Kazakh military plane crashes, all 27 on board killed

ALMATY (Reuters) - A military transport plane crashed in southern Kazakhstan on Tuesday, killing all 27 people on board, the RIA news agency quoted a senior Kazakh emergencies ministry official as saying.

"The plane has burnt up, only some of its fragments remain," RIA quoted the head of the regional emergencies department as saying.

Kazakh TV channel KTK said the plane had disappeared from radar screens at about 1900 local time (1300 GMT) as it was making a descent near the city of Shymkent, the capital of the South Kazakhstan Region.

Kazakhstan's KNB security service said the plane, bound for Shymkent from the capital Astana, belonged to its border troops.

The commander of the country's border guards, Turganbek Stambekov, was among those on board, it said on its site (www.knb.kz). The plane was carrying a crew of seven as well as 20 servicemen.

KTK TV quoted its sources as saying the Antonov An-72 plane had plunged to the ground in bad weather from an altitude of about 800 meters.

It broadcast footage of an eyewitness saying he had heard a loud explosion and had seen flames at the crash site.

(Reporting by Dmitry Solovyov; Additional reporting by Mariya Gordeyeva; Editing by Andrew Osborn)

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Japan's policy veteran Motegi likely to serve as trade minister: media

TOKYO (Reuters) - Incoming Japan Prime Minister Shinzo Abe is likely to pick policy veteran Toshimitsu Motegi as trade minister, who will also take charge of energy and other key economic policies, media reported on Tuesday.

Motegi, 57, a former policy affairs chief for the Liberal Democratic Party (LDP), will tackle energy problems after last year's Fukushima nuclear crisis, as well as issues such as the U.S.-led Trans-Pacific Partnership (TPP) free trade pact, public broadcaster NHK said.

Motegi was a leading member of the LDP's panel tasked with drafting an economic revival plan aimed at tackling the strong yen, deflation and preventing Japanese firms from shifting overseas.

The LDP returned to power in the December 16 election for the lower house, calling for radical monetary easing and big spending on public works.

First elected to parliament in 1993 as a member of a small opposition party, Motegi joined the LDP shortly thereafter and has served posts including parliamentary vice-minister for the trade ministry and senior vice-minister for foreign affairs.

Motegi's formal appointment is likely to be made on December 26, when Abe is expected to be elected as prime minister in parliament and form a new cabinet.

(Reporting by Tetsushi Kajimoto)

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Syrian refugees face harsh winter in desperate conditions

BAB AL-SALAMEH, Syria (Reuters) - Huddled inside thin plastic tents in a makeshift camp after fleeing Syrian President Bashar al-Assad's bombs thousands of refugees say they face a new enemy. "The cold is killing us," many of them say.

Having survived a conflict in which more than 40,000 people are estimated to have been killed, refugees at the Bab al-Salameh camp on the Syrian-Turkish border say the winter is now a bigger threat to them than the violence engulfing their country.

"The situation here is even worse than being at home," said Waad Orfali, a 27-year-old woman, dressed in a pink headscarf, velvet pink gown and slippers, as rain pounded the camp.

"At least in the village there was a doctor," said Orfali, who escaped from the northern village of Marea about two weeks ago after snipers and air strikes forced her and her family to relocate to the relative safety of the camp.

The flimsy tents scattered across the encampment offer scant relief to the thousands of men, women and children facing freezing weather and constant rain, and colder conditions are still to come.

Earlier this month, the United Nations refugee agency said more than half a million Syrian refugees are registered or waiting in other Middle Eastern countries, with about 3,000 new people seeking refugee status and assistance daily.

"I'm three months pregnant and I've been bleeding," said Orfali, who suffered from mouth sores. She said her husband suffered from kidney stones, but that neither had been able to receive medical care at the camp.

"At home there's no water or electricity and it's the same thing here," another woman chimed.

Tents reeked of damp as the rain seeped through, soaking blankets, clothes and rugs, and with no electricity in the camp, children, many wearing a single layer of clothing and slippers with no socks, shivered in the cold.

Mothers complained they received little food. By the afternoon, they said breakfast had not even been distributed. With no running water, lavatories near the mosque stank of rubbish and sewage.

"Tell them Syria's people are full of lice," said Um Ali, a mother of 12, said. She carried her ID papers in plastic to protect them from the rain in the hope that she could use them to get supplies from the camp authorities for her children.

WE JUST WANT THE SLAUGHTER TO STOP

Some refugees here are trying to scrape together a living amid the misery. They set up stands to sell cigarettes, and children zigzag through the tents hawking sweets and chocolate.

IHH, a Turkish relief group, is running the camp. Shawkat Gukman, the IHH coordinator at Bab al-Salameh, said the camp housed about 870 tents and 6,000 people with about 200 people streaming through each day.

Gukman said IHH had not been entirely in charge of running the camp until recently. He said some 5,000 pairs of children's shoes had been given out.

Challenging conditions like a lack of water and electricity made food preparation and distribution particularly challenging, Gukman said.

"The crisis may last for years. It's not clear but the war could last for a longer time."

As the war continues, more Syrians are expected to flee.

The latest estimates indicate that the total number of Syrians who have fled during the conflict has already surpassed the 700,000 refugees that the UNHCR forecast by year-end, though more than 200,000 of them have not registered formally. Another 2.5 million or more are believed to be displaced inside Syria.

Um Ahmed, a mother of five girls and two boys, said she moved to the Bab al-Salameh camp four months ago from the Hanano district of Aleppo.

"When we first came, we were sleeping under the tires of trucks. The sun burned us," she told Reuters in her three-by-four meter tent, where she had lit a coal fire and was grilling onions she said would help fight her children's infections.

Dressed in a purple sweater and red wool skirt, Um Ahmed said she had been a supporter of Assad at the beginning of the conflict, now in its 21st month.

"He said there wouldn't be a drop of blood, and now there's a river of blood. So now I'm the most opposed to Assad after what I've seen with my eyes," she said.

Like many other refugees thrust into dire conditions, Um Ahmed has tried to keep some semblance of a home in her tent. In a vain effort to keep the tent dry, a mop is perched against the tent's corner, and there is a red basin to bathe in. One side of the tent is decorated with the Syrian rebels' flag.

Complaining of chaotic scenes when the camp authorities distribute supplies, she said: "We have too much pride and dignity," to push through queues.

"We don't want money, food or water," she said. "We just want the slaughter to stop. We dream of going back home."

(Editing by Andrew Osborn)

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Two killed as passenger plane lands in Myanmar rice field

YANGON (Reuters) - Two people were killed and 10 wounded in northeast Myanmar on Tuesday when a passenger plane missed an airport runway in heavy fog and landed in a rice paddy, state television said.

The pilot of the Air Bagan plane touched down beyond Heho airport in Shan state, killing one passenger and a motorcyclist on the ground, MRTV said.

MRTV had earlier reported the dead passenger was an 11-year-old boy but the airline later confirmed the deceased was a female tour guide.

Four foreigners -- two Americans, a South Korean and a Briton -- and the pilot were among the injured. The plane was carrying 63 passengers, 51 of whom were foreigners.

Air Bagan is one of five airlines operating domestic routes in Myanmar.

Owned by Tay Za, a local tycoon blacklisted by the United States for his alleged links to former military regime, Air Bagan was the country's first privately run carrier when it was established in 2004.

(Reporting by Aung Hla Tun; Editing by Martin Petty and Daniel Magnowski)

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Former South African president Mandela "much better": Zuma

JOHANNESBURG (Reuters) - Former South African president and anti-apartheid hero Nelson Mandela is looking much better after more than two weeks in hospital, President Jacob Zuma said on Tuesday.

Zuma, who visited Mandela on Christmas Day, said in a statement that doctors were happy with the progress the elder statesman was making.

"We found him in good spirits. He was happy to have visitors on this special day and is looking much better. The doctors are happy with the progress that he is making," said Zuma.

The 94-year-old Nobel Peace laureate has been in hospital in Pretoria for more than two weeks after being admitted for routine tests. He then underwent surgery to remove gallstones.

Mandela, who came to power in historic elections in 1994 after decades struggling against apartheid, remains a symbol of resistance to racism and injustice at home and around the world.

He has a history of lung problems dating back to when he contracted tuberculosis while in jail as a political prisoner. But this is his longest stay in hospital since he was released from prison in 1990.

He spent time in a Johannesburg hospital in 2011 with a respiratory condition, and again in February this year because of abdominal pains though he was released the following day after a keyhole examination showed there was nothing serious.

Zuma, who has just been re-elected as president of the ruling African National Congress party, last week described Mandela's condition as serious.

"The Mandela family truly appreciates all the support they are receiving from the public. That is what keeps them going at this difficult time," said Zuma.

Periodic statements from the presidency continue to stress that the veteran politician is responding to treatment. No date has been given for his release from hospital.

Mandela spent 27 years in prison, including 18 years on the windswept Robben Island off Cape Town.

After his release, he used his popularity to push for reconciliation between whites and blacks. This reconciliation is the bedrock of the post-apartheid "Rainbow Nation".

Sworn in as South Africa's first black president in 1994, Mandela stepped down in 1999 after one term in office and has largely been absent from public life for the last decade.

His fragile health has prevented him from making any public appearances in South Africa, though he has continued to receive high-profile domestic and international visitors, including former U.S. president Bill Clinton in July.

(Reporting by Sherilee Lakmidas; Editing by Andrew Osborn)

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Afghans seek policewoman's motive for killing U.S. contractor

KABUL (Reuters) - An Iranian-Afghan policewoman who killed a U.S. contractor at the police headquarters in Kabul may have been motivated by a personal grudge, said security officials, who were also probing possible Taliban or al Qaeda involvement.

The officials said the woman named as Narges seemed wracked with remorse over the shooting. They said she held an Iranian passport but offered no evidence that Iran may have orchestrated the attack.

She arrived at police headquarters on Monday morning and headed to a bathroom where she loaded a pistol and hid it under her long scarf, they said. She then approached the American police trainer as he was walking to a canteen and shot him in the ribs.

"After she shot the American, she pointed her pistol to other policemen who rushed to arrest her. But her weapon jammed," one top police official told Reuters. "Her prime target could have been senior officials in the compound."

It appeared to be the first time that a female member of Afghanistan's security forces had carried out such an attack.

At least 52 members of the NATO-led International Security Assistance Force (ISAF) have been killed this year by Afghans wearing police or army uniforms, in so-called insider attacks.

Also known as green-on-blue attacks, the incidents have undermined trust between coalition and Afghan forces who are under mounting pressure to contain the Taliban insurgency before most NATO combat troops withdraw by the end of 2014.

"This was a very organized shooting," said the top police official. "There must have been bigger hands involved... At this stage, we can only say that she could have been brainwashed either by the Taliban or al Qaeda."

Virginia-based DynCorp International described the killing of its employee, police mentor Joseph Griffin, 49, as a tragedy.

"The loss of any team member is tragic but to have this happen over the holidays makes it seem all the more unfair," the company said on its website.

IRANIAN PASSPORT

There had been no indication that Narges posed any threat during her six years on the job and officials had believed she was dedicated to improving security in her troubled country.

They invested in the mother of three, sending her on a law enforcement training course in Egypt and giving her responsibility for promoting women's rights in the police force, senior police officials told Reuters.

"She is a religious person with a clean background. That's why we didn't have surveillance on her," said the top police official. "It's very difficult to have surveillance on thousands of people in the police force to see who is doing what."

Authorities were examining her phone records on Tuesday. At a press conference, Interior Ministry officials presented what they said was her Iranian passport, which identified her as Narges Rezaeimomenabad.

Interior Ministry spokesman Sediq Sediqqi said she had obtained an Afghan national identity card when she married her husband, an Afghan who works in the ministry's criminal investigation department.

"She is in a terrible condition now and crying, sighing deeply and asking herself why she did it," said the top police official. "She keeps saying 'shoot me dead'."

(Additional reporting by Mirwais Harooni and Miriam Arghandiwal; Editing by Tom Pfeiffer)

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Syria envoy seeks peace as clashes rage

BEIRUT (Reuters) - International envoy Lakhdar Brahimi pursued mediation efforts in Damascus on Tuesday, but there was no pause in the bloodletting as Syrian Christians marked a bleak Christmas Day with prayers for peace.

"We are here in a cave that symbolizes Syria right now," said a priest standing beside a nativity scene in a grotto.

"It is cold here but the door is open to all refugees," he told Syrian state TV. "Amid the hunger, cold and deprivation, we still have hope for peace and love for our country."

More than 44,000 Syrians have been killed since a revolt against President Bashar al-Assad erupted 21 months ago, igniting an increasingly sectarian conflict that broadly pits a Sunni Muslim majority against Assad's Alawite minority.

Christians, many of whom have been reluctant to join what they see as an Islamist-tinged insurgency, feel threatened.

Bishop John Kawak, speaking on state TV, said the Christmas holiday was "a symbol for the rebirth of the nation". He condemned "terrorism", the government's term for the rebellion.

Brahimi met some dissidents who are tolerated by Assad but rejected by the mainstream opposition and by rebels fighting to oust him, a day after he held talks with the Syrian president.

There was no word on any progress in the U.N.-Arab League' envoy's drive to end violence that has intensified in recent months as Assad uses airpower and artillery against rebel gains.

Raja Naser, secretary general of the National Coordination Body, said after meeting Brahimi that the envoy planned a week of meetings in Damascus and would stay until Sunday.

"There is still a lot of concern but there is also great hope that these meetings with other Syrian officials will result in some agreements or positive developments," he said.

But most opposition groups appear frustrated with Brahimi's quest for a deal on a transitional government. He has not clarified any role for Assad, whose foes say he must simply go, arguing that too much blood has been shed for any other outcome.

GULF PLEA

Gulf Arab leaders, who have long called for Assad's removal and some of whom have helped the rebels with guns and money, urged swift world action to halt the "massacres" and violations of international law in Syria.

The pro-opposition Syrian Observatory for Human Rights reported clashes and government shelling in hotspots across the country, including towns on the eastern outskirts of Damascus.

Abu Nidal, a spokesman for the Rebel Military Council in Damascus, said fighters had killed the head of a local security branch in the capital's suburb of Jaramana, home to a large Christian and Druze population.

In his Christmas message to the world on Tuesday, Pope Benedict encouraged Syrians not to lose hope for peace.

"May peace spring up for the people of Syria, deeply wounded and divided by a conflict which does not spare even the defenseless and reaps innocent victims," he said.

"I appeal for an end to the bloodshed, easier access for the relief of refugees and the displaced, and dialogue in the pursuit of a political solution to the conflict."

Hundreds of thousands of Syrians have fled abroad to escape the daily violence. Those who remain face severe shortages of food, fuel and other essentials as winter weather takes a grip.

Syrian activists offered a message of solidarity with Christians despite rising tensions in central Hama province, where rebels have demanded that Christian villages let them enter to force out the army and pro-Assad "shabbiha" militias.

"We say to the Christians, you are our brothers and our beloved, and your holiday is our holiday," said Abu Faisal, a Hama activist who posted a Christmas message on the Internet.

"The rebels are surrounding (the Christian town) Muhardeh to get rid of Assad's soldiers and shabbiha, but we have not forgotten your honorable stance when you took care of our refugees when the army entered Hama," he said.

"We will not accept that you are targeted by hatred, you are our brothers and our friends."

(Additional reporting by Philip Pullela in Vatican City and Asma Alsharif in Manama)

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Gulf Arabs decry Iran "interference" in region

MANAMA (Reuters) - Six U.S.-allied Gulf Arab states demanded on Tuesday that Iran end what they called interference in the region, reiterating a long-held mistrust of their main rival.

The Islamic Republic denies trying to subvert Saudi Arabia and its wealthy Gulf neighbors.

A communique issued at the end of a two-day summit of the Saudi-led Gulf Cooperation Council (GCC) also urged action to halt mass killings and violations of international law in Syria.

The oil-producing GCC states wield influence out of proportion to their sparse populations due in part to global energy and investment links, generous international aid and Saudi Arabia's role as home to Islam's two holiest sites.

"The council expressed its rejection and condemnation of the continuing Iranian interference in the affairs of the Gulf Cooperation Council's states and called on Iran to stop these policies," the communique said.

On the conflict in Syria, the statement, read out by GCC Secretary-General Abdulatif al-Zayani, added: "We ask the international community for serious and swift moves to stop these massacres and these severe attacks".

Kuwait said it would host an international humanitarian donor conference for Syria in late January, amid concern for millions of Syrians suffering war, homelessness and winter cold.

"LOTS OF MEDDLING"

Gulf Arab leaders have long called for Syrian President Bashar al-Assad to step down, and in November the GCC recognized a newly-formed opposition coalition as the legitimate representative of the Syrian people.

The communique did not elaborate on Iran, but the most common Gulf Arab complaint about alleged Iranian meddling in the region relates to Bahrain, which has repeatedly accused Tehran of interference in its internal politics.

Iran sees the Gulf as its own backyard and believes it has a legitimate interest in expanding its influence there.

Bahraini Foreign Minister Khalid Bin Ahmed Bin Mohammed Al Khalifa told reporters Iran posed a "very serious threat".

"Politically, (there is) lots of meddling in the affairs of GCC states; an environmental threat to our region from the technology used inside nuclear facilities; and there is of course the looming nuclear program," he said, referring to Iran's disputed atomic work.

"So the threat level is quite high, but we are ready if faced with circumstances that require action."

While not racked by disturbances on the scale of Syria or Egypt, Bahrain has been volatile since pro-democracy protests led by its Shi'ite Muslim majority erupted last year.

Scattered smoke plumes rose from Bahrain's Sitra and Sanabis districts on Tuesday, apparently caused by youths burning tires, but no major demonstrations were reported by activists.

Bahrain's Sunni Muslim rulers brought in Saudi and United Arab Emirates forces last year to help quell the protests, and Shi'ite power Iran condemned the move, saying it could lead to regional instability. Bahrain has accused Iran of being behind the unrest. Tehran denies this.

GCC FORCE LONG SEEN AS INEFFECTIVE

Bahrain's Shi'ites say they are marginalized politically and economically, a charge the government denies. It has rejected the protesters' main demand for an elected government.

The summit statement said the GCC would set up a unified military command to tighten defense cooperation but offered few details of a project long prey to sensitivities about sovereignty. Security in the waterway, through which 40 percent of the world's seaborne oil exports passes, has been dominated for decades by the United States.

But uprisings against long-standing governments across the Middle East and rivalry with Iran over the conflict in Syria have stirred calls among Gulf Arabs to speed up long-stymied efforts to integrate their own foreign and security policies.

The GCC said it had "supported the creation of a unified military command that organizes and plans and leads the ground, naval and air forces."

The communique did not elaborate. But Mustafa Alani, a security analyst, told Reuters that he understood the idea was to have a standing command rather than a functioning one, and that it would only operate in times of crisis.

The GCC already has a pan-GCC military force -- the 9,000-strong Peninsula Shield, created in 1986 and based in Saudi Arabia. It took part in the 1991 Gulf war and was deployed in Kuwait during the U.S.-led invasion of Iraq in 2003.

But the Saudi-based force is widely seen as ineffective. Gulf Arab states have faced a host of obstacles to military integration, including a lack of common equipment, their own reliance on their U.S. ally and concern among some states about potential Saudi dominance of any joint military effort.

(Reporting by Asma Alsharif; Writing by William Maclean; Editing by Alistair Lyon)

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Egypt expected to pass constitution; currency limits imposed

CAIRO (Reuters) - Egypt is expected to announce on Tuesday that voters approved a new Islamist-backed constitution, and the government slapped limits on carrying cash abroad to save the economy from collapse after weeks of street violence and political disarray.

President Mohamed Mursi, an Islamist elected this year after a 2011 revolution toppled long-serving autocrat Hosni Mubarak, has been accused by liberal, leftist and Christian opponents of ramming through a basic law mixing religion with politics.

Mursi says the charter has sufficient guarantees of minority rights, and that quickly enacting it will bring an end to the uncertainty and unrest plaguing Egypt since Mubarak's ouster in the wave of revolts across the Middle East and North Africa.

The referendum result appears to be in little doubt, and opposition groups which marched for weeks against the new charter did not announce plans for any major demonstrations to mark the official announcement.

Unofficial tallies from Mursi's Muslim Brotherhood showed the charter was approved by a 64 percent majority. The electoral commission will announce the official result at 1700 GMT.

In a move aimed at preventing capital flight and a potential bank run, the government banned people from carrying more than $10,000 in foreign currency cash in or out of the country.

A growing sense of crisis has gripped Egypt's polarized society, with a rush by Egyptians to take out savings from banks compounding worries about the future of its battered economy. On Monday, Standard and Poor's cut Egypt's long-term credit rating.

Hours ahead of the results announcement, Prime Minister Hisham Kandil told the nation of 83 million the government was committed to taking steps to heal the economy.

"The main goals that the government is working towards now is plugging the budget deficit, and working on increasing growth to boost employment rates, curb inflation, and increase the competitiveness of Egyptian exports," he said.

The government says its opponents are contributing to the economic crisis by prolonging the state of unrest. Mursi's opponents say by pushing through the contentious text he has made it harder to build a consensus needed for economic reform.

The central bank said on Monday it would take steps to "safeguard" bank deposits, without giving any details. Some Egyptians have withdrawn cash from accounts out of concern that the authorities might freeze deposits. Rumors are rife.

"I have been hearing that the central bank is going to take over all our bank deposits to pay wages for government employees given the current deteriorating economic situation," said Ayman Osama, father of two young children.

He said he had taken out the equivalent of about $16,000 from his account this week and planned to withdraw more, adding that he had also told his wife to buy more gold jewellery.

"I am not going to put any more money in the bank and neither will many of the people I know," he said.

It was not immediately possible to say how much people were withdrawing, with one senior banker saying there was not enough information available to make an estimate.

CRISIS MODE

"This is a political, economic and security crisis which requires serious work for the interests of Egypt," opposition leader Amr Moussa wrote on his Facebook page.

If the "yes" vote is confirmed, a parliamentary election will follow in about two months, setting the stage for yet another electoral battle between the surging Islamists and their fractious liberal and leftist opponents.

The referendum will be the Islamists' third electoral victory since the fall of Mubarak, after parliamentary and presidential elections. However, secularist and liberal opposition members hope they can organize better this time.

The opposition says the constitution, crafted mostly by Mursi's Islamist allies, fails to guarantee personal freedoms and rights for women and minorities. The government denies this.

Hossam El-Din Ali, a 35-year-old newspaper vendor in central Cairo, said he agreed the new constitution would help bring some political stability but like many others he feared the possible economic austerity measures lying ahead.

"People don't want higher prices. People are upset about this," he said. "There is recession, things are not moving. But I am wishing for the best, God willing."

Without broad support, Mursi will find it hard to implement reforms needed to secure a $4.8 billion loan from the International Monetary Fund.

Shortly before the referendum, Mursi introduced hikes on the sales tax on a range of goods and services from alcoholic beverages, cigarettes and mobile phone calls to automobile licenses and quarrying permits. However, he withdrew them within hours under criticism from his opponents and the media.

(Additional reporting by Patrick Werr and Tamim Elyan; Writing by Maria Golovnina; Editing by Peter Graff)

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Pope gives advice as Italians prepare for bitter campaign

ROME (Reuters) - Pope Benedict sent a political Christmas greeting to Italians on Tuesday as they head into an election campaign expected to be brutal and bitter: think, cooperate for the common good and don't discard values when making big choices.

The pope, in his Christmas greetings in 65 languages, said in his special message to Italians that he hoped the spirit of the day would "make people reflect, favor the spirit of cooperation for the common good and lead to a reflection on the hierarchy of values when making the most important of choices".

Italy holds national elections on Feb 24-25 to choose a new parliament and a new government.

Given that Italy's Catholic Church has turned its back on former Prime Minister Silvio Berlusconi - who is trying to make a comeback even though his previous terms were mired in sex scandals and judicial woes - Benedict's words could be far less general and casual than they appear at first glance.

"It's not a specific endorsement for (Prime Minister Mario) Monti but it comes pretty close, given the well-known esteem the outgoing prime minister enjoys (at the Vatican)," the Italian news agency Ansa said of the pope's words.

Monti has urged Italians to join a debate on their country's future. He declared his availability to lead a reform-minded centrist alliance to seek a second term to complete the economic reform program begun when he took office just over a year ago.

He may yet stay on the sidelines, outside elected office, but still exercising substantial influence over a new centrist grouping that could at the very least help shape the agenda of the next government.

The Church has been embarrassed by the scandals surrounding Berlusconi but at the same time fears the unknown of what a leftist government might do on issues such as gay marriage and euthanasia.

SOBER AND STEADY

The former EU Commissioner - once labeled Supermario for his effectiveness in the job - goes to mass every Sunday with his wife of 40 years and has impressed the Vatican with his calmness, sobriety and what the Church sees as a genuine desire to fix Italy's economic problems and avoid social unrest of the kind seen in Greece.

Significantly, one of the ministers in Monti's outgoing technocrat government is Andrea Riccardi, founder of the internationally prestigious Catholic peace and charity group, the Sant' Egidio Community.

Riccardi is very influential among Catholics in Italy and could help deliver the Catholic vote for Monti or anyone else who promises to continue his policy of economic reform.

Italy's Catholic Church used to support Silvio Berlusconi as a bulwark against leftist governments. But it has made it clear to Berlusconi that this time there will be no blessing.

In its reaction to Berlusconi's decision to return to politics, Famiglia Cristiana, an influential Catholic magazine with one of Italy's largest weekly circulations, likened him to a "dinosaur" who could throw "the whole country into chaos".

The magazine accused him of selling Italians a mirage and trying to lure them with populist promises, such as the abolition of property taxes on primary residences.

Monti, demonstrating the kind of sobriety the Church says Italy needs, has said no one loves taxes but if the property levy is abolished for opportunistic electoral reasons, the move would throw accounts so out of whack that future governments would have to re-introduce it at a higher rate.

Berlusconi's adversaries accuse him of wanting to return to front-line politics to protect his business interests and regain partial and temporary immunity in trials for corruption and paying for sex with a minor.

Cardinal Angelo Bagnasco, head of the Italian Bishops Conference, has made it clear where he stands on the issue.

"I am shocked by the irresponsibility of people who want to look after their own affairs while the house is still on fire," Bagnasco said.

(Reporting by Philip Pullella; editing by Patrick Graham)

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Iraqi president in hospital after suffering stroke

BAGHDAD (Reuters) - Iraqi President Jalal Talabani, a Kurd who has mediated among Shi'ite, Sunni and Kurdish parties, was in hospital on Tuesday after suffering a stroke that left him in "critical but stable condition", government officials and lawmakers said.

Without Talabani, Iraq would lose an influential peace-maker who often eased tensions in the fragile power-sharing government and negotiated in the growing rift over oil between Baghdad and the OPEC member country's autonomous Kurdistan region.

Reports on his medical condition varied. Three government sources said he was in critical condition, but his office said the 79-year-old president was stable under intensive medical supervision after receiving treatment for blocked arteries.

"President Talabani has suffered a light stroke. His condition is stable now and doctors are closely monitoring him and if they decide he should be transferred outside then he'll go," veteran Kurdish politician Mahmoud Othman, a close Talabani associate who was in the Baghdad hospital.

Talabani had been suffering from ill health much of this year and received medical treatment overseas several times in the last two years.

Prime Minister Nuri al-Maliki visited the hospital earlier on Tuesday.

TOUGH TIMES AHEAD?

Under Iraq's constitution, the parliament should elect a new president if the post becomes vacant and Iraq's power-sharing deal calls for the presidency to go to a Kurd while two vice presidents are shared by a Sunni Muslim and a Shi'ite Muslim.

Political analysts said former Kurdistan prime minister Barham Salih is favored candidate to replace Talabani should the president be incapacitated.

But his exit from Iraqi politics would come at a sensitive time and any succession would be complicated, a year after the last American troops left the country.

"He is the most moderate among Iraqi politicians and the most able to defuse political shocks. I do not think any one will be able to fill his position as a president and as a politician," Iraqi analyst Ibrahim al-Sumaidaie said.

Iraq law would see one of the vice presidents take over Talabani's duties before the parliamentary vote. But Iraq's Sunni Vice President, Tareq al-Hashemi, is a fugitive outside of the country after he fled to escape charges he ran death squads. He was sentenced to death in absentia.

Any parliament vote would also be complex, with Maliki locked in a struggle with Sunni, Kurdish and some Shi'ite rivals in the power-sharing government. Talabani was crucial in helping the Shi'ite leader survive a no-confidence motion directed against him earlier this year.

Talabani also recently helped ease a military stand-off between Maliki's central government and the autonomous Kurdistan president, Masoud Barzani, in their long-running dispute over oil-field rights and internal boundaries.

But that situation remains sensitive after both regions sent troops to reinforce positions along their internal frontier.

A veteran of the Kurdish guerrilla movement, Talabani survived wars, exile and infighting in northern Iraq to become the country's first Kurdish president a few years after the 2003 invasion that toppled Saddam Hussein.

(Additional reporting by Raheem Salman, Aseel Kami and Isabel Coles; Writing by Patrick Markey; Editing by Michael Roddy)

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Iran defiant on enrichment ahead of possible nuclear talks

DUBAI (Reuters) - Iran will not stop higher-grade uranium enrichment in response to external demands, its top nuclear energy official was quoted as saying on Tuesday, signaling a tough bargaining stance ahead of planned new talks with world powers.

The West wants Iran to halt enrichment of uranium to a fissile concentration of 20 percent as it represents a significant step closer to the level that would be required to make nuclear bombs. Iran says it needs this higher-grade uranium to run its medical research reactor in Tehran.

Israel has threatened air strikes on Iran if its nuclear work is not curbed through diplomacy or sanctions, raising the specter of a Middle East war damaging to the global economy.

Iran "will not suspend 20 percent uranium enrichment because of the demands of others," said Fereydoun Abbasi-Davani, head of Iran's Atomic Energy Organisation, the Iranian Students' News Agency (ISNA) reported.

Iran "will produce 20 percent enriched uranium to meet its needs and for however long it is required."

He did not specify what he meant by "needs". Western diplomats say Iran already has made sufficient amounts to fuel its Tehran Research Reactor for several years. Abbasi-Davani has in the past said Iran plans to build another research reactor.

The European Union quickly responded to Abbasi-Davani's comments, saying Iran must come to grips with increasing international disquiet over the ultimate purpose of its uranium enrichment program to resolve the protracted dispute.

"Iran has to address the immediate key concern, which is the issue of 20 percent enrichment, by taking an initial comprehensive confidence-building step in this area, thereby creating space for more diplomacy and negotiations," the spokesman for EU foreign policy chief Catherine Ashton said.

In his statements, Abbasi-Davani signaled renewed Iranian defiance in negotiations with world powers expected to resume soon. But he did not appear to categorically rule out that Tehran at some point could shelve higher-grade enrichment.

The powers - the United States, France, Britain, Germany, China and Russia - also want Iran to shut down the Fordow underground site where its 20 percent enrichment is carried out.

Nuclear expert Mark Fitzpatrick, of the International Institute for Strategic Studies, said about Abbasi-Davani's comments: "This hard line doesn't bode well for success in the next round of talks, where stopping the 20 percent enrichment is just one of the steps Iran will be asked to take."

BEHIND THE SCENES

But others suggested Abbasi-Davani's comments, and those of other Iranian officials, were intended more for public consumption at home and abroad.

Iranian foreign and security policies are ultimately decided by clerical Supreme Leader Ayatollah Ali Khamenei.

"What matters is not stay-the-course statements like these but whether behind the scenes the Supreme Leader and his entourage, and the Obama White House, step out of their shadow and agree to direct bilateral talks," Mark Hibbs, of the Carnegie Endowment think tank, said.

Iranian foreign ministry spokesman Ramin Mehmanparast said Iranian and EU officials had held discussions regarding the time and place of the next negotiations between the powers and Iran.

"If there is an agreement, it will be announced," Mehmanparast said in his weekly news conference.

The EU spokesman said the six powers are still waiting for an Iranian answer regarding a possible date for new talks: "We made contact last week and suggested getting together for another round. We are waiting to hear the response."

Though Israel has threatened to bomb Iranian nuclear sites, Vice Prime Minister Moshe Yaalon said the Jewish state had noticed renewed U.S.-led efforts to curb Iran's nuclear work since President Barack Obama's re-election last month, including preparation for possible military action.

He also cited contacts among the powers and Iran about holding new negotiations and ongoing sanctions against Iran.

Iranian media quoted Foreign Minister Ali Akbar Salehi as saying that any calls for direct talks between the U.S. and Iran were meaningless as long as Washington continued to exert pressure on Iran through sanctions and other measures.

In October, the New York Times reported that secret exchanges between U.S. and Iranian officials had yielded agreement "in principle" to hold one-on-one talks. Both Iran and the United States denied that the two countries had scheduled direct bilateral negotiations on the nuclear program.

(Additional reporting by Fredrik Dahl in Vienna and Justyna Pawlak in Brussels; Editing by Mark Heinrich)

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Egypt prosecutor's resignation angers Brotherhood

CAIRO (Reuters) - Egypt's public prosecutor resigned under pressure from his opponents in the judiciary, dealing a blow to President Mohamed Mursi and drawing an angry response on Tuesday from the Islamist leader's supporters in the Muslim Brotherhood.

Seeking to keep pressure on Mursi, the main opposition coalition staged protests against an Islamist-backed draft constitution that has divided Egypt but which looks set to be approved in the second round of a referendum on Saturday.

A few hundred protesters made their way through the streets of Cairo chanting "Revolution, revolution, for the sake of the constitution" and calling on Mursi to "Leave, leave, you coward".

But as the protest got under way, the numbers were well down on previous demonstrations.

Mursi obtained a 57 percent "yes" vote for the constitution in a first round of the referendum last weekend, state media said, less than he had hoped for.

The opposition, which says the law is too Islamist, will be emboldened by the result but is unlikely to win the second round, to be held in districts seen as even more sympathetic towards Mursi's Muslim Brotherhood.

Protesters broke into cheers when the public prosecutor appointed by Mursi last month announced his resignation late on Monday.

In a statement on its Facebook page, the Muslim Brotherhood, which propelled Mursi to power in elections in June, said the enforced resignation of public prosecutor Talaat Ibrahim was a "crime".

The Supreme Judiciary Council, which governs the country's judicial system, should refuse to accept the prosecutor's resignation, the Brotherhood said.

Further signs of opposition to Mursi emerged when a judges' club urged its members not to supervise Saturday's vote. But the call is not binding and balloting is expected to go ahead.

If the constitution passes next weekend, national elections can take place early next year, something many hope will help end the turmoil that has gripped Egypt since the fall of Hosni Mubarak nearly two years ago.

The National Salvation Front opposition coalition said there were widespread voting violations in the first round and called for protests to "bring down the invalid draft constitution".

The Ministry of Justice said it was appointing a group of judges to investigate complaints of voting irregularities around the country.

DEMONSTRATIONS

Opposition marchers headed for Tahrir Square, cradle of the revolution that toppled Mubarak, and Mursi's presidential palace, still ringed with tanks after earlier protests.

A protester at the presidential palace, Mohamed Adel, 30, said: "I have been camping here for weeks and will continue to do so until the constitution that divided the nation, and for which people died, gets scrapped."

The build-up to the first round of voting saw clashes between supporters and opponents of Mursi in which eight people died. Recent demonstrations in Cairo have been more peaceful, although rival factions clashed on Friday in Alexandria, Egypt's second biggest city.

On Monday evening, more than 1,300 members of the General Prosecution staff gathered outside the public prosecutor's office, demanding Ibrahim leave his post.

Hours later, Ibrahim announced he had resigned. The crowd cheered "God is Great! Long live justice!" and "Long live the independence of the judiciary!" witnesses said.

The closeness of the first-round referendum vote and low turnout give Mursi scant comfort as he seeks to assemble support for difficult economic reforms.

OPPOSITION BOOST

"This percentage ... will strengthen the hand of the National Salvation Front and the leaders of this Front have declared they are going to continue this fight to discredit the constitution," said Mustapha Kamal Al-Sayyid, a professor of political science at Cairo University.

Mursi is likely to become more unpopular with the introduction of planned austerity measures, polarizing society further, Sayyid told Reuters.

To tackle the budget deficit, the government needs to impose tax rises and cut back fuel subsidies. Uncertainty surrounding economic reform plans has already forced the postponement of a $4.8 billion loan from the International Monetary Fund. The Egyptian pound has fallen to eight-year lows against the dollar.

Mursi and his backers say the constitution is needed to move Egypt's democratic transition forward. Opponents say the document is too Islamist and ignores the rights of women and of minorities, including Christians who make up 10 percent of the population.

Demonstrations erupted when Mursi awarded himself extra powers on November 22 and then fast-tracked the constitution through an assembly dominated by his Islamist allies and boycotted by many liberals.

The referendum has had to be held over two days because many of the judges needed to oversee polling staged a boycott in protest. In order to pass, the constitution must be approved by more than 50 percent of those voting.

(Additional reporting by Tamim Elyan and Edmund Blair; Writing by Giles Elgood; Editing by Robin Pomeroy)

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Bahrain extends detention of rights campaigner held in rally

DUBAI (Reuters) - Bahrain has extended by seven days the detention of a leading human rights activist who was arrested on Monday during a demonstration in the Gulf Arab island kingdom, his lawyer said on Tuesday.

Sayed Yousif al-Muhafda, from the Bahrain Centre for Human Rights, was being investigated on charges of spreading false news on Twitter after he was arrested by police during a march in the capital Manama, Mohammed al-Jishi said.

All rallies and gatherings are banned in Bahrain, which hosts the U.S. Navy's Fifth Fleet and which has been in turmoil since pro-democracy protests led by its Shi'ite Muslim majority erupted last year.

Jishi told Reuters that Muhafda had not taken part in the demonstration. "He was there only as an observer," he said.

Muhafda was detained last month for a week on charges of taking part in an illegal gathering and an unauthorized march.

On Monday, police fired stun grenades to break up dozens of protesters and arrested about 25 people, including Muhafda, during rallies in the centre of Manama.

The Interior Ministry said on Twitter late on Monday that "police confronted illegal rallies and rioting in Manama and arrested a number of lawbreakers". It gave no further details.

Bahrain has stepped up efforts to end the unrest in recent months and several activists have been arrested or jailed for organizing or taking part in unlicensed protests.

The government also detained four men in October on charges of defaming the king on Twitter.

Earlier this month, Bahrain's opposition groups welcomed a call by the Crown Prince for dialogue. But meetings have not started and the unrest has continued.

On Sunday, Information Minister Samira Ibrahim bin Rajab criticized the opposition for "misusing" the call for dialogue, state news agency BNA reported.

BNA quoted Rajab as telling al-Sharq al-Awsat newspaper that dialogue would start once "the opposition stops violence and relinquishes conditions" to engage in that dialogue.

The opposition had said they were prepared to meet without any pre-conditions, but called for the results of talks to be put to a referendum.

Wefaq, the leading opposition group in Bahrain, said in a statement on Sunday that "Bahrain suffers the toughest political crisis in its modern history."

"The opposition societies demanded the regime to respond to the calls from the international community to immediately start a fruitful and serious dialogue that can achieve the democratic transition and realize the people's aspirations," Wefaq said.

Bahrain's ruling Al-Khalifa family, who are Sunni Muslims, used martial law and help from Gulf neighbors to put down last year's uprising, but unrest has resumed.

The opposition says little progress has been made towards its demands for reforms including a parliament with full powers to legislate and form governments. Many Shi'ites complain of political and economic marginalization, a charge Bahrain denies.

(Reporting by Rania El Gamal; Editing by Louise Ireland)

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In second verdict, war crimes court acquits Congolese

THE HAGUE (Reuters) - Congolese militia leader Mathieu Ngudjolo Chui was acquitted at the Hague war crimes court on Tuesday, after prosecutors failed to prove he ordered atrocities in eastern Congo a decade ago.

Delivering only its second verdict in 10 years of existence, the International Criminal Court (ICC) saw insufficient evidence to find Ngudjolo guilty of massacres during a war in Ituri district in 2003. In its first ever verdict, in July, the court had jailed opposing commander Thomas Lubanga Dyilo for 14 years.

Ngudjolo was accused of war crimes and crimes against humanity, including overseeing killings, rape and pillage. His prosecutors will appeal the verdict and the court was to rule later on Tuesday whether to free him from jail in the meantime.

The judges said they had no doubt the people of Ituri suffered the massacres described at Ngudjolo's trial and critics of the ICC called for better prosecutions in future in order that victims and their surviving relatives should have justice.

"The people trusted the International Criminal Court more than our national courts," said Emmanuel Folo of Ituri human rights group Equitas. "After this decision, for those who were victims of this, there is a feeling of disappointment. The victims feel forgotten, abandoned by international justice."

The acquittal also raised doubts about the case against Ngudjolo's better known co-accused, Germain Katanga. Judges extended Katanga's trial last month in a move that some observers said might raise the probably of a conviction.

The violence in Ituri was a localized ethnic clash over land and resources among myriad conflicts that spun out of the wider war in Democratic Republic of Congo from 1998 to 2003.

Some rebels involved in the current M23 insurgency in neighboring North Kivu province were involved in fighting in Ituri - among them M23 leader Bosco Ntaganda, who is himself on the ICC wanted list for war crimes alleged in Ituri in 2003.

Prosecutors accused Ngudjolo of ordering fighters to block roads around the village of Bogoro in February 2003 in order to kill civilians attempting to flee and that civilians, including women and small children, were burned alive inside their homes.

Two hundred people were killed during and after the attack on the village when ethnic Lendu and Ngiti fighters destroyed the homes of the village's mainly Hema inhabitants.

Describing the prosecution case as relating to a "a very concise incident", international criminal lawyer Nick Kaufmann, said: "The prosecution failed to investigate the chain of command adequately as far as the attack in Bogoro is concerned."

The ICC judges stressed that atrocities had been committed during the conflict, but said the witnesses prosecutors had chosen to testify to Ngudjolo's involvement were not credible.

"This does not in any way throw into question what befell the people of that area on that day," presiding judge Bruno Cotte said.

UNLIKELY TO BE OVERTURNED

Ngudjolo's defense asked judges to release him immediately, saying he would not leave the European Union and would return to court for the prosecution's appeal hearing.

Legal experts said it was unlikely the acquittal would be overturned because new evidence cannot be introduced at appeal. Appeals panels rarely reassess the credibility of witnesses.

"The acquittal of Ngudjolo leaves the victims of Bogoro and other massacres by his forces without justice for their suffering," said Geraldine Mattioli-Zeltner, international justice advocacy director at New York-based Human Rights Watch.

"The ICC prosecutor needs to strengthen its investigations of those responsible for grave crimes in Ituri, including high-ranking officials in Congo, Rwanda, and Uganda who supported the armed groups fighting there."

Luis Moreno Ocampo, who stepped down as chief prosecutor this year, failed to convince judges to approve some of his requests for arrest warrants or for cases to be tried in relation to the Congo conflicts.

In May, the ICC refused to issue an arrest warrant for Sylvestre Mudacumura, a militia leader operating in the Kivu provinces, saying his charge sheet was not detailed enough.

Judges last month split the cases against Katanga and Ndgujolo, postponing a verdict on the former until next year and giving prosecutors time to build a case centered around the claim that Katanga was part of a criminal plan to commit war crimes.

That decision, which would allow Katanga to be convicted even if he had not himself committed or ordered war crimes, has been appealed by the defense and criticized by scholars and by dissenting judge Christine van den Wyngaert. She said the decision would cause Katanga "irreparable prejudice".

Thomas Lubanga, the court's first convict, was sentenced to 14 years earlier this year for his role in recruiting child soldiers to another side in the same conflict in Ituri.

Some observers said the different outcomes of the trials for militia leaders from different tribes could cause new friction.

"Lubanga was a Hema leader, and the acquittal of a Ngudjolo, a Lendu, just after the conviction of a Hema could exacerbate tension between the two ethnicities in Ituri," Jennifer Easterday of the Open Society Justice Initiative said.

Ngudjolo was arrested by U.N. peacekeepers in Bunia, eastern Congo, in October 2003, and was handed over by Democratic Republic of Congo's government to the ICC in 2008.

(Additional reporting by Joe Bavier in Abidjan and Pascal Fletcher; Editing by Michael Roddy and Alastair Macdonald)

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Israel presses on with plan for 6,000 new settler homes

JERUSALEM (Reuters) - Israeli officials said they would press on with plans this week to build 6,000 homes for settlers on land claimed by Palestinians, defying criticism from Western powers who fear the move will hit already faint hopes for a peace accord.

Stung by the de facto recognition of Palestinian sovereignty in a U.N. General Assembly vote last month, Israel announced it would expand settlements in the occupied West Bank and East Jerusalem.

An Israeli Interior Ministry planning committee on Monday gave preliminary approval for 1,500 new homes in the Ramat Shlomo settlement.

The panel will now start discussing plans for another 4,500 homes in two other settlements, Givat Hamatos and Gilo, in back-to-back sessions that could run into next week, ministry spokesman Efrat Orbach said on Tuesday.

Israel counts the three settlements as part of its Jerusalem municipality though they are on West Bank land seized in the 1967 Middle East war.

Palestinians see the settlements as obstacles to achieving a viable state with a capital in East Jerusalem.

"Settlement activity is unilateral and is completely adverse to the continued viability of a two-state solution and the possibility for our people to continue to exist," Palestinian Prime Minister Salam Fayyad told Reuters on Monday.

Most countries deem the settlements illegal and Western powers have been especially troubled by Israel's declared intent to build in E-1, a wedge of land between East Jerusalem and the West Bank where it had previously held off under U.S. pressure.

On Tuesday, EU foreign policy chief Catherine Ashton joined the chorus of condemnation, saying in a statement the bloc was "deeply dismayed by and strongly opposes" the Israeli plans.

NETANYAHU DEPUTY DEFENDS

Israel says the future Palestine's border should be set in direct negotiations, from which Abbas withdrew two years ago in protest against the settlements.

Israeli officials have accused him of avoiding new talks to avoid having to compromises and because his authority does not extend to the other Palestinian territory, Gaza, which is under rival Hamas Islamists hostile to the Jewish state.

Israeli Vice Prime Minister Moshe Yaalon told Israel's Army Radio the expansion of the Jerusalem-area settlements was a resumption of plans put on hold while Western powers tried to persuade Abbas to abandon the Palestinians' U.N. status upgrade.

"We said, 'We won't build, so as not to give Abu Mazen (Abbas) an excuse to go to the U.N. and an excuse not to come to the table,'" Yaalon said.

"After he did what he did ... we removed these restrictions from ourselves," Yaalon added.

He dismissed the international criticism. "The world automatically condemns any construction over the Green Line, and then moves on," he said, referring to the West Bank boundary.

Critics in Israel have suggested Israeli Prime Minister Benjamin Netanyahu is pandering to the right-wing electorate as he prepares to run for re-election in a January 22 ballot.

(Writing by Dan Williams; Additional reporting by Noah Browning; Editing by Maayan Lubell and Andrew Heavens)

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South Africa's Zuma boosted by Ramaphosa return in ANC win

BLOEMFONTEIN, South Africa (Reuters) - South Africa's ruling African National Congress (ANC) re-elected President Jacob Zuma as its leader on Tuesday, setting him up for seven more years as head of state of Africa's biggest economy.

Nelson Mandela's 100-year-old liberation movement also chose respected businessman Cyril Ramaphosa as his deputy, seeking to repair the image of a Zuma administration battered by corruption scandals and strikes and facing growing discontent among the poor black majority.

More than 4,000 ANC delegates crammed into a marquee in the central city of Bloemfontein erupted into wild cheers when Zuma was confirmed in the top party post after comfortably seeing off a challenge by Deputy President Kgalema Motlanthe.

Given the ANC's dominance at the ballot-box less than two decades after the end of apartheid, 70-year-old Zuma is virtually assured a second, five-year term as President of South Africa in 2014 elections.

The rand briefly edged higher against the dollar, reflecting relief among investors at the prospect of policies remaining largely unchanged.

After the vote, the beaming president, who secured 2,995 votes out of 3,977 cast, walked on stage to shake hands with his fellow 'comrades' - a label reflecting the ANC's roots in the communist-backed struggle against decades of white-minority rule.

Zuma, a polygamous Zulu traditionalist, came to power in 2009 amid the first recession in 18 years and has had a chequered economic record, culminating in violent labor unrest in the mines this year that triggered two downgrades in South Africa's credit ratings.

He has also been dogged by personal scandals, including fathering a child by the daughter of a close friend. Despite this, his popularity within the party is overwhelming.

"I don't care what people say about Jacob Zuma," said Sinovuyo Kley, a delegate from the impoverished Eastern Cape. "When you hear him sing, you know he is one with the people. He speaks our language and knows our struggles."

RAMAPHOSA RETURNS

Zuma's re-election had looked likely for much of the year, making the main talking point of the five-day Bloemfontein conference the political renaissance of Ramaphosa after a decade-long absence to focus on his business interests.

Attention was also diverted by the arrest of four whites on suspicion of a plot to bomb the meeting and execute Zuma and top ministers as part of a plan to carve an independent Afrikaner state out of Mandela's "Rainbow Nation".

Having risen to prominence as a charismatic union leader in the 1980s, Ramaphosa became the ANC's main negotiator in the talks that led to historic all-race elections in 1994 and Mandela's appointment as South Africa's first black president.

He was also tipped as a successor to the revered Mandela - now 94 and recovering in hospital from a lung infection - but gradually removed himself from politics when the job went to party stalwart Thabo Mbeki in 1999.

It was unclear just how much impact Ramaphosa's inclusion in Zuma's inner circle could have on the ANC government.

Some analysts say he should help push through plans to lift long-term economic growth and stop South Africa's competitive slide against fast-growing economies in Asia and South America.

However, others who know his business style told Reuters he tended not to throw his weight around in company board-rooms, suggesting he might avoid challenging South Africa's politically powerful unions.

"He is surprisingly quiet and non-confrontational on boards," one person who knows Ramaphosa said.

Others suggest that his ranking as South Africa's second richest black businessman could limit his appeal to the legions of poor and jobless who are increasingly doubting the ANC's post-apartheid promise to deliver "a better life for all".

LOOMING DOWNGRADE

"Looking further ahead, we remain doubtful that Zuma can oversee the reforms needed to pull the South African economy out of its current rut," said Shilan Shah, Africa economist at UK-based Capital Economics.

There is precious little time to make an impact, with Fitch expected in January to follow Moodys and Standard & Poor's in cutting South Africa's credit rating because of concerns about sluggish growth, forecast at 2.5 percent this year.

"The leadership issue is never really decisive for the market," said Nomura emerging markets analyst Peter Attard-Montalto. "It's always interested in policy and that's far more what the ratings agencies are looking at."

Zuma may also find his Bloemfontein victory dance cut short, with a poll published this week putting his nationwide approval rating at 52 percent, in contrast to 70 percent for the outgoing Motlanthe. This reflects just how much the internal politics of the ruling ANC is insulated from daily realities.

The opposition Democratic Alliance (DA) is starting to make in-roads into ANC support at local and regional level despite its reputation among many black South Africans as the party of white privilege. The DA said it had been inundated with membership inquiries within an hour of Zuma being re-elected.

Even within his own party, young South Africans are snapping at Zuma's heels, demanding political and economic change for a generation that has little memory of apartheid but which remains at the sharp end of 25 percent unemployment.

"The young people of South Africa are tired of promises and need action for economic freedom in our lifetime," the ANC Youth League, which had backed Motlanthe, said in a statement.

(Additional reporting by Jon Herskovitz, David Dolan, and Stella Mapenzauswa; Writing by Ed Cropley; Editing by Pascal Fletcher and Matthew Tostevin)

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Russia expects Obama visit despite "mini-crisis" in ties

MOSCOW (Reuters) - U.S. President Barack Obama is likely to visit Russia in the first half of 2013 despite a "mini-crisis" in relations over U.S. moves to punish Russians accused of rights abuses, a Kremlin aide said on Tuesday.

Russia's President Vladimir Putin has been angered by the U.S. Congress passing the so-called Magnitsky Act which will bar entry to alleged Russian human rights violators and freeze any assets they hold in the United States.

Obama signed the legislation last week. But, signaling that the Kremlin does not want the spat to block efforts to improve relations, foreign policy aide Yury Ushakov said Putin stood by an invitation for the U.S. president to visit Russia.

"We reckon that Obama's visit could take place in the first half of next year," he told a news briefing.

The Russian parliament has given initial approval to a tit-for-tat law barring Americans accused of human rights violations from entering the country, and the "reset" in relations which Obama called for four years ago has not gone as well as hoped.

Lawmakers have also proposed banning adoption of Russian children by Americans, a move backed by Russia's Children's Rights Commissioner, Pavel Astakhov.

The proposal has upset Kremlin critics and human rights activists, and two government ministers called on Tuesday for restraint over such a move. Foreign Minister Sergei Lavrov said the ban would be wrong and Education Minister Dmitry Livanov criticized the idea on Twitter.

"The logic is like 'an eye for an eye', but the logic is wrong, as children could suffer harm if they cannot find adoptive parents in Russia," he said.

Any such ban would go back on a bilateral agreement ratified in June on rules for U.S. citizens adopting Russian children.

MINI-CRISIS

Both Obama and Putin have signaled, since winning presidential elections this year, that they want U.S.-Russian ties to warm up, and Putin invited Obama to visit soon after the U.S. election last month.

Obama is expected to come to Russia in September anyway, for a Group of 20 summit in St Petersburg, but a separate visit for a bilateral summit would send a positive signal to Moscow about his intentions.

Obama visited Russia in 2009, and struck up a good rapport with then-President Dmitry Medvedev. The "reset" led to the signing of a new nuclear-arms reduction treaty, but Obama has a more difficult relationship with Putin.

The Magnitsky Act was drawn up because of U.S. concern over the death in a Russian prison of anti-corruption lawyer Sergei Magnitsky in 2009. It has outraged Russian politicians and members of parliament.

"This is an unfriendly move," Ushakov said at Tuesday's briefing. "These moves cannot be left unanswered."

"The Americans have created a mini-crisis out of nothing. We are losing time for the normal development of relations," he said. "Now we need to spend some time getting through this mini-crisis."

Putin has described the legislation as an attempt by Washington to "reap some political dividends at home".

(Additional reporting by Sonia Elks; Writing by Alexei Anishchuk; Editing by Louise Ireland and Timothy Heritage)

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Russia eyes Syria evacuation as rebels take Damascus district

BEIRUT (Reuters) - Russia sent warships to the Mediterranean to prepare a potential evacuation of its citizens from Syria, a Russian news agency said on Tuesday, a sign President Bashar al-Assad's key ally is worried about rebel advances now threatening even the capital.

Moscow acted a day after insurgents waging a 21-month-old uprising obtained a possible springboard for a thrust into Damascus by seizing the Yarmouk Palestinian camp, an urban zone just 2 miles from the heart of the city, activists said.

The Syrian opposition has scored significant military and diplomatic gains in recent weeks, capturing several army installations across Syria and securing formal recognition from Western and Arab states for its new coalition.

Despite those rebel successes, bloodshed has been rising with more than 40,000 killed in a movement that began as peaceful street protests but has transformed into civil war.

Assad's pivotal allies have largely stood behind him and Iran, believed to be his main bankroller in the conflict, said there were no signs of Assad was on the verge of being toppled.

"The Syrian army and the state machine are working smoothly," Deputy Foreign Minister Hossein Amir-Abdollahian said in Moscow on Tuesday.

But Russia, Assad's primary arms supplier, has appeared to waver with contradictory statements over the past week stressing opposition to Assad stepping down and airing concerns about a possible rebel victory.

Russia's Interfax news agency quoted unnamed naval sources on Tuesday as saying that two armed landing craft, a tanker and an escort vessel had left a Baltic port for the Mediterranean Sea. Russia has a naval maintenance base in the Syrian port of Tartus, around 250 km (155 miles) northwest of Damascus.

"They are heading to the Syrian coast to assist in a possible evacuation of Russian citizens ... Preparations for the deployment were carried out in a hurry and were heavily classified," the Russian agency quoted the source as saying.

Assad and his minority Alawite sect retain a solid grip on most of the coastal provinces of Tartus and Latakia, where their numbers are high. But the mostly Sunni Muslim rebels now control wide swathes of rural Syria, have seized border zones near Turkey in the north and Iraq to the east, and are pushing hard to advance on Damascus, Assad's fulcrum of power that sits close to the western frontier with Lebanon.

It was not possible to independently verify the Interfax report, which came a day after Russia confirmed that two citizens working in the Latakia province were kidnapped along with an Italian citizen. About 5,3000 Russian citizens are registered with consular authorities in Syria.

YARMOUK A "RED LINE"

In Damascus, activists reported overnight explosions and early morning sniper fire around the Palestinian refugee camp of Yarmouk. The Yarmouk and Palestine refugee "camps" are actually densely populated urban districts home to thousands of impoverished Palestinian refugees and Syrians.

"The rebels control the camp but army forces are gathering in the Palestine camp and snipers can fire in on the southern parts of Yarmouk," rebel spokesman Abu Nidal said by Skype.

"Strategically, this site is very important because it is one of the best doors into central Damascus. The regime normally does not fight to regain areas captured any more because its forces have been drained. But I think they could see Yarmouk as a red line and fight back fiercely."

Syria hosts half a million Palestinian refugees, most living in Yarmouk, descendants of those admitted after the creation of Israel in 1948. Damascus has always cast itself as a champion of the Palestinian struggle, sponsoring several guerrilla factions.

The battle in Yarmouk was one of a series of conflicts on the southern edges of Damascus, as the rebels try to seal off the capital in their campaign to end 42 years of rule over the major Arab state by the Assad family.

Both Assad's government and the rebels have enlisted and armed divided Palestinian factions.

Streams of refugees have fled Yarmouk. Many have headed to central Damascus while hundreds more have crossed into Lebanon.

"We walked out on foot without our belongings until we reached central Damascus. We got in a taxi and drove straight for the border," said 75-year-old Abu Ali, speaking at the Lebanon's Masnaa border crossing.

Abu Ali said around 70 percent of Yarmouk residents had fled and many had slept rough on the streets of Damascus.

MEDICAL SHORTAGES, EXTREME HUNGER

Around 200 people died in Syria on Monday alone, according to the British-based Syrian Observatory for Human Rights, which has a network of activists across the nation. Violence has risen sharply, and with it humanitarian conditions are deteriorating.

The World Health Organisation said around 100 people were being admitted daily to the main hospital of Damascus and that supplies of medicines and anesthetics were scarce.

It also reported a rise in cases of extreme hunger and malnutrition coming from across Syria, including the insurgent-dominated rural areas outside the capital, where Assad has unleashed warplanes to try to dislodge rebel units.

Aid organizations say fighting has blocked their access into many conflict zones, and residents in rebel-held areas in particular have grappled with severe food and medical shortages.

Fighting raged across Syria on Tuesday, with fighter jets and ground rockets bombarding rebel-controlled eastern suburbs of the capital and army forces shelling a town in Hama province after clashes reignited there over the weekend.

The Syrian government severely restricts media access into the country, making it difficult to report events on the ground.

An news team for the American NBC network who were kidnapped after entering Syria through the rebel-held northern border returned to Turkey on Tuesday after being freed in a gunfight.

NBC chief foreign correspondent Richard Engel said his team was held by an unidentified band for five days, and the men were subjected to psychological torture including mock shootings.

He said he had a "very good idea" who his captors were.

"This was a group known as the shabbiha. This is a government militia. These are people who are loyal to President Bashar Assad," he said on NBC, adding that the kidnappers spoke openly about their allegiance to the Damascus government.

(Additional reporting by Oliver Holmes, Erika Solomon and Dominic Evans in Beirut, Stephanie Nebehay in Geneva, Afif Diab in Masnaa, Lebanon, Susan Heavey in Washington; Editing by Mark Heinrich)

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Insight: Rattled Israel holds key to Palestinian uprising

HEBRON, West Bank (Reuters) - Mohammad Salaymeh was killed on his 17th birthday after going to buy a cake for the family celebration, shot dead by an Israeli paramilitary policewoman just two years older than him.

The Israeli police called him a terrorist and said he had pulled a gun on guards manning a permanent checkpoint next to his house in this divided city. The gun turned out to be a child's toy and Salaymeh never got to his party.

"He was no terrorist. He was just a lovely kid," said Adel Salaymeh, a relative walking behind Salaymeh's funeral cortege, the teenager's face poking out of the green flag of the Islamic resistance movement Hamas that shrouded his body.

"The people don't want another Intifada (uprising), but if the Israelis carry on like this, then they will get one," he said, rain dripping from his forehead as a crowd of more than 1,000 walked briskly to the sodden cemetery.

As a winter chill falls on the West Bank, tensions are rising after years of relative calm, with clashes reported almost daily across the territory in a tangled ritual that has come to define 45 years of Israeli occupation.

Groups of Palestinian youths, their faces wrapped in a checkered Keffiyeh headdresses, hurl abuse, stones and the odd petrol bomb at soldiers, who respond with tear gas, stun grenades, rubber bullets and the occasional live round.

"Raids in Ramallah, arrests in Jenin, shootings and riots in Hebron. Scenes from the start of the Third Intifada?" said Amir Mizroch, editor of the Israel Hayom English-language news website.

Despite the friction, another sustained, organized uprising against Israeli occupation looks unlikely in the near future.

To a large degree, the Israelis themselves may determine which way the balance tips. A confrontational approach to security, unchecked violence by Jewish settlers or a poorly calibrated response to Palestinian diplomatic maneuvering could yet unleash massive unrest in this rocky, arid territory.

"Uprisings come when people see that their interests and livelihoods are put under extreme pressure," Tayseer Khaled, a senior member of the Palestine Liberation Organisation (PLO), told Reuters. "An explosion in security is totally not in our interests, but the ball is in Israel's court."

UNREST AND PEACE

The West Bank instability is playing out against the backdrop of campaigning for an Israeli general election on January 22. As Israeli society shifts to the right, politicians know they can win votes by appearing tough and uncompromising. This in turn raises the chances of a misstep or misunderstanding.

Even before the election was called, Yuval Diskin, the recently retired head of the Shin Bet internal security agency, was sounding the alarm. "When the concentration of gas fumes in the air is so high, the question is only when the spark will come to light it," he said in May.

The spark that lit the first Intifada in 1987 was an apparently banal road accident involving an Israeli army tank transporter that killed four Palestinians.

That uprising finished in 1993 having opened the way to the Oslo peace accords between Israel and the PLO, which promised an end to the decades-old Arab-Israeli conflict within five years.

The Second Intifada broke out in 2000 after the failure of a U.S.-led drive to negotiate a final peace settlement. Over the following seven years, more than 1,000 Israelis died, half of them in suicide attacks mostly against civilians, and more than 4,500 Palestinians were killed by Israeli forces.

The Palestinians lost ground in the court of world opinion as a result, and their appetite for resistance was curtailed. However, Palestinian self-belief has risen markedly in the past month, driven by different dynamics in the West Bank and Gaza Strip -- two territories divided geographically and politically.

An eight-day conflagration in Gaza saw the Islamic group Hamas fire rockets for the first time at Tel Aviv and Jerusalem, a feat that enabled the militants to claim victory once a ceasefire was agreed -- a verdict the Israelis dispute.

Days later, Palestinian President Mahmoud Abbas, whose administration has limited self-rule in the West Bank, won an overwhelming vote in the U.N. General Assembly, granting de-facto statehood on all the land seized by Israel in a 1967 war.

"The situation has changed in the space of a month. People feel much more confident," said Barkat Abu Senanih, a shoe maker from Hebron -- a perennially tense city where Arabs and Jews live side-by-side, constantly chafing against one another.

"But I don't think an Intifada is in the air. It's not like before. The politicians don't want it. Abbas won't let it happen," he added. Shoe boxes with Hebrew writing stacked in his shop show the ties that bind the Israelis and Palestinians.

The West Bank economy has grown some 40 percent since the end of the Second Intifada. Nowhere is that more visible than in Abbas's administrative capital, Ramallah. Gleaming stone and glass buildings have shot up, foreign aid has poured in and the quality of life is as good as in some European cities.

However, that well-being is built on shaky foundations.

Increased access to easy money saw personal Palestinian debt double from 2008 to the end of 2011, jumping 40 percent last year alone. The aid-dependent government can't balance its books and the World Bank predicts it will run up a budget deficit of 12.3 percent of gross domestic product (GDP) in 2012.

The trappings of wealth have helped stabilize society, giving people a future to build on. But the outlook is cloudy.

EXPLOSIVE COMBINATIONS

Angered by the U.N. statehood drive, which it said breached peace accords, Israel this month withheld $100 million of customs duties raised on behalf of the Palestinians. It said it will keep back at least $300 million more to cover unpaid bills with Israeli utility firms.

Diplomats have urged Israel to relent, warning that this decision will make an already fragile situation much worse.

The cash is badly needed to pay public salaries, including the wages of the West Bank's Western-trained security forces, which has been cooperating quietly with Israel for the past five years, helping reduce the inevitable frictions.

On December 14, local police in their distinctive blue fatigues intervened in Hebron to stop Hamas supporters from clashing with Israeli soldiers stationed in the heart of the city, bringing a hail of stones down upon their heads. Deprived of pay, their willingness to act as a vital buffer might shrivel.

"The lack of political (peace) projects together with financial restraints is an explosive combination," said Ghassan Khatib, a former spokesman for Prime Minister Salam Fayyad who now lectures in contemporary Arab studies at Birzeit University.

"The general trend in opinion polls is that people are not so interested in violence, but the Gaza conflict and the settler problem is radicalizing people," he added.

A survey released by Palestinian researchers at the Jerusalem Media and Communications Centre in February showed 29.3 percent of Palestinians backed "military operations" against Israel, down from a peak of 84.6 percent in 2001.

Some 72 percent of those questioned in the annual poll said economic considerations and the political situation were the most important factors in deciding if they supported violence.

Direct peace talks between Israel and the Palestinians broke down in 2010 because of continued Jewish settlement building in the West Bank and East Jerusalem. Some 500,000 Israelis live on land captured in 1967 and the number is growing every year.

In another act of retaliation after the U.N. vote, Israel announced it would build some 3,000 new settler homes, while officials in Jerusalem this week pushed ahead with plans for the construction of more than 6,800 homes for settlers.

Although most countries deem the settlements illegal, Israel rejects this, claiming biblical and historical ties to the land.

The Palestinians are refusing to return to the negotiating table until the building stops. Israeli Prime Minister Benjamin Netanyahu has rejected this, saying that just as in the past, there should be no preconditions for talks.

Israeli critics accuse Netanyahu of dragging his feet and say inaction will lead to disaster. "If we do not see a (peace) accord in this coming period, we will see a third Intifada," said Shaul Mofaz, head of the opposition Kadima party.

Buoyed by international condemnation of the settlements, the Palestinians say the time has come to increase the pressure.

"Unless we increase the cost of the occupation, I do not think that Israel will be in a position to withdraw from the Palestinian Territories," Mohammed Shtayyeh, a leading member of Abbas's Fatah party, told Reuters.

"The Palestinians should be engaged in massive popular, peaceful resistance," he said.

Just how to raise the cost of occupation lies at the heart of the unresolved dispute between Fatah, which dominates the West Bank, and Hamas, which governs Gaza.

The two groups, which fought a civil war in 2007, say they are now committed to unity, but gaping differences remain.

While Hamas is committed to armed resistance and has refused to renounce an inch of modern-day Israel, although it has said it would consider a long-term truce with the Jewish state, Fatah says it is ready to accept a state along 1967 lines. It believes diplomatic pressure and non-violent confrontation can win out.

In this vein, it is considering joining a welter of global bodies following its U.N. upgrade, including the International Criminal Court in the Hague, which it could use to pursue Israel for alleged war crimes tied to the settlement movement.

Such a move could pose a trickier challenge to Israel than a renewed uprising, with the hi-tech army well versed in dealing with the West Bank's 2.5 million Palestinians. However, senior officers say they are taking nothing for granted.

"Our forces must increase their alertness and maintain their operational preparedness, at all levels," Major General Nitzan Alon, who heads the military Central Command that oversees West Bank operations, told his troops on December 11.

(Additional reporting by Jihan Abdalla and Noah Browning; Editing by Paul Taylor)

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Kyrgyzstan could be "new Afghanistan", says president

BERLIN (Reuters) - The president of Kyrgyzstan warned in his first visit to the West on Tuesday his central Asian republic would suffer the kind of turmoil seen in the south of the region unless it consolidated democratic reforms.

"If we don't develop democracy further in Central Asia or succeed in building a parliamentary democracy in Kyrgyzstan, then a new Afghanistan will arise in Central Asia," President Almazbek Atambayev told a joint news conference in Berlin with German Chancellor Angela Merkel.

The country of 5.5 million people lies on a drug trafficking route from Afghanistan and is home to Russian and U.S. military air bases, while China is extending its economic reach across the border to counterbalance Washington and Moscow.

Kyrgyzstan has overthrown two presidents since 2005 and about 500 people died in clashes in 2010 between ethnic Kyrgyz and Uzbeks. Atambayev became president in 2011 in the first peaceful transition of power in its post-Soviet history.

One of the poorest of the former Soviet republics, the Kyrgyz economy relies heavily on production from a single gold mine and cash sent home by migrant workers. It lacks the rich energy reserves of some neighbours such as Kazakhstan.

"We know what the strategic importance of this region is, you only have to look at the neighbouring countries," Merkel said at the news conference with Atambayev.

Merkel added that Europe must be "fair" in its relations with all of Central Asia and not focus on "countries that have raw materials or are just strategically important as withdrawal routes from Afghanistan".

The two leaders discussed the human rights situation in Kyrgyzstan, including the case of journalist Azimzham Askarov, a campaigner against police brutality who was jailed for life in 2010 on charges of inciting ethnic violence in the city of Osh.

Askarov, an ethnic Uzbek, was awarded the International Press Freedom Award in absentia this year by the Committee to Protect Journalists.

"I got the impression that the president is very well aware of this situation," said Merkel, adding that they discussed the need to respect the rights of Kyrgyzstan's ethnic minorities.

Atambayev said he would like to see Askarov's case reopened if there were grounds, "but it must all be strictly according to the law and be decided by the courts, not by the president".

"We don't want a clan or a family or a person taking our decisions," said Atambayev, whose predecessor Kurmanbek Bakiyev was ousted in 2010 after being accused of nepotism, corruption and brutality. He took shelter in Belarus.

(Additional reporting by Andreas Rinke; editing by Gareth Jones and Andrew Roche)

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Syrian rebels battle army near Damascus

BEIRUT (Reuters) - Syrian rebels clashed with forces loyal to President Bashar al-Assad near Damascus airport on Tuesday, battling for the capital's outskirts after 20 months of conflict which the United Nations said has driven half a million people from the country.

Fighting near the airport, 20 km (12 miles) south-east of Damascus city center, is part of a broader confrontation between Assad's forces and rebels who hold a near continuous arc of territory from the east to the southwest of Assad's power base.

"There were very heavy clashes since yesterday in the town of Haran, on the eastern side of the airport, and there has been intermittent fighting in the Aqraba area by the airport," said rebel spokesman Mussab Abu Qitada.

"The rebels are trying to maintain an encirclement of the airport. They are also still surrounding the Aqraba air base, on the international airport road," he said by Skype from Damascus.

The center of the capital, shielded for months from the violence which has killed 40,000 people since March 2011, echoed to the sound of shelling from Monday evening, residents said.

The shelling appeared to be directed from the Qasioun mountain range, overlooking northern Damascus, towards the rebellious southern suburbs.

The mainly Sunni Muslim rebels have made military gains against the forces still loyal to Assad, many of them from Syria's Alawite religious minority. The rebels have seized military bases across the country in the last month and are starting to encircle the capital, where power cuts and food shortages are hurting residents bracing for winter.

"We are barely surviving," said a woman in the Midan district who would only identify herself as Umm Ahmed. She said she queued in vain from 6 a.m. until midday at bakeries which ran out of bread before she could buy any at the normal price, leaving her looking for supplies at much inflated rates.

"If I want to buy it on the street, the black market price is 150 lira (about $2) - three times the cost," she said. "We are living without electricity and water, and the food is very expensive."

Central Damascus has been suffering up to 12 hours of power cuts a day, residents say. Movement around the city, peppered with security checkpoints, is increasingly difficult and soldiers, security forces and local vigilantes are everywhere.

HALF A MILLION REFUGEES

The conflict started with street protests inspired by uprisings across the Arab world. Demonstrations were met with gunfire by Assad's forces and spiraled into the most protracted and destructive battle of the Arab uprisings.

The fighting has driven hundreds of thousands of Syrians into neighboring countries and the United Nations refugee agency UNHCR said on Tuesday more than half a million were either registered or awaiting registration in the region.

Lebanon is now host to 154,387 registered Syrian refugees, Jordan has 142,664, Turkey 136,319, Iraq 65,449 and North Africa 11,740, UNHCR said in a statement issued in Geneva. In addition, there are more than 1.5 million Syrians who fled violence in their homes and are displaced in safer areas within the country.

Large numbers of Syrians have also crossed into neighboring countries but have not yet come forward to register for refugee status and assistance, it said. These include about 100,000 in Jordan, 70,000 each in both Turkey and Egypt and tens of thousands in Lebanon, it said, citing government estimates.

Assad's political and armed opponents, dogged by splits and rivalries throughout their battle to end his family's 42-year rule, have established a more unified political opposition and military command, hoping to win international recognition and stronger support on the battlefield.

Abu Moaz al-Agha, a leader and spokesman of the powerful Ansar al-Islam Gathering which includes many Islamist rebel brigades, said the new, Islamist-dominated military command elected in Turkey at the weekend deserved more foreign backing.

"What we need now is the heavy weapons and we expect to get them after the formation of this. The anti-armour and anti-aircraft weapons are what we are expecting," he told Reuters by Skype from Turkey before heading on a trip to the Gulf.

"The Qataris and the Saudis gave us positive promises. We will see what will happen," he said, adding that officials from Western countries, who also attended the meeting in Turkey, had not mentioned arming the rebels but talked about "sending aid".

The new political opposition coalition, formed in Qatar last month, will meet officials from countries mostly opposed to Assad in Morocco on Wednesday, hoping for a clear recognition as the legitimate representatives of the Syrian people.

France, Britain, Turkey and the Gulf states have already granted the formal recognition. The European Union, in a meeting on Monday, moved a step closer towards recognition and the United States has suggested it could also endorse the coalition.

(Additional reporting by Erika Solomon and Mariam Karouny in Beirut; Editing by Alastair Macdonald)

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Mali PM forced to quit by army

BAMAKO (Reuters) - Mali's prime minister was forced to resign on Tuesday by the soldiers who staged a coup in March, complicating international efforts to help push Islamists from the north of the country.

Once a beacon of democracy in West Africa, Mali has been mired in crisis since ethnic Tuareg rebels and al Qaeda-linked Islamist fighters seized the northern two-thirds of the arid nation in the wake of the coup.

Although the soldiers handed over to a civilian president and prime minister under international pressure, they have remained powerful.

Cheick Modibo Diarra resigned as prime minister hours after he was arrested trying to leave the country for former colonial power France and was brought to the ex-junta's headquarters at a barracks in Kati, just outside Bamako.

"I, Cheick Modibo Diarra, hereby resign with my entire government," a nervous-looking Diarra said in a short statement broadcast on state television early on Tuesday. Diarra is a former NASA scientist and Microsoft chief for Africa who was made prime minister in April.

Fearing Mali has become a safe haven for terrorism and organised crime, West African leaders have signed off on a plan to send 3,300 soldiers to Mali to revamp Mali's army and then support operations to retake the north.

Diarra's forced resignation was a clear indication that those behind the coup still maintained considerable control however, a fact that could discourage international partners from backing the plan until civilian rule is strengthened.

France called for a new government to be formed quickly after the resignation.

"These developments underline the need for the rapid deployment of an African stabilization force," French Foreign Ministry spokesman Philippe Lalliot told reporters in Paris.

A spokesman for the former junta said Tuesday's events did not amount to a new coup and that interim civilian President Diouncounda Traore remained in place.

EX-JUNTA POWERFUL

Diarra was forced to step down during a meeting with ex-coup leader Captain Amadou Sanogo, according to Bakary Mariko, the spokesman.

Mariko accused Diarra of recording two speeches - the contents of which were not disclosed - and of urging his supporters to disrupt talks on the political crisis this week.

"This is not a coup. The president is still in place but the prime minister was no longer working in the interests of the country," Mariko said.

There was no immediate reaction from the president.

Downtown Bamako was calm, but the main road leading to Kati was blocked for security reasons, residents said.

Coup leader Sanogo has been repeatedly accused of meddling in politics since he stepped down and was officially tasked with overseeing reforms of Mali's army.

A senior west African diplomat said Diarra's resignation shows there was a de facto leader orchestrating things in Mali.

"Sanogo is pulling at the strings. Until we have a real transitional government in place, we will keep having these problems," the diplomat said, requesting not to be named.

Even before Diarra's arrest and resignation, support for the military intervention plan was not universal.

France is keenest to see military action to tackle the Islamist groups, including al Qaeda's North African wing, AQIM. But the United States and the United Nations have expressed concern, saying the plan lacks necessary detail.

The United States warned on Monday that Mali was "one of the potentially most explosive corners of the world".

Some of Mali's politicians support the idea of a foreign-backed military operation while others, including much of the military, say they need only financial and logistical support.

Mariko said the Malian army was ready to act even without international help.

"We want the help of the international community but if it has to wait until September or until an undefined date, then the Malian army will act to free its territory," he said.

Diarra was made prime minister when the junta officially handed power back to civilians. As the son-in-law of Moussa Traore, a former Malian coup leader and president, he appeared to have good ties with the military.

However, tensions became particularly acute in recent weeks, with analysts saying Diarra, a relative newcomer to Malian politics after years abroad, seemed keen to establish a political base of his own ahead of any future elections.

Mariko later told French television France 24 that the prime minister had failed in the two missions of liberating the north and the organizing free and transparent elections.

"Since he was appointed he has not acted as a man of duty. Everything he did was for his own personal agenda," he said.

(Additional reporting by David Lewis in Dakar and John Irish in Paris; Writing by David Lewis and Bate Felix; Editing by Pascal Fletcher, Joe Bavier and Catherine Evans)

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