Vietnam condemns China's sea claims as "serious violation"

HANOI/NEW DELHI (Reuters) - Vietnam condemned on Tuesday China's claims to disputed South China Sea islands as a serious violation of its sovereignty after saying it was setting up patrols to protect its fisheries and accusing Chinese boats of sabotage.

The condemnation of China's claims to the sea and its numerous reefs and tiny islands was the strongest yet from Vietnam since tension flared this year and came after India declared itself ready to send navy ships to safeguard its interests in the disputed waters.

Claims by an increasingly powerful China over most of the South China Sea have set it directly against U.S. allies Vietnam and the Philippines, while Brunei, Taiwan and Malaysia also claim parts of the mineral-rich waters.

Vietnam's condemnation came a day after its state oil and gas company, Petrovietnam, accused Chinese boats of sabotaging an exploration operation by cutting a seismic cable being towed behind a Vietnamese boat.

Vietnam's Foreign Ministry spokesman condemned the cable cutting as well as some recent Chinese provincial regulations that identified the disputed Spratly and Paracel islands as Chinese, and a map that did the same thing.

"The actions of the Chinese side have seriously violated Vietnam's sovereignty over the two archipelagos," the spokesman, Luong Thanh Nghi, said in a statement.

Vietnamese Foreign Ministry officials met representatives of the Chinese embassy in Hanoi on Monday, Nghi said.

The Vietnamese officials handed over a diplomatic note "resolutely opposing the above mentioned actions by the Chinese side, asking China to respect Vietnam's sovereignty, to immediately stop such wrongful acts and not to repeat similar actions."

Earlier, Vietnam said civilian-led patrols, backed by marine police and a border force, would be deployed from January 25 to stop foreign vessels violating fishing laws in Vietnam's waters.

A decree on the Vietnamese patrols was signed on November 29, the day Chinese media announced new rules authorizing police in the southern Chinese province of Hainan to board and seize foreign ships in the South China Sea.

"It's going to lead to friction," Carl Thayer, a Southeast Asia security expert at the University of New South Wales in Australia, said of China's new rules that take effect from January 1 on boarding ships which "illegally enter" waters it claims.

"If it begins to assert these rights and isn't challenged, over time it becomes customary, it becomes practice."

On Monday, Petrovietnam said the seismic vessel had been operating outside the Gulf of Tonkin when the cable was severed on Friday. It had earlier been surveying the Nam Con Son basin further south - an area where Indian state-run explorer Oil and Natural Gas Corp (ONGC) has a stake in a Vietnamese gas field.

Petrovietnam posted on its website comments by the deputy head of exploration, Pham Viet Dung, in which he said the cable was repaired and the survey resumed the following day.

"The blatant violation of Vietnamese waters by Chinese fishing vessels not only violates the sovereignty ... of Vietnam but also interferes in the normal operations of Vietnamese fishermen and affects the maritime activities of Petrovietnam," Dung was quoted as saying.

Asked about the complaint, Chinese Foreign Ministry spokesman Hong Lei told a briefing in Beijing that China was checking the reports of the incident, which he said was understood to have taken place in an area of overlapping claims.

"Chinese fishing boats were operating in normal fishing activities," Hong said.

COLLISION COURSE?

India has also declared itself ready to deploy naval vessels to the South China Sea to protect its oil-exploration interests there, a new source of tension in a disputed area where fears of conflict have been growing steadily.

Indian navy chief, Admiral D.K Joshi, said on Monday that, while India was not a territorial claimant in the South China Sea, it was prepared to act, if necessary, to protect its maritime and economic interests in the region.

"When the requirement is there, for example, in situations where our country's interests are involved, for example ONGC ... we will be required to go there and we are prepared for that," Joshi told a news conference.

"Now, are we preparing for it? Are we having exercises of that nature? The short answer is yes," he said.

An Indian government spokesman on Tuesday played down the comments: "This is an issue for the parties concerned to resolve."

India is not the only non-claimant nation concerned about disruption to shipping or oil exploration in the South China Sea. The United States, a close ally to several of the Southeast Asian claimants, has also voiced concern at the prospect of China stopping international ships in contested waters.

India has sparred diplomatically with China in the past over its gas and oil exploration block off the coast of Vietnam.

Any display of naval assertiveness by India in the South China Sea would likely fuel concern that the navies of the two rapidly growing Asian giants could be on a collision course as they seek to protect trade routes and lock in the supply of coal, minerals and other raw material from foreign sources.

Joshi described the modernization of China's navy as "truly impressive" and a source of major concern for India.

Asked what China would do if Indian navy entered the South China Sea to protect its oil interests, the Chinese Foreign Ministry spokesman, Hong, said China had "indisputable sovereignty" over the sea's islands and surrounding waters.

"China opposes unilateral oil and gas development in disputed waters of the South China Sea. We hope that concerned countries respect China's position and rights, and respect efforts made through bilateral talks to resolve disputes."

Singapore, home to the world's second-busiest container port, joined the Philippines on Monday in expressing concern at the prospect of Chinese police boarding ships. The Philippines on Saturday condemned the Chinese plan as illegal.

Estimates for proven and undiscovered oil reserves in the South China Sea range as high as 213 billion barrels of oil, the U.S. Energy Information Administration said in a 2008 report. That would surpass the proven oil reserves of every country except Saudi Arabia and Venezuela, according to the BP Statistical Review.

On Monday, China's National Energy Administration said China aims to produce 15 billion cubic meters of natural gas a year from the South China Sea by 2015.

It said the sea would "form the main part" of China's offshore gas exploration plans.

(Reporting by Arup Roychoudhury and Mayank Bhardwaj in NEW DELHI, Kevin Lim in SINGAPORE, Ho Binh Minh in HANOI, Paul Carsten in Bangkok and Ben Blanchard in Beijing; Editing by Jason Szep and Robert Birsel)

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Netanyahu's Israeli settlement push could be ballot box boon

JERUSALEM (Reuters) - For Benjamin Netanyahu, plans to expand Israeli settlements may risk a diplomatic crisis with Europe but could prove a good bet at the ballot box.

With a January 22 election looming, the Israeli leader has defied long-standing international opposition to settlements and announced plans to build at least 3,000 more homes in the occupied West Bank and East Jerusalem after the United Nations' de facto recognition of Palestinian statehood.

Standing up to Europe, where a string of Israeli diplomats were summoned for reprimands by the governments of Britain, France, Spain, Sweden and Denmark on Monday, could help cement right-wing voter support for the conservative prime minister.

"We feared that politicians would clamber over themselves to show who could be tougher with the Palestinians. However we had hoped that Netanyahu would show more restraint. It didn't happen," said a Western diplomat in Jerusalem.

"We did not want the Palestinians to go to the United Nations during an Israeli election campaign precisely for this reason," the diplomat said.

Israel rebuffed European protests and appeals to reverse course on the settlement drive, saying it would "stand by its vital interests, even in the face of international pressure".

Settlement projects on land Israel captured in the 1967 Arab-Israeli War are considered illegal by most world powers and have routinely drawn condemnation from them. Some 500,000 Israelis and 2.5 million Palestinians live in the West Bank and East Jerusalem.

But this time, the government also ordered new "planning work" in one of the most highly sensitive areas of the West Bank known as "E1". Israeli housing on its barren hills could split the West Bank in two, denying the Palestinians a viable state.

Many Israelis have traditionally viewed the United Nations and many European governments as being particularly sympathetic to the Palestinian cause.

And in an aside by Netanyahu during a visit to the United States, Israel's main ally, he appeared to indicate he shared those sentiments.

"Americans get it," he said, referring to arguments he has made in support of his government's policies. "Europeans don't."

That has not always been the case as far as U.S. President Barack Obama is concerned, particularly on the settlement issue and the open question of whether Israel might attack Iran's nuclear program in defiance of Washington's calls to give diplomatic options more time.

But Obama has never been at the top of Israelis' popularity lists and friction between the two leaders seems not to have hurt Netanyahu in the opinion polls, which predict he will coast to victory in the upcoming ballot.

VOTER EXPECTATIONS

Tamir Sheafer, a political scientist at Jerusalem's Hebrew University, said Netanyahu's settlement move was "what his voters expect of him" and stemmed from internal political considerations.

"Maybe they are worried in (Netanyahu's) Likud that right-wing voters will opt instead for (the far-right religious)Habayit Hayehudi party," Sheafer said.

So far, European anger over the settlement plan has not led to any sanctions against Israel. Any punitive measures before the election would fuel arguments made by Netanyahu's political opponents that he was deepening its diplomatic isolation.

"I think there are electoral considerations (behind Netanyahu's settlement moves)," said Gideon Rahat, a Hebrew University political scientist. "But he's also used to (Europe and the United States) not bothering him much and now they seem to have changed the rules of the game."

Still, Sheafer said, "something very unusual or unexpected would have to happen for the next government not to be headed by Netanyahu - it's very simple mathematics, the center-left simply doesn't have enough parliamentary seats" to form a coalition.

With details of the future settler housing in the West Bank and East Jerusalem still sketchy and Israeli officials saying any construction in E1 would be more than a year away, Israel and Europe still have room to maneuver.

"We don't know where these units will be built. I don't think anyone knows. They are probably scurrying around now trying to figure out where they will be built," said Daniel Seidemann, an Israeli expert on settlements.

"This announcement was made for dramatic effect. That doesn't mean it won't happen, it means the dramatic effect precedes the decision," Seidemann said.

Tzipi Livni, a former foreign minister who is running in the upcoming poll as the head of a new centrist party, said in a statement that Netanyahu's settlement move "isolates Israel and encourages international pressure".

But she also appeared to suggest that Netanyahu might be bluffing.

"In any case (the construction) won't happen," she said.

(Additional reporting by Crispian Balmer and Allyn Fisher-Ilan; Writing by Jeffrey Heller; Editing by Andrew Osborn)

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No Russian revolution after a year of protests

MOSCOW (Reuters) - Artyom Kolpakov has learnt not to hope for too much after an exhilarating but ultimately frustrating year of protests against Russian leader Vladimir Putin.

Seething with anger over suspected fraud in a parliamentary election, the 39-year-old businessman ignored his wife's pleas to stay at home on Dec 5 last year and joined a rally in Moscow's Chistiye Prudy area where people chanted "Revolution!"

The demonstration, at which police made dozens of arrests, touched off the biggest wave of protests against the former KGB spy since he was first elected president in 2000.

For a few weeks, the mainly young, urban and middle-class protesters dared hope that Putin's days in power were numbered. Even in the heart of winter, the biggest rallies drew tens of thousands of people shouting "Russia without Putin!".

A year on, Putin is back in the presidency after four years as premier, the opposition is divided and the protests have lost momentum after failing to take off in the provinces, where the president's support is traditionally stronger.

"There's no longer anything revolutionary in the rallies like there was back then, when they were spontaneous, like at Chistiye Prudy," Kolpakov said.

"It was stupid to ever think that everything would change (because of the protests). Breaking something down does not mean building something else. Building something is much harder."

But Kolpakov, who runs a small recording studio, still plans to attend an "anniversary" march on December 15 to show solidarity with a cause that he believes has unlocked the door to change in Russian society however slow it may be in fully opening.

Putin's opponents say his authority is gradually being eroded as he struggles to find a new direction or a "big idea" to push Russia forwards and strengthen his grip on power.

"Peaceful protests are all we have at our disposal. You can feel the mood of society and Putin's ratings are falling. It's clear that now he's got to do something to respond," Kolpakov said.

EVOLUTION, NOT REVOLUTION

The rally on December 5, 2011 was the biggest opposition protest in years. It spawned a larger rally five days later as outrage grew over the police intervention and over concerns that vote-rigging may have helped Putin's United Russia win the election.

Anti-corruption blogger Alexei Navalny missed the second protest because he had been sentenced to 15 days in jail for resisting the police at the first demonstration.

But he was back for the next rallies and established himself as the most prominent of the motley group of opposition leaders.

His message now is that change will come slowly. The opposition mantra is evolution, not revolution.

"It is clear that Putin's regime is not giving up and will not give up, that he will push back against us and is willing to resort to repression," Navalny said on the sidelines of an opposition meeting.

"But over the past year the situation in the country has changed completely ... Tens, even hundreds of thousands of people are involved in protest activities, and we could not have imagined this a year ago. I still believe we are on the threshold of major changes and all we've done was not in vain."

Few Russians would dispute the fact that the protests have accelerated the birth of a civil society in Russia two decades after the collapse of the Soviet Union, particularly in big cities such as Moscow.

Hundreds of interest groups have sprung up, some of them defending citizens' rights on single issues and others opposition-minded discussion groups.

The protests initially forced the Kremlin into concessions, letting more parties register and restoring the election of regional governors who had previously been appointees. But critics say the Kremlin used fine print and political muscle to limit the effects of the reforms.

Putin was elected to a six-year third term in March and the parliament, dominated by his party, has pushed through laws which critics say can be used to stifle dissent - tightening controls of the Internet, imposing new checks on foreign-funded lobby groups and broadening the definition of treason.

Several leaders face what they say are politically motivated criminal charges intended by the Kremlin to limit their opposition activities. Navalny, for example, could be jailed for up to 10 years if found guilty of charges of stealing timber from a state firm.

Regional elections in October tightened Putin's hold on power and underlined the opposition's failure to build the street protests into an effective challenge. They have all but no seats in parliament.

"FIRST GRADERS"

The Kremlin, perhaps with bravado and certainly with relief after a tricky start to 2012 when the protests were at their peak, says it does not regard the opposition as a big threat.

"Fortunately, there will be no revolution in Russia. There are simply not enough young people," said Konstantin Kostin, a former Kremlin political aide who still advises the president in his role as head of a political think tank.

He dismissed the opposition leaders as "first-grade kids."

"I always tell our 'revolutionaries': Don't fool around, go and take part in the election, so that in seven or eight years you can make a serious election bid," Kostin said.

The Kremlin has denied launching a political clampdown on the opposition and accused foreign governments, including the United States, of meddling in Russia's domestic affairs.

Most Russian media have remained loyal to the Kremlin, preventing the opposition gaining regular access to a mass audience except on the Internet.

The opposition has at times shot itself in the foot and played into the Kremlin's hands, by arguing in public.

Although it tries to present a united front, the opposition includes nationalists, liberals, ecologists and leftists and its leaders have failed to unite on much except a desire to oust Putin. Even agreement on a date, venue and slogans for rallies has often proved difficult at chaotic opposition meetings.

Clashes with police at a rally on May 6, the eve of Putin's inauguration, further damaged the opposition's image and scared some supporters away from later rallies as attendance dwindled.

Some Russians even blame the opposition for new fractures in society, especially since the trial of the all-women punk band Pussy Riot over its profane protest in a Russian Orthodox Church over Putin's ties with the clergy.

A majority of Russians opposed the protest even though many disapproved of the two-year jail sentences handed down to two of the band's members. The case came to embody the gulf between liberal and conservative Russians.

PUTIN'S PROBLEMS

But opposition leaders are also encouraged by the decline in Putin's own image. At 60, he is an object of biting satire after almost 13 years in power and has a back problem which has undermined his macho image.

Many foreign investors continue to be hesitant about investing in Russia, which is heavily dependent on the price of energy exports remaining high, and are worried by issues such as corruption and the weak rule of law.

Many rich Russians continue to show their own worries by taking their money out of the country. Capital flight is running at about the same rate as last year, when it reached $84.2 billion, the Central Bank said last month.

Putin portrays himself as a patriot defending Russia's interests and has overseen several high-profile anti-corruption cases in a campaign that appears intended to win votes in a country where corruption is seen as one of the biggest problems.

But a new opinion poll by the independent Levada research group showed Putin's approval rating had fallen from 67 percent to 63 percent, a sign that many are skeptical about the true intention of the anti-graft campaign and how far it will go.

Such polls give the opposition hope.

"We are living in a very dynamically changing situation. A lot of the people who have fallen out of love with Putin are not going to fall in love with him again," Ksenia Sobchak, a socialite turned opposition figure, said in London on Monday.

"And despite the tough period that lies ahead, this is an inevitable process towards success.

(Additional reporting by Gleb Bryanski, Maria Golovnina, Steve Gutterman and Gabriela Baczynska; editing by Anna Willard)

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U.S. court hearing set in Strauss-Kahn civil lawsuit

NEW YORK (Reuters) - Former International Monetary Fund head Dominique Strauss-Kahn and the hotel maid who accused him of sexual assault will appear in New York state court next week to brief a judge on the status of settlement talks in the maid's civil case against him.

The setting of the court date comes just days after a source familiar with the matter said the two sides had reached a preliminary agreement to settle the case.

"The parties have been directed to appear before me on December 10 to report on the status of settlement discussions," Justice Douglas McKeon, the Bronx County Supreme Court judge overseeing the case, said on Tuesday. "If the case settles, this will be announced in open court on that date."

Strauss-Kahn's lawyers in the United States and France have acknowledged that a deal was under discussion but said last week that no settlement had been reached. They denied a report that the 63-year-old had agreed to pay the maid, Nafissatou Diallo, $6 million to end the lawsuit.

A source familiar with the case said the amount of any settlement would likely be the subject of a confidentiality agreement.

The scheduling of the status conference, however, may signal that a final deal has been reached. Lawyers for both Strauss-Kahn and Diallo did not immediately respond to requests for comment on Tuesday morning.

Diallo accused Strauss-Kahn of attacking her in his luxury hotel room in Manhattan on May 14, 2011. The allegations led to Strauss-Kahn's arrest, forced his resignation from the IMF and destroyed his status as a frontrunner for the French presidency.

The criminal charges were dropped in August 2011 after New York prosecutors developed doubts about Diallo's credibility. Diallo filed the civil lawsuit against Strauss-Kahn a few weeks before the case was dismissed.

Strauss-Kahn, who has said that the encounter with Diallo was a "moral error" but was entirely consensual, filed a countersuit against her, claiming defamation.

Even as the U.S. case appears close to an end, Strauss-Kahn is awaiting a decision by a French court on December 19 on whether to call off an investigation involving parties in Lille attended by prostitutes, where he risks trial on a charge of "aggravated pimping.

In recent months, Strauss-Kahn has been making an under-the-radar comeback with a handful of speaking engagements at private conferences and by setting up a business consultancy firm in Paris.

If the Lille case is dropped and Diallo ends her civil lawsuit, Strauss-Kahn would be freer to pursue his consultancy work and could even consider a return to public life in France, where he has been shunned since the Diallo scandal.

(Editing by Dan Burns and Jackie Frank)

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U.S. denies Iran's reports of captured drone

DUBAI (Reuters) - Iran said on Tuesday it had captured a U.S. intelligence drone in its airspace over the Gulf in the last few days, but the U.S. military quickly denied having lost any unmanned aircraft in the Middle East.

The incident highlighted tensions in the Gulf as the Islamic Republic and the United States demonstrate their military capabilities in the vital oil exporting region in a standoff over Iran's disputed nuclear program.

Iran has repeatedly threatened to close the Strait of Hormuz - through which about 40 percent of the world's seaborne crude oil is shipped - if it comes under attack. U.S. commanders have said they will not let that happen.

The Islamic Revolutionary Guards Corps (IRGC) said on its website that the ScanEagle drone had been flying over the Gulf in the last few days and was "captured" when it strayed into Iranian airspace.

A spokesman for U.S. Naval Forces Central Command in Bahrain said no U.S. drone had gone missing in the region recently.

"The U.S. Navy has fully accounted for all unmanned air vehicles (UAV) operating in the Middle East region. Our operations in the Gulf are confined to internationally recognized water and air space," Commander Jason Salata said.

Iranian Foreign Minister Ali Akbar Salehi said Iran had warned the U.S. over its violations and the drone was evidence of American incursions which it would use it to pursue its complaint "via international bodies", IRIB News reported.

The IRGC statement did not specify when or where the drone was caught, or whether the unmanned spy plane was shot down or crashed. But it released what it said was video of an apparently undamaged ScanEagle being examined by uniformed officers beneath a sign reading "We shall trample on the U.S." in English.

The incident is the latest in a string of complaints by Iran over what it says are U.S. violations of its territory in an often clandestine conflict over Tehran's nuclear program that has featured assassinations, espionage and cyber sabotage.

The ScanEagle is a 4-ft (1.25-metre) long "off the shelf" spy plane manufactured by U.S.-based Boeing. The company also supplies and operates drones for customers in several Middle Eastern countries, including to help ensure oil platform security in the Gulf, according to its website.

Iran and OPEC rival Saudi Arabia have also accused each other of violating each other's territory near oil and gas fields in the Gulf over the past year.

VIOLATIONS

In November, the United States said Iranian warplanes shot at a U.S. surveillance drone flying in international airspace. Iran said the aircraft had entered its airspace to spy on Iranian oil platforms and said it would respond "decisively" to any incursions.

Days later Iran's ambassador to the United Nations, Mohammad Khazaee, wrote to Secretary-General Ban Ki-Moon to complain about alleged repeated U.S. violations of Iranian airspace, describing them as "illegal and provocative acts".

Khazaee said that U.S. craft had entered southern Iran seven times in October around Bushehr where Iran's only nuclear power station is situated.

A year ago to the day, Iranian forces announced they had captured a U.S. RQ-170 reconnaissance drone in eastern Iran which was reported lost by U.S. forces in neighboring Afghanistan.

Iranian commanders have since announced they have extracted valuable technology from the aircraft and were in the process of reverse-engineering it for their own defense industry.

The United States and its allies believe Tehran is trying to develop nuclear weapons and have imposed tough economic and financial sanctions. Iran says its program is purely peaceful.

Israel has threatened to bomb Iranian nuclear sites if diplomacy and sanctions fail to stop its nuclear activities. In October, Israel shot down an Iranian-made drone launched into the Jewish state by Lebanese Islamist group Hezbollah.

According to Boeing's publicity material, the ScanEagle drone can be launched by a catapult from mobile vehicles or small ships, making it independent of runways.

It can fly pre-programmed or operator-run missions guided by the U.S. Global Positioning System (GPS) and its onboard flight control system.

It is retrieved using a "Skyhook" system in which the drone catches a rope hanging from a 50-ft (16-metre) high pole.

(Writing by Marcus George and Daniel Fineren; Editing by Anna Willard and Paul Taylor)

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Palestinians warn Israel must be held accountable over settlements

UNITED NATIONS (Reuters) - The Palestinians accused Israel in a letter to the United Nations of planning to commit further "war crimes" by expanding Jewish settlements after the Palestinians won de facto U.N. recognition of statehood and warned that Jerusalem must be held accountable.

In the letter to U.N. Secretary-General Ban Ki-moon and the U.N. Security Council, the Palestinians said Israel was behaving "in a rogue, hostile and arrogant manner, contravening all principles and rules of international law and reacting with contempt to the will of the international community."

After the U.N. General Assembly upgraded the Palestinians' status at the world body on Thursday from "observer entity" to "non-member state," Israel said on Friday it would build 3,000 more settler homes in the West Bank and East Jerusalem - areas Palestinians want for a future state, along with Gaza.

Approximately 500,000 Israelis and 2.5 million Palestinians live in the West Bank and East Jerusalem.

"A clear message must be sent to Israel that all of its illegal policies must be ceased or that it will be held accountable and will have to bear the consequences if its violations and obstruction of peace efforts," Palestinian U.N. observer Riyad Mansour wrote in the letter dated Monday.

After winning the U.N. status upgrade, the Palestinians can now access the International Criminal Court in The Hague, which prosecutes people for genocide, war crimes and other major human rights violations and where it could complain about Israel.

The Palestinians have said they will not rush to sign up to the International Criminal Court, but have warned that seeking action against Israel in the court would remain an option if Israel continued to build illegal settlements.

Prior to the U.N. vote, some Western nations unsuccessfully pushed for a Palestinian pledge not to pursue Israel in the ICC.

(Reporting by Michelle Nichols; Editing by Bill Trott)

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Tunisian Islamists, leftists clash after job protests

TUNIS (Reuters) - Tunisian police broke up a clash in Tunis on Tuesday after pro-government Islamists attacked labor union leaders they blamed for inciting protests last week against the Islamist government.

Several hundred Islamists with knives and sticks charged a gathering of the UGTT main labor union body in the capital and broke its office windows with stones, a Reuters witness said. Police then intervened to separate the two groups.

"UGTT, you are thieves, you want to destroy the country," the Islamists chanted. They also carried banners.

Hundreds of leftist union members, who backed days of protests over lack of jobs and development in the deprived town Siliana last week, had been chanting slogans in the streets by the UGTT headquarters calling for a general strike and downfall of the government led by the Islamist Ennahda party.

Ennahda came to power last year after an uprising brought down veteran ruler Zine al-Abidine Ben Ali, whose police state had repressed Islamists and promoted secularism.

Some 2,000 unionists gathered after the clashes at the government headquarters in Tunis, demonstrating against Ennahda prime minister Hamadi Jebali.

"Ennahda will end up like Ben Ali. They have not chosen their enemy well," said one demonstrator who did not give his name.

Ennahda accused leftists who lost last year's elections of fomenting the unrest in Siliana by provoking Tunisians in impoverished areas into confrontations that would drive away foreign investors.

The protests, which led to at least 252 injuries including some cases of blinding by birdshot, began after a call by the UGTT to take to the streets to demand jobs, investment and the removal of Ennahda's Islamist governor of the province.

The government on Saturday temporarily removed the local governor, promised jobs to victims of the 2010 uprising, and police stopped using birdshot after criticism of "excessive force" from the U.N. Rights Commissioner Navi Pillay.

The protests were the fiercest since more conservative Salafi Islamists attacked the U.S. embassy in Tunis in September over an anti-Islam film made in California, in violence that left four people dead.

The clashes on Tuesday did not appear to involve Salafis.

"This is a message from Ennahda to stop union activism. It's the same method used by Ben Ali," said UGTT figure Fethi Debek.

The shift to slogans against the Islamists in Siliana seemed to wrong-foot the government, which has been absorbed so far with violent disputes between Salafis and liberals over the future direction of what was once a bastion of Arab secularism, and securing international funding to meet budget targets.

The Western-backed government secured international funding last week for an economy suffering from the financial crisis in the European Union, Tunisia's main trading partner.

(Reporting by Tarek Amara; Writing by Andrew Hammond; Editing by Jon Hemming)

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NATO warns Syria not to use chemical weapons

BEIRUT (Reuters) - NATO told Syrian President Bashar al-Assad on Tuesday that any use of chemical weapons in his fight against encroaching rebel forces would be met by an immediate international response.

The warning from NATO Secretary-General Anders Fogh Rasmussen came as U.S. government sources said Washington had information that Syria was making what could be seen as preparations to use its chemical arsenal.

Syrian forces meanwhile bombarded rebel districts near Damascus in a sustained counter-attack to stem rebel gains around Assad's power base.

Syrian state media said a rebel mortar attack on a school had killed 28 students and a teacher.

International concern over Syria's intentions has been heightened by reports that its chemical weapons have been moved and could be prepared for use.

"The possible use of chemical weapons would be completely unacceptable for the whole international community and if anybody resorts to these terrible weapons I would expect an immediate reaction from the international community," Rasmussen told reporters at the start of a meeting of alliance foreign ministers in Brussels.

The chemical threat made it urgent for the alliance to send Patriot anti-missile missiles to Turkey, Rasmussen said.

The French Foreign Ministry referred to "possible movements on military bases storing chemical weapons in Syria" and said the international community would react if the weapons were used.

U.S. President Barack Obama on Monday told Assad not to use chemical weapons, without saying how the United States might respond. The Foreign Ministry in Damascus said it would never use such weapons against Syrians.

The U.S. has collected what has been described as highly classified intelligence information demonstrating that Syria is making what could be construed as preparations to use elements of its extensive chemical weapons arsenal, two U.S. government sources briefed on the issue said.

One of the sources said that there was no question that the US "Intelligence community" had received information pointing to "preparations" under way in Syria related to chemical weapons. The source declined to specify what kind of preparations had been reported, or how close the intelligence indicated the Syrians were to deploying or even using the weapons.

Western military experts say Syria has four suspected chemical weapons sites, and it can produce chemical weapons agents including mustard gas and sarin, and possibly also VX nerve agent. The CIA has estimated that Syria possesses several hundred liters of chemical weapons and produces hundreds of tonnes of agents annually.

FLIGHTS SUSPENDED

The fighting around Damascus has led foreign airlines to suspend flights and prompted the United Nations and European Union to reduce their presence in the capital, adding to a sense that the fight is closing in.

The army fightback came a day after the Syrian foreign ministry spokesman was reported to have defected in a potentially embarrassing blow to the government.

The Syrian Observatory for Human Rights said 200 people were killed across Syria on Monday, more than 60 of them around Damascus. Assad's forces bombarded districts to the south-east of the capital on Tuesday, near to the international airport, and in the rebel bastion of Daraya to the south-west.

Opposition footage posted on the Internet showed a multiple rocket launcher fire 20 rockets, which activists said was filmed at the Mezze military airport in Damascus.

Reuters could not independently verify the footage due to the government's severe reporting restrictions.

In central Damascus, shielded for many months from the full force of a civil war in which 40,000 people have been killed, one resident reported hearing several loud explosions.

"I have heard four or five thunderous blows. It could be barrel bombs," she said, referring to makeshift bombs which activists say Assad's forces have dropped from helicopters on rebel-dominated areas.

The state news agency said that 28 students and a teacher were killed near the capital when rebels fired a mortar bomb on a school. Rebels have targeted government-held residential districts of the capital.

The mainly Sunni Muslim rebel forces have made advances in recent weeks, seizing military bases, including some close to Damascus, from forces loyal to Assad, who is from Syria's Alawite minority linked to Shi'ite Islam.

Faced with creeping rebel gains across the north and east of the country, and the growing challenge around the capital, Assad has increasingly resorted to air strikes against the insurgents.

A diplomat in the Middle East said Syrian Foreign Ministry spokesman Jihad Makdissi had left the country and defected, while the British-based Observatory said it had information that he flew from Beirut on Monday afternoon heading for London.

In Beirut, a diplomat said Lebanese officials had confirmed that Makdissi spent several days in Beirut before leaving on Monday, but could not confirm his destination.

"We're aware of reports that he has defected and may be coming to the UK. We're seeking clarification," a Foreign Office spokeswoman in London said.

Makdissi was the public face to the outside world of Assad's government as it battled the 20-month-old uprising. But he had barely appeared in public for several weeks before Monday's report of his defection.

He had little influence in a system largely run by the security apparatus and the military. But Assad's opponents will see the loss of such a high profile figure, if confirmed, as further evidence of a system crumbling from within.

ESCALATED VIOLENCE

The United Nations and European Union both said they were reducing their presence in Syria in response to the escalated violence around the capital.

A spokesman for U.N. humanitarian operations said the move would not stop aid deliveries to areas which remained accessible to relief convoys.

"U.N.-funded aid supplies delivered through SARC (Syrian Arab Red Crescent) and other charities are still moving daily where the roads are open," Jens Laerke told Reuters in Geneva.

"We have not suspended our operation, we are reducing the non-essential international staff."

Three remaining international staff at the European Union delegation, who stayed on in Damascus after the departure of most Western envoys, crossed the border into Lebanon on Tuesday after pulling out of the Syrian capital.

(Additional reporting by David Brunnstrom in Brussels, Khaled Yacoub Oweis in Cairo, Erika Solomon, Oliver Holmes and Ayat Basma in Beirut, Mark Hosenball, Mohammed Abbas and David Cutler in London, and Stephanie Nebehay in Geneva)

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Sunni-Alawite clashes break out in Lebanon's Tripoli

TRIPOLI, Lebanon (Reuters) - Two men were killed and 12 wounded in sectarian clashes in the Lebanese port city of Tripoli on Tuesday between gunmen loyal to opposing sides in neighboring Syria's civil war, residents said.

The army cut off all roads leading to the area on Tuesday evening as militants launched rocket-propelled grenades at each other along Syria Street, a main thoroughfare that has become synonymous with fighting over the past year.

Tensions had been building since the deaths of at least 14 Lebanese and Palestinian gunmen from north Lebanon in a Syrian town close to the border. They appeared to have joined insurgents waging a 20-month-old revolt against Syrian President Bashar al-Assad.

Syrian state television has shown graphic footage of the dead men, riddled with gunshot wounds and lying in the grass.

Lebanon's Foreign Minister Adnan Mansour asked the Syrian ambassador to hand over the bodies of the men after their families protested in Tripoli to demand the Lebanese government return the dead and determine the whereabouts of the missing.

Tripoli's sectarian divisions have made it a flashpoint within Lebanon where violence from Syria has sometimes spilled over. The Syrian uprising is mostly being waged by Sunni Muslims and largely opposed by minorities like Assad's own Alawite sect.

Tripoli is a majority Sunni city and mostly supports the uprising next door, but the coastal city has an Alawite minority and clashes have erupted several times since the revolt began.

Residents said violence flared overnight when rocket-propelled grenades were fired by gunmen in the Sunni neighborhood of Bab al-Tabbaneh and the Alawite area of Jabal Mohsen.

Fighting then broke out on Tuesday morning after Sunni gunmen approached some Alawite shops.

(Additional reporting by Oliver Holmes and Laila Bassam in Beirut; Writing by Oliver Holmes; Editing by Jon Hemming)

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Putin ally and MP to table bill doubling jail time for graft

MOSCOW (Reuters) - An ally of President Vladimir Putin said on Tuesday she would table an amendment in parliament to double the maximum jail sentence for corruption to 20 years, urging fellow MPs to back a crackdown on one of Russia's most deep-seated problems.

The statement by Irina Yarovaya, head of a powerful parliamentary committee, appeared to be part of a Kremlin attempt to convince skeptical voters that Putin is serious about cracking down on financial crime.

Former Defence Minister Anatoly Serdyukov is one of a number of officials to have been fired or placed under suspicion in corruption investigations in recent weeks. But opinion polls show many Russians are skeptical about the authorities' motives and the seriousness of their anti-corruption campaign.

Yarovaya, a member of the ruling United Russia party which dominates parliament, said she would propose changes to the law to increase the punishment for embezzlement involving public or state resources.

"Responsibility for these crimes should be higher than for economic crimes. I think ... it should be raised to 20 years in prison," she told a news conference.

The current maximum sentence for such crimes was 10 years in prison, she said. It was unclear whether the kind of amendment she is proposing would pass, but given her status it seems likely it would garner considerable support.

Corruption has blighted Russia since tsarist times with many foreign investors citing it as an obstacle to putting money into the world's largest country, two decades after the collapse of the Soviet Union.

Russia is ranked 143 out of 182 countries on Transparency International's Corruption Perceptions Index, tying with Nigeria on a table where number 1 is the best rank.

NEW LAW ON DECLARATIONS

Putin is widely regarded to have failed to curb corruption since he was first elected president in 2000, despite saying he would impose a "dictatorship of the law".

In his latest attempt to show he is cracking down on graft, he signed a law on Tuesday obliging ministers to declare their spending and that of their families, but even this met with skepticism.

Kirill Kabanov, an anti-corruption activist, told Ekho Moskvy radio that the law would not cover spending abroad, making it less effective.

In other graft cases, the head of the Russian satellite network Glonass has been dismissed in a fraud investigation and a regional governor arrested over accusations that he stole funds meant for September's Asia-Pacific Economic Cooperation summit.

An opinion poll by the independent Levada research center showed that all the recent talk of an anti-corruption campaign had failed to boost support for Putin or for Prime Minister Dmitry Medvedev.

The same survey also showed that some 40 percent of Russians thought the dismissal of Serdyukov was the start of a reshuffle of officials who have been abusing their posts. However, just as many people said they thought it was merely part of a power struggle between various interest groups around Putin.

Russia's Defence Ministry channels billions of dollars every year through the country's arms industry, the world's second-largest defence exporter. A military prosecutor said last year that one fifth of the military budget was stolen.

Putin named a loyalist, Sergei Shoigu, to head the ministry but few see corruption ending.

"This will not change the corruption schemes. This is just a bit of cleansing," said Natalia, a Moscow law student who declined to give her last name. "If it was a genuine fight with corruption, I'm afraid they would have to send all the ministers away".

(Additional reporting by Steve Gutterman; Editing by Andrew Osborn)

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