into a quarrel and he carries them all off.]
Thus having related these five Stories, at the end he related the Discourse on Taking up a Stick. 
[Extract: Fear arises from one who has taken up a stick, look at people arguing,
I will explain my spiritual anxiety, the way I experienced it:
Having seen this generation trembling like fish in little water,
Having seen how they are opposed to each other fear came upon me.
The world is without essence, agitated in all directions,
Wishing for a place of safety for myself, I saw nowhere that was free,
Having seen how they are opposed to the end, I became detached,
Then I saw a dart  here, hard to see, resting in the heart,
Affected by this dart one runs about in all directions,
Having pulled out the dart, one does not run nor sink.] 
Then the Kings, being pleased, said: “If the Teacher had not come, having slaughtered each other, we would have set flowing a river of blood, because of the Teacher we have received back our lives!
If the Teacher had lived in the house, the four great island kingdoms, surrounded by the two-thousand islands would have gone into his hand, and he would have had more than a thousand children, and would have gone about with a retinue of Nobles. But after giving up his fortune and going forth, he attained Complete Awakening. Now he should go around with a retinue of Nobles also!” and those who dwelt in the two cities gave two-hundred and fifty young men each, and the Gracious One, having given them the going-forth, returned to the Great Wood.
- These were two clans gotta in North-East India, who had established themselves just under the Himālayan mountains on the border of what is now Nepal. ↩
- This exact meaning is not given in PED., which says: shutting off, barring out, withstanding; nt. hindrance, obstruction, bar. ↩
- This normally falls in June, which is towards the end of the dry season in northern India. ↩
- This is referring to their mythical origins; in the reply below the Sākiyans return the insult in a similar way by referring to the supposed origins of the Koliyans. ↩
- These are rolls of cloth placed on the heads upon which are carried pots and the like. ↩
- Jā 475; which tree this is is unclear, according to Flora & Fauna of The Pāli Canon it may be the Gardenia turgida tree; PED identifies it as a Dalbergia. I summarise the story below, but nothing in the comm. would lead us to believe the foes fought for an aeon. ↩
- This is a hard-skinned fruit from the tree Aegle marmelos, that would make a fair noise when it dropped. ↩
- Laṭukikajātakaṁ, Jā 357. ↩
- Rukkhadhammajātakaṁ, Jā 74. ↩
- There are three Vaṭṭakajātakaṁ in our present text, Nos. 35, 118 and 394, but this is identified by the sub-commentary as being Jā 33, which is known to us as Sammodamānajātakaṁ. ↩
- Only the first 5 of 20 verses are translated here. ↩
- The dart of craving. ↩
- Comm: sink into the four floods. ↩