Assad forces take Aleppo village, reopening supply line

BEIRUT (Reuters) - Syrian President Bashar al-Assad's forces seized a village southeast of the city of Aleppo on Friday, reopening a supply line to the country's biggest city where they have been battling rebels for eight months, a monitoring group said.

The Syrian Observatory for Human Rights said the capture of Tel Shghaib marked the last step to creating a land supply route north into Aleppo from Hama province, crucial for Assad's forces who have lost control of part of the main north-south highway.

Rebels say they hold most of the city itself and nearly all the rural hinterland. But they have been unable to achieve a decisive victory and complain that they are outgunned and vulnerable to Assad's air force, artillery and ballistic missiles, which killed dozens of people in Aleppo last week.

The United States pledged direct but non-lethal aid to the rebels at a meeting in Rome on Thursday, disappointing Assad's opponents who had hoped for more tangible military support to tip the balance of forces on the ground.

Activists reported another day of fierce fighting around Aleppo, including the military airport at Nairab, three miles north of Tel Shghaib which Assad's forces retook.

"It's a significant gain for the regime," the British-based Observatory's director Rami Abdelrahman said of the army's push north, which reversed many rebel advances when they moved south into Hama from Aleppo province at the end of last year.

Further east, on the Iraqi frontier, government troops also managed to wrest back control of the Yarubiyah border crossing after insurgents seized it 24 hours earlier, he said.

SYRIA COULD FALL APART

The revolt against Assad, which erupted in March 2011 with mainly peaceful protests, has escalated into civil war between mainly Sunni Muslim forces and troops and militias loyal to Assad, from the minority Alawite community whose faith derives from Shi'ite Islam.

The United Nations says 70,000 people have been killed, nearly a million have fled the country and millions more have been displaced or need aid.

U.N. Secretary-General Ban Ki-moon said on Friday that Syria, a major Arab state on the fault lines of broader Middle East conflict, would fall apart if the government and rebels keep fighting instead of seeking a negotiated peace.

"This is a very small window of opportunity which we strongly support and encourage them to use that. The opportunity may close soon," Ban said in Geneva.

The government and opposition have both edged away in recent weeks from their previous rejection of dialogue. Foreign Minister Walid al-Moualem said on Monday the government would even talk to armed rebels and opposition coalition leader Moaz Alkhatib has said he is ready to meet Assad's representatives.

But Syrian officials say any serious talks must be on Syrian soil under state control, and have shown no readiness to discuss Assad's departure - the central demand of the opposition. For rebel fighters, who do not answer to exiled civilian opposition leaders, Assad's exit is a precondition for any negotiations.

"I continue to urge the Syrian parties to find their way to the negotiating table. The horrors of the last months and years prove beyond doubt: the military solution in Syria is leading to the dissolution of Syria," Ban said.

He also called on the U.N. Security Council, paralyzed by a standoff between the United States and European allies on one side, pushing for U.N. action against Assad, and Russia and China, who have backed Assad, to unite and address the crisis.

Moscow criticized Thursday's meeting in Rome of largely anti-Assad Western and Arab states for taking positions and steps which "directly encourage extremists" to topple the government by force.

But the Kremlin also said presidents Vladimir Putin and Barack Obama had told their foreign ministers to keep in close touch and seek new initiatives to end Syria's civil war.

U.S. Secretary of State John Kerry said on Thursday Washington would provide non-lethal aid including medical supplies and food to rebel fighters, as well as $60 million to help the civilian opposition provide services including security, education and sanitation.

The European Union said it had amended sanctions on Syria to allow the supply of armored vehicles, non-lethal military equipment and technical aid.

The steps still fell well short of what rebels are looking for - more arms, and prompted the opposition to postpone a Saturday meeting where they had been due to choose a prime minister to head the administration of rebel-held territory.

Alkhatib said he was tired of hearing Western concerns over the growing role of Islamists in the Syrian rebel ranks - one of the main obstacles to greater military support, saying it paled into insignificance alongside the prolonged civilian suffering.

"Many sides...focus (more) on the length of the rebel fighter's beard than they do on the blood of the children being killed," he said, standing next to Kerry after their meeting.

(Additional reporting by Stephanie Nebehay in Geneva and Alissa de Carbonnel in Moscow; Editing by Mark Heinrich)

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Italy parties seek way out of election stalemate

ROME (Reuters) - Italy's stunned political parties searched for a way forward on Tuesday after an inconclusive election gave none of them a parliamentary majority and threatened prolonged instability and a renewal of the European financial crisis.

The results, notably the dramatic surge of the anti-establishment 5-Star Movement of comic Beppe Grillo, left the center-left bloc with a majority in the lower house but without the numbers to control the upper chamber, the Senate.

Financial markets fell sharply at the prospect of a stalemate that reawakened memories of the crisis that pushed Italy's borrowing costs toward unsustainably high levels and brought the euro zone to the brink of collapse in 2011.

"The winner is: Ingovernability," ran the headline in Rome newspaper Il Messaggero, reflecting the deadlock the country will have to confront in the next few weeks as sworn enemies are forced to work together to form a government.

Ratings agency Standard & Poor's said on Tuesday that policy choices of the next Italian government would be crucial for the country's creditworthiness, underlining the need for a coalition that can agree on new reforms.

Pier Luigi Bersani, head of the center-left Democratic Party (PD), has the difficult task of trying to agree a "grand coalition" with former prime minister Silvio Berlusconi, the man he blames for ruining Italy, or striking a deal with Grillo, a completely unknown quantity in conventional politics.

The alternative is new elections either immediately or within a few months, although both Berlusconi and Bersani have indicated that they want to avoid a return to the polls if possible: "Italy cannot be ungoverned and we have to reflect," Berlusconi said in an interview on his own television station.

For his part, Grillo, whose movement won the most votes of any single party, has indicated that he believes the next government will last no more than six months.

"They won't be able to govern," he told reporters on Tuesday. "Whether I'm there or not, they won't be able govern."

He said he would work with anyone who supported his policy proposals, which range from anti-corruption measures to green-tinted energy measures but rejected suggestions of entering a formal coalition: "It's not time to talk of alliances... the system has already fallen," he said.

The election, a massive rejection of the austerity policies applied by Prime Minister Mario Monti with the backing of international leaders from U.S. President Barack Obama to German Chancellor Angela Merkel, caused consternation across Europe.

German Finance Minister Wolfgang Schaeuble put a brave face on it, saying "that's democracy".

Spanish Foreign Minister Jose Manuel Garcia-Margallo was more pessimistic.

"This is a jump to nowhere that does not bode well either for Italy or Europe," he said.

A long recession and growing disillusionment with mainstream parties and tax-raising austerity fed a bitter public mood and contributed to the massive rejection of Monti, whose centrist coalition was relegated to the sidelines.

Projections by the Italian center for Electoral Studies showed that the center-left will have 121 seats in the Senate, against 117 for the center-right alliance of Berlusconi's PDL and the regionalist Northern League. Grillo would take 54.

That leaves no party with the majority in a chamber which a government must control to pass legislation.

"THE BELL IS RINGING"

On a visit to Germany, President Giorgio Napolitano said he would not comment until the parties had consulted with each other and Bersani called on Berlusconi and Grillo to "assume their responsibilities" to ensure Italy could have a government.

He warned that the election showed austerity policies alone were no answer to the economic crisis and said the result carried implications beyond Italy.

"The bell is ringing for Europe as well," he said in his first public comments since the election.

He said he would present a limited number of reform proposals to parliament, focusing on jobs, institutional reform and European policy.

However forming an alliance may be long and difficult and could test the sometimes fragile internal unity of the mainstream parties.

"The idea of a majority without Grillo is unthinkable. I don't know if anyone in the PD is considering it but I'm against it," said Matteo Orfini, a member of Bersani's PD secretariat.

"The idea of a PD-PDL government, even if it's backed by Monti, doesn't make any sense," he said.

For his part, Berlusconi won a boost when his Northern League ally Roberto Maroni won the election to become regional president of Lombardy, Italy's economic heartland and one of the richest and most productive areas of Europe.

For Italian business, with an illustrious history of export success, the election result brought dismay that there would be no quick change to what they see as a regulatory sclerosis that has kept the economy virtually stagnant for a decade.

"This is probably the worst possible scenario," said Francesco Divella, whose family began selling pasta under its eponymous brand in 1890 in the southern region of Puglia.

Berlusconi's campaign, mixing sweeping tax cut pledges with relentless attacks on Monti and Merkel, echoed many of the themes pushed by Grillo and underlined the increasingly angry mood of the Italian electorate.

But even if the next government turns away from the tax hikes and spending cuts brought in by Monti, it will struggle to revive an economy that has scarcely grown in two decades.

Monti was widely credited with tightening Italy's public finances and restoring its international credibility after the scandal-plagued Berlusconi, who is currently on trial for having sex with an under-age prostitute.

However, Monti struggled to pass the kind of structural reforms needed to improve competitiveness and lay the foundations for a return to economic growth. A weak center-left government may not find it any easier.

The view from some voters, weary of the mainstream parties, was unrepentant: "It's good," said Roger Manica, 28, a security guard in Rome, who voted for the center-left PD.

"Next time I'll vote 5-Star. I like that they are changing things, even if it means uncertainty. Uncertainty doesn't matter to me, for me what's important is a good person who gets things done," he said. "Look how well they've done."

(Additional reporting by Barry Moody, Gavin Jones, Lisa Jucca, Steven Jewkes, Steve Scherer, Catherine Hornby and Massimiliano Di Giorgio, Annika Breidthardt in Berlin. Writing by Philip Pullella and James Mackenzie; Editing by Peter Graff)

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Abe vows to revive Japanese economy, sees no escalation with China

WASHINGTON (Reuters) - Japanese Prime Minister Shinzo Abe told Americans on Friday "I am back and so is Japan" and vowed to get the world's third biggest economy growing again and to do more to bolster security and the rule of law in an Asia roiled by territorial disputes.

Abe had firm words for China in a policy speech to a top Washington think-tank, but also tempered his remarks by saying he had no desire to escalate a row over islets in the East China Sea that Tokyo controls and Beijing claims.

"No nation should make any miscalculation about firmness of our resolve. No one should ever doubt the robustness of the Japan-U.S. alliance," he told the Center for Strategic and International Studies.

"At the same time, I have absolutely no intention to climb up the escalation ladder," Abe said in a speech in English.

After meeting U.S. President Barack Obama on his first trip to Washington since taking office in December in a rare comeback to Japan's top job, he said he told Obama that Tokyo would handle the islands issue "in a calm manner."

"We will continue to do so and we have always done so," he said through a translator, while sitting next to Obama in the White House Oval Office.

Tension surged in 2012, raising fears of an unintended military incident near the islands, known as the Senkaku in Japan and the Diaoyu in China. Washington says the islets fall under a U.S.-Japan security pact, but it is eager to avoid a clash in the region.

Abe said he and Obama "agreed that we have to work together to maintain the freedom of the seas and also that we would have to create a region which is governed based not on force but based on an international law."

Abe, whose troubled first term ended after just one year when he abruptly quit in 2007, has vowed to revive Japan's economy with a mix of hyper-easy monetary policy, big spending, and structural reform. The hawkish leader is also boosting Japan's defense spending for the first time in 11 years.

"Japan is not, and will never be, a tier-two country," Abe said in his speech. "So today ... I make a pledge. I will bring back a strong Japan, strong enough to do even more good for the betterment of the world."

'ABENOMICS' TO BOOST TRADE

The Japanese leader stressed that his "Abenomics" recipe would be good for the United States, China and other trading partners.

"Soon, Japan will export more, but it will import more as well," Abe said in the speech. "The U.S. will be the first to benefit, followed by China, India, Indonesia and so on."

Abe said Obama welcomed his economic policy, while Deputy Chief Cabinet Secretary Katsunobu Kato said the two leaders did not discuss currencies, in a sign that the U.S. does not oppose "Abenomics" despite concern that Japan is weakening its currency to export its way out of recession.

The United States and Japan agreed language during Abe's visit that could set the stage for Tokyo to join negotiations soon on a U.S.-led regional free trade agreement known as the Trans-Pacific Partnership.

In a carefully worded statement following the meeting between Obama and Abe, the two countries reaffirmed that "all goods would be subject to negotiations if Japan joins the talks with the United States and 10 other countries.

At the same time, the statement envisions a possible outcome where the United States could maintain tariffs on Japanese automobiles and Japan could still protect its rice sector.

"Recognizing that both countries have bilateral trade sensitivities, such as certain agricultural products for Japan and certain manufactured products for the United States, the two governments confirm that, as the final outcome will be determined during the negotiations, it is not required to make a prior commitment to unilaterally eliminate all tariffs upon joining the TPP negotiations," the statement said.

Abe repeated that Japan would not provide any aid for North Korea unless it abandoned its nuclear and missile programs and released Japanese citizens abducted decades ago to help train spies.

Pyongyang admitted in 2002 that its agents had kidnapped 13 Japanese in the 1970s and 1980s. Five have been sent home, but Japan wants better information about eight who Pyongyang says are dead and others Tokyo believes were also kidnapped.

Abe also said he hoped to have a meeting with new Chinese leader Xi Jinping, who takes over as president next month, and would dispatch Finance Minister Taro Aso to attend the inauguration of incoming South Korean President Park Geun-hye next week.

(Additional reporting by Jeff Mason and Doug Palmer; Editing by David Brunnstrom and Paul Simao)

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French, Malian forces fight Islamist rebels in Gao

GAO, Mali (Reuters) - French and Malian troops fought Islamists on the streets of Gao and a car bomb exploded in Kidal on Thursday, as fighting showed little sign of abating weeks before France plans to start withdrawing some forces.

Reuters reporters in Gao in the country's desert north said French and Malian forces fired at the mayor's office with heavy machineguns after Islamists were reported to have infiltrated the Niger River town during a night of explosions and gunfire.

French Defense Minister Jean-Yves Le Drian told a news conference in Brussels that Gao was back under control after clashes earlier in the day.

"Malian troops supported by French soldiers killed five jihadists and the situation is back to normal," he said.

In Kidal, a remote far north town where the French are hunting Islamists, residents said a car bomb killed two. A French defense ministry source reported no French casualties.

French troops dispatched to root out rebels with links to al Qaeda swiftly retook northern towns last month. But they now risk being bogged down in a guerrilla conflict as they try to help Mali's weak army counter bombings and raids.

"There was an infiltration by Islamists overnight and there is shooting all over the place," Sadou Harouna Diallo, Gao's mayor, told Reuters by telephone earlier in the day, saying he was not in his office at the time.

Gao is a French hub for operations in the Kidal region, about 300 km (190 miles) northeast, where many Islamist leaders are thought to have retreated and foreign hostages may be held.

"They are black and two were disguised as women," a Malian soldier in Gao who gave his name only as Sergeant Assak told Reuters during a pause in heavy gunfire around Independence Square.

Six Malian military pickups were deployed in the square and opened fire on the mayor's office with the heavy machineguns. Two injured soldiers were taken away in an ambulance.

French troops in armored vehicles later joined the battle as it spilled out into the warren of sandy streets, where, two weeks ago, they also fought for hours against Islamists who had infiltrated the town via the nearby river.

Helicopters clattered over the mayor's office, while a nearby local government office and petrol station was on fire.

A Gao resident said he heard an explosion and then saw a Malian military vehicle on fire in a nearby street.

Paris has said it plans to start withdrawing some of its 4,000 troops from Mali next month. But rebels have fought back against Mali's weak and divided army, and African forces due to take over the French role are not yet in place.

Islamists abandoned the main towns they held but French and Malian forces have said there are pockets of Islamist resistance across the north, which is about the size of France.

CAR BOMB

Residents reported a bomb in the east of Kidal on Thursday.

"It was a car bomb that exploded in a garage," said one resident who went to the scene but asked not to be named.

"The driver and another man were killed. Two other people were injured," he added.

A French defense ministry official confirmed there had been a car bomb but said it did not appear that French troops, based at the town's airport, had been targeted.

Earlier this week, a French soldier was killed in heavy fighting north of Kidal, where French and Chadian troops are hunting Islamists in the Adrar des Ifoghas mountains, which border Algeria.

Operations there are further complicated by the presence of separatist Tuareg rebels, whose rebellion triggered the fighting in northern Mali last year but were sidelined by the better-armed Islamists.

Having dispatched its forces to prevent an Islamist advance south in January, Paris is eager not to become bogged down in a long-term conflict in Mali. But their Malian and African allies have urged French troops not to pull out too soon.

(Additional reporting by Emanuel Braun in Gao, Adama Diarra in Bamako, David Lewis and John Irish in Dakar and Adrian Croft in Brussels; Writing by David Lewis; Editing by Jason Webb and Roger Atwood)

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French general urges EU to equip "impoverished" Mali army

BAMAKO, Mali (Reuters) - The European Union should complement a mission to train Mali's army, routed by rebels last year, by providing equipment from uniforms to vehicles and communications technology, a French general said on Wednesday.

General Francois Lecointre, appointed to head the EU training mission to Mali (EUTM) that was formally launched this week, said in Bamako equipping the "very impoverished" and disorganized Malian army was as important as training it.

Europe, along with the United States, has backed the French-led military intervention in Mali which since January 11 has driven al Qaeda-allied Islamist insurgents out of the main northern towns into remote mountains near Algeria's border.

European governments have ruled out sending combat troops to join French and African soldiers pursuing the Islamist rebels.

But the EU is providing a 500-strong multinational training force that will give military instruction to Malian soldiers for an initial period of 15 months at an estimated cost of 12.3 million euros ($16.45 million).

While hailing what he called the EU's "courageous, novel, historic" decision to support Mali, Lecointre told a news conference the Malian army's lack of equipment was a problem.

"I know the Malian state is poor, but the Malian army is more than poor," the French general told a news conference, adding that it urgently needed everything from uniforms and weapons to vehicles and communications equipment.

Last year, when Tuareg separatist forces swelled by weapons and fighters from the Libyan conflict swept out of the northern deserts, a demoralized and poorly-led Malian army collapsed and fled before them, abandoning arms and vehicles.

Mali's military was further shaken by a March 22 coup by junior officers who toppled President Amadou Toumani Toure, sowing division among rival army factions. Islamist radicals allied to al Qaeda later hijacked the victorious Tuareg rebellion to occupy the northern half of the country.

In a fast-charging military campaign led by Paris, French and African troops have driven the jihadists out of principal northern towns like Gao and Timbuktu, and are fighting the rebels in the Adrar des Ifoghas mountains.

HUMAN RIGHTS INSTRUCTION

Flanked by Mali's armed forces chief, General Ibrahima Dembele, Lecointre said he was disappointed that a meeting of international donors last month pledged funds for an African military force, known as AFISMA, being deployed in Mali, but included "very few" contributions for the Malian army itself.

"The European Union needs to invest today in the equipping of the Malian army and not just in its training," the general said, adding he would make this point strongly in a report to EU member state representatives early next month.

Asked how much re-equipping the army would cost, he said it would be "much more" than the 12 million euros of EU financing for the training mission, but could not give a precise estimate.

Starting early in April, the EU mission will start instructing Malian soldiers with a plan to train four new battalions of 600-700 members each, formed from existing enlisted men and new recruits.

Lecointre said the EU training would include instruction in human rights. Demands for this increased after allegations by Malian civilians and international human rights groups that Malian soldiers were executing Tuaregs and Arabs accused of collaborating with Islamist rebels.

The European training contingent is drawn from a range of European countries, but the main contributors would be France, Germany, Italy, Spain and Britain, EUTM officers said.

Mali's army has received foreign training before - several battalions that fled before the rebels last year were trained by the U.S. military and the leader of the March 22 coup, Captain Amadou Sanogo, attended training courses in the United States.

Dembele said U.S. training failed to forge cohesion among Malian units and he hoped the EU training would achieve this.

The United States, which halted direct support for the Malian military after last year's coup, could eventually resume aid if planned national elections in July fully restore democracy to the West African country.

Washington is providing airlift, refuelling and intelligence support to the French-led military intervention in Mali. ($1 = 0.7479 euros)

(Reporting by Pascal Fletcher; Editing by Jason Webb)

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Chavez back in Venezuela, on Twitter with four million followers

CARACAS (Reuters) - After Hugo Chavez spent two months out of the public eye for cancer surgery in Cuba, the Venezuelan government hailed his homecoming on Monday and said the president had achieved another milestone - four million followers on Twitter.

The 58-year-old flew back from Havana before dawn and was taken to a military hospital. No new details were given on his health, and there were no images of his arrival. Officials say his condition remains delicate.

The normally loquacious socialist leader, who is struggling to speak as he breathes through a tracheal tube, took to Twitter with a passion back in April 2010, tweeting regularly and encouraging other leftist Latin American leaders to do likewise.

His @chavezcandanga account quickly drew a big mixed following of fans, critics and others just curious to see how his famously long speeches and fiery anti-U.S. invective would work within the social media network's 140-character limit.

But as he fought the cancer and underwent weeks of grueling chemotherapy and radiation therapy, he began to tweet less and less frequently, before stopping altogether on November 1.

Early on Monday morning, he made his reappearance.

"It was 4:30, 5 a.m. He got to his room and surprised everyone: rat-tat-tat, he sent three or four messages, and at that moment fireworks began to go off around the country," Vice President Nicolas Maduro said in a televised cabinet meeting.

During the day, Maduro added, the president's number of followers had shot up to well over four million.

"It's incredible, in just a few hours ... he's the second most-followed president in the world (after Barack Obama), and the first if we make the comparison by per capita," he said.

Obama has more than 27 million Twitter followers and is No. 5 most followed globally. Chavez is Twitter's No. 190 globally.

4TH MILLION FOLLOWER

Maduro said Chavez's four millionth follower was a 20-year-old single Venezuelan woman named Alemar Jimenez from the gritty San Juan neighborhood in downtown Caracas, near the military hospital where the president arrived earlier in the day.

"She's one of the golden generation of youth who support the fatherland and have been waiting with growing love for commander Hugo Chavez," Maduro said, before presenting a dazzled-looking Jimenez to the cameras and giving her a bunch of flowers.

"We were really emotional" she said, recounting how she was with her mother when they heard Chavez had returned. "I sent him a message on Twitter saying he must get better."

There are still big questions over the president's health. He could have come back to govern from behind the scenes, or he may be hoping to ease political tensions and pave the way for a transition to Maduro, his preferred successor.

Chavez has often ordered followers to fight back against opposition critics of his self-styled revolution by using social media, leading from the front himself on Twitter and referring to the Internet as a "battle trench."

As his ranks of followers grew, Chavez said he hired 200 assistants to help him respond to messages - which he said were a great way to receive first-hand the requests, demands, complaints and denunciations of citizens in the thousands.

During his re-election campaign last year, the government launched an SMS text message service that forwards his tweets to cellphones that lack Internet service, broadening their reach to the poorest corners of the South American country.

"He's a communication revolution!" Maduro said, later unbuttoning his shirt on TV to show he was wearing a T-shirt bearing Chavez's eyes emblazoned across his chest.

For the tens of thousands who signed up on Monday to follow Chavez on Twitter, it is unclear how much will be posted there in the weeks and months ahead. Venezuela's 29 million people are mostly wondering something similar.

(Additional reporting by Diego Ore; Editing by Todd Eastham)

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Ecuador's Correa cruises to re-election victory

QUITO (Reuters) - Ecuadorean President Rafael Correa swept to a re-election victory on Sunday that allows him to strengthen state control over the OPEC nation's economy and gives a timely boost to Latin America's alliance of socialist leaders.

The charismatic leftist had 57 percent support compared with 24 percent for runner-up Guillermo Lasso, with almost 40 percent of votes counted. The electoral authority said it did not expect the results to change significantly.

"Nobody can stop this revolution," a jubilant Correa told supporters from the balcony of the presidential palace, after claiming victory.

"The colonial powers are not in charge anymore. You can be sure that in this revolution it's Ecuadoreans in control."

The combative, U.S.-trained economist took power in 2007 and has won strong support among the poor by using booming oil revenues to build roads, hospitals and schools in rural areas and shantytowns.

"Our Ecuador needs a president like Rafael Correa. He has been strong and has not allowed anyone to intimidate him," said Julieta Moira, 46, who is unemployed, as she celebrated outside the presidential palace. "I'm very excited, happy and thankful."

Supporters also gathered in a park in the upscale north end of Quito, waving the signature neon-green flags of Correa's Alianza Pais party.

DEDICATES WIN TO CHAVEZ

Correa, 49, may now be in line to become Latin America's main anti-American voice and de facto leader of the ALBA bloc of leftist governments as Venezuelan President Hugo Chavez has been silenced during his battle with cancer.

Correa said he dedicated his victory to Chavez.

The principal challenge in Correa's new four-year term will be wooing investors needed to boost stagnant oil production and spur the mining industry. A $3.2 billion debt default in 2008 and aggressive oil contract negotiations scared off many.

Critics view Correa as an authoritarian leader who has curbed media freedom and appointed aides to top posts in the judiciary.

"This government has not given us anything good, only insults and taxes. We're tired of all that. I'm concerned that this government has alliances with communist countries," said Celeste Guerrero, a 68-year-old pensioner in Guayaquil.

Even some supporters disapprove of his tempestuous outbursts, confrontations with media and bullying of adversaries.

But the fractured opposition failed to make a consolidated challenge. It fielded seven candidates, making it easy for Correa, and he is now on track for a decade in office.

That is rare stability in a country where three presidents were pushed from office by coups or street protests in the decade before Correa took power in 2007.

He is already the longest-serving president since the return to democracy in the 1970s following a military dictatorship.

Correa's success has hinged in part on high oil prices that allowed for liberal state spending, including boosting cash handouts to 2 million people, and spurred solid economic growth.

He is likely to continue spending heavily to maintain his popularity, but state revenues would dry up if oil prices fell.

He now hopes to diversify the economy away from its dependence on oil, in part by bringing in new investment for the mining sector. Despite promising reserves of gold and copper, mining operations have barely gotten off the ground.

In a news conference on Sunday after polls closed, Correa played down the need for more foreign investment. He insisted the ultimate goal was to ensure economic growth rather than "mortgaging" the country to bring in cash from abroad.

"We welcome foreign investment, and we're already getting plenty of it," Correa said. "Ecuador is one of the most successful economies in Latin America."

Lasso, a wealthy ex-banker and Correa's closest rival, had tried to woo voters with promises of lower taxes. He congratulated Correa on his victory but also took pride in his Creo party taking a quarter of the vote.

"We are now the second-largest political force in the country," said Lasso, who was beaming despite losing.

CONGRESS BATTLE

The other six opposition candidates included former Correa ally Alberto Acosta, former President Lucio Gutierrez and banana magnate and five-time presidential candidate Alvaro Noboa.

Pollsters say some of them focused their campaigns too much on attacking Correa and failed to put forward concrete proposals to entice voters.

Ecuadoreans also chose a new Congress on Sunday.

The Alianza Pais party was expected to win a majority in the legislature, which would let Correa push ahead with controversial reforms, including a media law and changes to mining legislation, without having to negotiate with rivals.

The results of the vote for Congress are not expected to be known for several days, but Correa said he was confident.

"I think we are going to get a majority and we will manage that majority with great responsibility," he told Latin America's Telesur TV network, set up by Chavez and his allies as an alternative to established media.

Correa never shies away from a fight, be it with international bondholders, oil companies, local bankers, the Catholic Church or media that criticize his policies.

He vowed on Sunday to expand state regulations over media groups he has called "dogs" and "hired assassins."

"One of the things we have to fix is an unethical and unscrupulous press that wants to judge, legislate and govern," Correa said. "That goes against the rule of law and we will not allow it."

His criticism of the U.S. "empire" and his clashes with foreign investors and the World Bank have fueled Correa's popularity as a strong-minded leader who stands up to foreign powers that many say meddled in Ecuador's affairs for decades.

He took the global limelight last year when he granted asylum to WikiLeaks' founder Julian Assange. Critics say he did it to brush off accusations that he is curbing freedom of expression in Ecuador.

(Additional reporting by Jose Llangari and Eduardo Garcia in Quito and Yuri Garcia in Guayaquil; Editing by Kieran Murray, Andrew Cawthorne and Eric Beech)

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Ecuador votes for president, Correa seen winning new term

QUITO (Reuters) - Ecuadoreans vote for president on Sunday in a ballot expected to hand incumbent Rafael Correa a new term to advance his socialist agenda of heavy government spending and expansion of state power that critics slam as creeping authoritarianism.

Generous state outlays to expand access to healthcare, pave decrepit roads and build new schools have given the combative economist a strong base among the South American nation's poor.

Victory for Correa would cheer the leftist ALBA bloc of Latin American and Caribbean nations at a time when the group's indisputable leader, Venezuelan President Hugo Chavez, is struggling to recover from cancer.

Polls show Correa leading his closest rival by more than 35 percentage points.

Critics say Correa he is a despot who tolerates no dissent and is intent on amassing power. But the opposition's inability to unite behind a single candidate - seven opposition candidates are running - has helped give Correa a comfortable lead.

Former banker Guillermo Lasso is Correa's nearest rival in the polls, but surveys show him commanding only between 9 and 15 percent of the vote.

The Ecuadorean leader has built up an image of nationalist man-of-the-people through theatrical confrontation with oil companies and Wall Street investors.

POLITICAL STABILITY

The only Ecuadorean president in the past 20 years to complete a full term in office, he is admired for bringing political stability to a nation where leaders had been frequently toppled by violent street protests or military coups.

"We're done with the opportunists, they would take power and snatch up all the money and forget about their promises," Jorge Pazmino, 65, who upholsters vehicles, said on Thursday at Correa's final campaign rally in a working-class southern Quito neighborhood.

"Now we finally have a president who is getting things done. There's just nobody else to vote for," Pazmino added.

Pazmino said it was easier to get medical attention thanks to an overhaul of the social security system and credits the president with forcing employers to respect labor laws.

The Perfiles de Opinion polling firm recently showed Correa with 62 percent support. To avoid a second round, he needs to win at least 50 percent of the vote or 40 percent with a lead of 10 percentage points over the second-placed candidate.

Correa, 49, has ruled since 2007. In a new four-year term, he would face the challenge of securing financing after a 2008 debt default and wooing investors to boost oil output and kick-start the mining industry.

Opposition leaders call Correa a dictator in the making who is quashing free speech through hostile confrontation with media and squelching free enterprise through heavy taxation and constant regulatory changes.

Lasso has called Correa's "Citizens' Revolution" a fast food menu of unsuccessful economic policies copied from Ecuador's era of military rulers and leftist governments like Venezuela's Chavez.

"He'll have to explain how this development model is revolutionary if it's a copy of the dictatorship of the 1970s and depends on high prices for oil that is mortgaged to China in exchange for loans," Lasso said on Thursday at his final rally.

YOUTHFUL ENERGY

Correa has spent weeks on the campaign trail, from indigenous villages of the Andean highlands to urban slums in the bustling port city of Guayaquil, singing and dancing to play up an image of youthful energy.

An avid cyclist, Correa filmed one campaign spot showing him changing out of a sharp suit into biking clothes and then riding his bike over mountain peaks and past tropical fishing villages to show the improvement of roads under his leadership.

Even some Correa supporters acknowledge they find him brash and domineering. Sharp-tempered and quick to pick fights, he has remained in almost constant conflict with opposition media and on several occasions sued critical reporters and newspapers.

He also put himself on a collision course with the United States last year by letting WikiLeaks' founder Julian Assange take refuge at Ecuador's embassy in London and later offering the former computer hacker asylum.

Opposition leaders say the key to his longevity has been revamping state institutions to suit his needs and placing allies in key posts. In 2011, he called a referendum on a justice system overhaul, bypassing a hostile Congress in a move critics say boosted his control over the courts.

Correa has relied heavily on financing from China after a 2008 default on $3.2 billion in bonds left the country locked out of foreign credit markets. Lasso promises to cut taxes and spur entrepreneurship if he wins.

Other opposition candidates include banana magnate and five-time presidential candidate Alvaro Noboa, and former President Lucio Gutierrez, who was ousted in a 2005 coup.

Ecuadoreans also vote for a new legislature on Sunday, through the results are not expected to be in for several days. The Alianza Pais party also hopes to win more than 50 percent of the seats, up from around 42 percent now.

Investors will be watching Correa's new term for signs he is willing to compromise to bring in investment needed to raise stagnant oil production, boost the promising but still nascent mining sector, and expand power generation.

A major test will come this year in negotiations with Canada's Kinross to develop a large gold deposit.

(Additional reporting by Yuri Garcia in Guayaquil; Editing by Andrew Cawthorne and Will Dunham)

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Exclusive: North Korea tells China of preparations for fresh nuclear test - source

BEIJING (Reuters) - North Korea has told its key ally, China, that it is prepared to stage one or even two more nuclear tests this year in an effort to force the United States into diplomatic talks, said a source with direct knowledge of the message.

Further tests could also be accompanied this year by another rocket launch, said the source, who has direct access to the top levels of government in both Beijing and Pyongyang.

North Korea conducted its third nuclear test on Tuesday, drawing global condemnation and a stern warning from the United States that it was a threat and a provocation.

"It's all ready. A fourth and fifth nuclear test and a rocket launch could be conducted soon, possibly this year," the source said, adding that the fourth nuclear test would be much larger than the third, at an equivalent of 10 kilotons of TNT.

The tests will be undertaken, the source said, unless Washington holds talks with North Korea and abandons its policy of what Pyongyang sees as attempts at regime change.

North Korea also reiterated its long-standing desire for the United States to sign a final peace agreement with it and establish diplomatic relations, he said. North Korea remains technically at war with both the United States and South Korea after the Korean war ended in 1953 with a truce.

In Washington, U.S. State Department spokeswoman Victoria Nuland urged North Korea to "refrain from additional provocative actions that would violate its international obligations" under three different sets of U.N. Security Council resolutions that prohibit nuclear and missile tests.

North Korea "is not going to achieve anything in terms of the health, welfare, safety, future of its own people by these kinds of continued provocative actions. It's just going to lead to more isolation," Nuland told reporters.

The Pentagon also weighed in, calling North Korea's missile and nuclear programs "a threat to U.S. national security and to international peace and security."

"The United States remains vigilant in the face of North Korean provocations and steadfast in our defense commitments to allies in the region," said Pentagon spokeswoman Major Catherine Wilkinson.

Initial estimates of this week's test from South Korea's military put its yield at the equivalent of 6-7 kilotons, although a final assessment of yield and what material was used in the explosion may be weeks away.

North Korea's latest test, its third since 2006, prompted warnings from Washington and others that more sanctions would be imposed on the isolated state. The U.N. Security Council has only just tightened sanctions on Pyongyang after it launched a long-range rocket in December.

Pyongyang is banned under U.N. sanctions from developing missile or nuclear technology after its 2006 and 2009 nuclear tests.

North Korea worked to ready its nuclear test site, about 100 km (60 miles) from its border with China, throughout last year, according to commercially available satellite imagery. The images show that it may have already prepared for at least one more test, beyond Tuesday's subterranean explosion.

"Based on satellite imagery that showed there were the same activities in two tunnels, they have one tunnel left after the latest test," said Kune Y. Suh, a nuclear engineering professor at Seoul National University in South Korea.

Analysis of satellite imagery released on Friday by specialist North Korea website 38North showed activity at a rocket site that appeared to indicate it was being prepared for a launch (http://38north.org/2013/02/tonghae021413/).

NORTH 'NOT AFRAID' OF SANCTIONS

President Barack Obama pledged after this week's nuclear test "to lead the world in taking firm action in response to these threats" and diplomats at the U.N. Security Council have already started discussing potential new sanctions.

North Korea has said the test was a reaction to "U.S. hostility" following its December rocket launch. Critics say the rocket launch was aimed at developing technology for an intercontinental ballistic missile.

"(North) Korea is not afraid of (further) sanctions," the source said. "It is confident agricultural and economic reforms will boost grain harvests this year, reducing its food reliance on China."

North Korea's isolated and small economy has few links with the outside world apart from China, its major trading partner and sole influential diplomatic ally.

China signed up for international sanctions against North Korea after the 2006 and 2009 nuclear tests and for a U.N. Security Council resolution passed in January to condemn the latest rocket launch. However, Beijing has stopped short of abandoning all support for Pyongyang.

Sanctions have so far not discouraged North Korea from pursuing its nuclear ambitions.

"It is like watching the same movie over and over again," said Lee Woo-young, a professor at Seoul's University of North Korean Studies. "The idea that stronger sanctions make North Korea stop developing nuclear programs isn't effective in my view."

The source with ties to Beijing and Pyongyang said China would again support U.N. sanctions. He declined to comment on what level of sanctions Beijing would be willing to endorse.

"When China supported U.N. sanctions ... (North) Korea angrily called China a puppet of the United States," he said. "There will be new sanctions which will be harsh. China is likely to agree to it," he said, without elaborating.

He said however that Beijing would not cut food and fuel supplies to North Korea, a measure it reportedly took after a previous nuclear test.

He said North Korea's actions were a distraction for China's leadership, which was concerned that the escalations could inflame public opinion in China and hasten military build-ups in the region.

The source said he saw little room for compromise under North Korea's youthful new leader, Kim Jong-un. The third Kim to rule North Korea is just 30 years old and took over from his father in December 2011.

He appears to have followed his father, Kim Jong-il, in the "military first" strategy that has pushed North Korea ever closer to a workable nuclear missile at the expense of economic development.

"He is much tougher than his father," the source said.

(Additional reporting by Arshad Mohammed and Phillip Stewart in WASHINGTON; Writing by David Chance; Editing by Raju Gopalakrishnan, David Brunnstrom and Jackie Frank)

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Key U.S. general backs keeping Afghan forces at peak strength

WASHINGTON (Reuters) - The U.S. general nominated to oversee a vast region that includes Afghanistan on Thursday backed keeping Afghan forces at a peak strength of 352,000, contrary to current plans to shrink them after NATO declares the war over next year.

General Lloyd Austin, nominated to lead the U.S. military's Central Command, said at his Senate confirmation hearing that a more robust Afghan force, while more costly, would "hedge against any Taliban mischief" following America's longest war.

"Keeping the larger-size force would certainly reassure the Afghans, it would also reassure our NATO allies that we remain committed," Austin said.

The comments came two days after President Barack Obama announced in his State of the Union address that 34,000 U.S. troops - roughly half of the current U.S. force in Afghanistan - would be withdrawn by early 2014.

Obama reassured Americans that the costly, unpopular war was coming to an end, but he left unanswered bigger questions about America's exit strategy, including how many U.S. troops would stay in the country beyond 2014 to help train and advise the Afghans and to battle remnants of al Qaeda.

Obama also did not discuss the future size of the Afghan forces, although a White House fact sheet sent out after his address noted they would remain at 352,000 until "at least" early 2015.

Austin warned the Taliban would be waiting to test them.

"You could reasonably expect that an enemy that's been that determined, that agile, will very soon after we transition begin to try to test the Afghan security forces," Austin said.

Under current plans, the United States and its NATO allies will help build up the Afghan armed forces to 352,000 personnel, a number they are approaching, but the size of the force - which the allies will continue to fund - will be trimmed to 230,000 after 2015.

ECHOES OF IRAQ

The hearing frequently moved away from questions about the Afghan war and other current events to questions about Austin's past role as commander in Iraq, when a failure to strike an immunity deal for U.S. troops led to their total withdrawal in 2011.

Obama administration officials have warned that failure to strike an immunity deal with Afghanistan would also result in a pullout, but Afghan President Hamid Karzai and U.S. officials have expressed confidence a deal can be reached.

Republicans, who have criticized Obama's drawdown strategy in Afghanistan, noted that the president would have left a much smaller force in Iraq than Austin recommended, even if a deal had been struck.

Senator John McCain of Arizona lamented the lack of a U.S. presence in Iraq.

Pressed by Republicans, Austin acknowledged that the situation in Iraq was trending in a "problematic" direction, and agreed that a continued U.S. role would have helped bolster Iraqi forces.

When it came to Afghanistan, Senator Lindsay Graham of South Carolina warned Austin that if Obama sought an insufficient force for the post-2014 mission, he would refuse to vote for funding the war effort.

"It can be as low as 9 or 10,000, that I will stand with them," Graham said.

"If they overrule the commanders and create a force that cannot in my view be successful, I cannot in good conscience vote to continue this operation."

Graham said he would vote for Austin's confirmation once Austin spoke with the former commander of the Afghan mission, General John Allen, about his recommendations to Obama and reported back to the committee about his opinion.

(Reporting by Phil Stewart; Editing by David Brunnstrom)

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South Korea unveils missile it says can hit North's leaders

SEOUL (Reuters) - South Korea unveiled a cruise missile on Thursday that it said can hit the office of North Korea's leaders, trying to address concerns that it is technologically behind its unpredictable rival which this week conducted its third nuclear test.

South Korean officials declined to say the exact range of the missile but said it could hit targets anywhere in North Korea.

The Defence Ministry released video footage of the missiles being launched from destroyers and submarines striking mock targets. The weapon was previewed in April last year and officials said deployment was now complete.

"The cruise missile being unveiled today is a precision-guided weapon that can identify and strike the window of the office of North Korea's leadership," ministry spokesman Kim Min-seok said told reporters.

North Korea has forged ahead with long-range missile development, successfully launching a rocket in December that put a satellite into orbit.

The North's ultimate aim, Washington believes, is to design an intercontinental ballistic missile capable of carrying a nuclear warhead that could hit the United States.

North Korea, which accuses the United States and its "puppet", South Korea, of war-mongering on an almost daily basis, is likely to respond angrily to South Korea flexing its muscles.

North Korea, technically still at war with the South after their 1950-53 conflict ended in a truce, not a peace treaty, carried out its third nuclear test on Tuesday, drawing condemnation from around the world including its only major ally China.

The test and the threat of more unspecified actions from Pyongyang have raised tensions on the Korean peninsula as the South prepares to inaugurate a new president on February 25.

"The situation prevailing on the Korean peninsula at present is so serious that even a slight accidental case may lead to an all-out war which can disturb the whole region," North Korea's official KCNA news agency said.

(Reporting by Ju-min Park; Editing by Nick Macfie)

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North Korean nuclear test draws anger, including from China

SEOUL (Reuters) - North Korea conducted its third nuclear test on Tuesday in defiance of U.N. resolutions, drawing condemnation from around the world, including from its only major ally, China, which summoned the North Korean ambassador to protest.

Pyongyang said the test was an act of self-defense against "U.S. hostility" and threatened stronger steps if necessary.

The test puts pressure on U.S. President Barack Obama on the day of his State of the Union speech and also puts China in a tight spot, since it comes in defiance of Beijing's admonishments to North Korea to avoid escalating tensions.

The U.N. Security Council held an emergency meeting at which its members, including China, "strongly condemned" the test and vowed to start work on appropriate measures in response, the president of the council said.

North Korean leader Kim Jong-un, the third of his line to rule the country, has presided over two long-range rocket launches and a nuclear test during his first year in power, pursuing policies that have propelled his impoverished and malnourished country closer to becoming a nuclear weapons power.

North Korea said the test had "greater explosive force" than those it conducted in 2006 and 2009. Its KCNA news agency said it had used a "miniaturized" and lighter nuclear device, indicating it had again used plutonium, which is suitable for use as a missile warhead.

China, which has shown signs of increasing exasperation with the recent bellicose tone of its reclusive neighbor, summoned the North Korean ambassador in Beijing and protested sternly, the Foreign Ministry said.

Foreign Minister Yang Jiechi said China was "strongly dissatisfied and resolutely opposed" to the test and urged North Korea to "stop any rhetoric or acts that could worsen situations and return to the right course of dialogue and consultation as soon as possible".

Analysts said the test was a major embarrassment to China, which is a permanent member of the Security Council and North Korea's sole major economic and diplomatic ally.

Obama called the test a "highly provocative act" that hurt regional stability.

"The danger posed by North Korea's threatening activities warrants further swift and credible action by the international community. The United States will also continue to take steps necessary to defend ourselves and our allies," Obama said.

U.S. Ambassador to the United Nations Susan Rice said Washington and its allies intended to "augment the sanctions regime" already in place due to Pyongyang's previous atomic tests. North Korea is already one of the most heavily sanctioned states in the world and has few external economic links that can be targeted.

Japanese Prime Minister Shinzo Abe said the test was a "grave threat" that could not be tolerated.

Russian Foreign Minister Sergei Lavrov urged North Korea to abandon its nuclear arms program and return to talks. NATO condemned the test as an "irresponsible act."

South Korea, still technically at war with North Korea after a 1950-53 civil war ended in a mere truce, also denounced the test. Obama spoke to South Korean President Lee Myung-bak on Tuesday and told him the United States "remains steadfast in its defense commitments" to Korea, the White House said.

MAXIMUM RESTRAINT

North Korea's Foreign Ministry said the test was "only the first response we took with maximum restraint".

"If the United States continues to come out with hostility and complicates the situation, we will be forced to take stronger, second and third responses in consecutive steps," it said in a statement carried by the official KCNA news agency.

North Korea - which gave the U.S. State Department advance warning of the test - often threatens the United States and its "puppet", South Korea, with destruction in colorful terms.

North Korea told the U.N. disarmament forum in Geneva that it would never bow to resolutions on its nuclear program and that prospects were "gloomy" for the denuclearization of the divided Korean peninsula because of a "hostile" U.S. policy.

Suzanne DiMaggio, an analyst at the Asia Society in New York, said North Korea had embarrassed China with the test. "China's inability to dissuade North Korea from carrying through with this third nuclear test reveals Beijing's limited influence over Pyongyang's actions in unusually stark terms," she said.

Mark Fitzpatrick of the International Institute for Strategic Studies think tank, said: "The test is hugely insulting to China, which now can be expected to follow through with threats to impose sanctions."

The magnitude of the explosion was roughly twice that of the 2009 test, according to the Vienna-based Comprehensive Nuclear-Test Ban Treaty Organization. The U.S. Geological Survey said that a seismic event measuring 5.1 magnitude had occurred.

U.S. intelligence agencies were analyzing the event and found that North Korea probably conducted an underground nuclear explosion with a yield of "approximately several kilotons", the Office of the Director of National Intelligence said.

Nuclear experts have described Pyongyang's previous two tests as puny by international standards. The yield of the 2006 test has been estimated at less than 1 kiloton (1,000 tons of TNT equivalent) and the second at some 2-7 kilotons, compared with 20 kilotons for a Nagasaki-type bomb.

Initial indications are that the test involved the latest version of a plutonium-based prototype weapon, according to one current and one former U.S. national security official. Both previous tests involved plutonium. If it turns out the test was of a new uranium-based weapon, it would show that North Korea has made more progress on uranium enrichment than previously thought.

The United States uses WC-135 Constant Phoenix "sniffer" aircraft to collect samples to identify nuclear explosions. These would need to be deployed quickly to detect whether highly enriched uranium rather than plutonium was used because uranium decays to undetectable levels within a matter of days. Plutonium takes much longer to decay.

North Korea trumpeted news of the test on its state television channel to patriotic music against a backdrop of its national flag.

"It was confirmed that the nuclear test that was carried out at a high level in a safe and perfect manner using a miniaturized and lighter nuclear device with greater explosive force than previously did not pose any negative impact on the surrounding ecological environment," KCNA said.

North Korea linked the test to its technical prowess in launching a long-range rocket in December, a move that triggered the U.N. sanctions, backed by China, that Pyongyang said prompted it to take Tuesday's action.

The North's ultimate aim, Washington believes, is to design an intercontinental ballistic missile capable of carrying a nuclear warhead that could hit the United States. North Korea says the program is aimed at putting satellites in space.

Despite its three nuclear tests and long-range rocket tests, North Korea is not believed to be close to manufacturing a nuclear missile capable of hitting the United States.

It used plutonium in previous nuclear tests and before Tuesday there had been speculation that it would use highly enriched uranium so as to conserve its plutonium stocks, as testing eats into its limited supply of materials to construct a nuclear bomb.

"VICIOUS CYCLE"

When Kim Jong-un, who is 30, took power after his father's death in December 2011, there were hopes that he would bring reforms and end Kim Jong-il's "military first" policies.

Instead, North Korea, whose economy is smaller than it was 20 years ago and where a third of children are believed to be malnourished, appears to be trapped in a cycle of sanctions followed by further provocations.

"The more North Korea shoots missiles, launches satellites or conducts nuclear tests, the more the U.N. Security Council will impose new and more severe sanctions," said Shen Dingli, a professor at Shanghai's Fudan University. "It is an endless, vicious cycle."

Options for the international community appear to be in short supply. Diplomats at the United Nations said negotiations on new sanctions could take weeks since China is likely to resist tough new measures for fear they could lead to further retaliation by the North Korean leadership.

Beijing has also been concerned that tougher sanctions could further weaken North Korea's economy and prompt a flood of refugees into China.

Tuesday's action appeared to have been timed for the run-up to February 16 anniversary celebrations of Kim Jong-il's birthday, as well as to achieve maximum international attention.

Significantly, the test comes at a time of political transition in China, Japan and South Korea, and as Obama begins his second term. The U.S. president will likely have to tweak his State of the Union address due to be given on Tuesday.

Japanese Prime Minister Shinzo Abe is bedding down a new government and South Korea's new president, Park Geun-hye, is preparing to take office on February 25.

China too is in the midst of a once-in-a-decade leadership transition to Xi Jinping, who takes office in March. Both Abe and Xi are staunch nationalists.

The longer-term game plan from Pyongyang may be to restart international talks aimed at winning food and financial aid. China urged it to return to the stalled "six-party" talks on its nuclear program, hosted by China and including the two Koreas, the United States, Japan and Russia.

Its puny economy and small diplomatic reach mean that North Korea struggles to win attention on the global stage - other than through nuclear tests and attacks on South Korea, the last of which was made in 2010.

"Now the next step for North Korea will be to offer talks... - any form to start up discussion again to bring things to their advantage," predicted Jeung Young-tae, senior research fellow at the Korea Institute for National Unification in Seoul.

(Additional reporting by Jack Kim, Christine Kim and Jumin Park in SEOUL; Linda Sieg in TOKYO; Louis Charbonneau and Michelle Nichols at the UNITED NATIONS; Fredrik Dahl in VIENNA; Michael Martina and Chen Aizhu in BEIJING; Mette Fraende in COPENHAGEN; Adrian Croft, Charlie Dunmore and Justyna Pawlak in BRUSSELS; Mark Hosenball, Paul Eckert, Roberta Rampton, Tabassum Zakaria and Jeff Mason in WASHINGTON; Editing by Nick Macfie, Claudia Parsons and David Brunnstrom)

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North Korea conducts nuclear test: South Korea defense ministry

SEOUL (Reuters) - North Korea conducted a nuclear test on Tuesday, South Korea's defence ministry said, after seismic activity measuring 4.9 magnitude was registered by the U.S. Geological Survey.

The epicentre of the seismic activity, which was only one km below the Earth's surface, was close to the North's known nuclear test site.

"We've been informed by the South Koreans that there's been a (North Korean) nuclear test," a U.N. Security Council diplomat told Reuters on condition of anonymity.

An international nuclear test monitoring agency said the location of the seismic event was "roughly congruent with" 2006 and 2008 tests carried out by the reclusive state and had "clear explosion-like characteristics".

North Korea, which had been threatening a third nuclear test, had informed Beijing and Washington on Monday of plans to undertake a test, South Korea's Yonhap news agency reported.

The isolated state, which is banned under U.N. Security Council resolutions from developing nuclear and missile technology, did not make any immediate comment.

North Korea is not prone to seismic activity and it may take hours or even days to determine officially whether a nuclear test had been conducted.

South Korea's defence ministry said the North Korean seismic event could be the result of a 6-7 kiloton or stronger nuclear blast. South Korea's President Lee Myung-bak called a national security council meeting for 0400 GMT.

North Korea successfully launched a long-range rocket in December in violation of U.N. resolutions that banned it from developing missile or nuclear technology after nuclear tests in 2006 and 2009.

It announced plans for a third nuclear test in response to the sanctions imposed in January after the rocket launch, although satellite imagery indicated it has been readying its test site for more than a year.

(Reporting by David Chance; Editing by Michael Perry and Paul Tait)

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Gunbattle rocks Gao after rebels surprise French, Malians

GAO, Mali (Reuters) - Islamist insurgents launched a surprise raid in the heart of the Malian town of Gao on Sunday, battling French and local troops in a blow to efforts to secure Mali's recaptured north.

Local residents hid in their homes or crouched behind walls as the crackle of gunfire from running street battles resounded through the sandy streets and mud-brick houses of the ancient Niger River town, retaken from Islamist rebels last month by a French-led offensive.

French helicopters clattered overhead and fired on al Qaeda-allied rebels armed with AK-47s and rocket-propelled grenades who had infiltrated the central market area and holed up in a police station, Malian and French officers said.

The fighting inside Gao was certain to raise fears that pockets of determined Islamists who have escaped the lightning four-week-old French intervention in Mali will strike back with guerrilla attacks and suicide bombings.

After driving the bulk of the insurgents from major northern towns such as Timbuktu and Gao, French forces are trying to search out their bases in the remote and rugged Adrar des Ifoghas mountains, far up in the northeast.

But with Mali's weak army unable to secure recaptured zones, and the deployment of a larger African security force slowed by delays and kit shortages, vast areas to the rear of the French forward lines now look vulnerable to guerrilla activity.

"They infiltrated the town via the river. We think there were about 10 of them. They were identified by the population and they went into the police station," said General Bernard Barrera, commander of French ground operations in Mali.

He told reporters in Gao that French helicopters had intervened to help Malian troops pinned down by the rebels, who threw grenades from rooftops.

Malian gendarme Colonel Saliou Maiga told Reuters the insurgents intended to carry out suicide attacks in the town.

SUICIDE BOMBERS

No casualty toll was immediately available. But a Reuters reporter in Gao saw one body crumpled over a motorcycle. Malian soldiers said some of the raiders may have come on motorbikes.

The gunfire in Gao erupted hours after French and Malian forces reinforced a checkpoint on the northern outskirts that had been attacked for the second time in two days by a suicide bomber.

Abdoul Abdoulaye Sidibe, a Malian parliamentarian from Gao, said the rebel infiltrators were from the MUJWA group that had held the town until French forces liberated it late last month.

MUJWA is a splinter faction of al Qaeda's North African wing AQIM which, in loose alliance with the home-grown Malian Islamist group Ansar Dine, held Mali's main northern urban areas for 10 months until the French offensive drove them out.

Late on Saturday, an army checkpoint in Gao's northern outskirts came under attack by a group of Islamist rebels who fired from a road and bridge that lead north through the desert scrub by the Niger River to Bourem, 80 km (50 miles) away.

"Our soldiers came under heavy gunfire from jihadists from the bridge ... At the same time, another one flanked round and jumped over the wall. He was able to set off his suicide belt," Malian Captain Sidiki Diarra told reporters.

The bomber died and one Malian soldier was lightly wounded, he added. In Friday's motorbike suicide bomber attack, a Malian soldier was also injured.

Diarra described Saturday's bomber as a bearded Arab.

Since Gao and the UNESCO World Heritage city of Timbuktu were retaken last month, several Malian soldiers have been killed in landmine explosions on a main road leading north.

French and Malian officers say pockets of rebels are still in the bush and desert between major towns and pose a threat of hit-and-run guerrilla raids and bombings.

"We are in a dangerous zone... we can't be everywhere," a French officer told reporters, asking not to be named.

One local resident reported seeing a group of 10 armed Islamist fighters at Batel, just 10 km (6 miles) from Gao.

OPERATIONS IN NORTHEAST

The French, who have around 4,000 troops in Mali, are now focusing their offensive operations several hundred kilometers (miles) north of Gao in a hunt for the Islamist insurgents.

On Friday, French special forces paratroopers seized the airstrip and town of Tessalit, near the Algerian border.

From here, the French, aided by around 1,000 Chadian troops in the northeast Kidal region, are expected to conduct combat patrols into the Adrar des Ifoghas mountains.

The remaining Islamists are believed to have hideouts and supply depots in a rugged, sun-blasted range of rocky gullies and caves, and are also thought to be holding at least seven French hostages previously seized in the Sahel.

The U.S. and European governments back the French-led operation as a defense against Islamist jihadists threatening wider attacks, but rule out sending their own combat troops.

To accompany the military offensive, France and its allies are urging Mali authorities to open a national reconciliation dialogue that addresses the pro-autonomy grievances of northern communities like the Tuaregs, and to hold democratic elections.

Interim President Dioncounda Traore, appointed after a military coup last year that plunged the West African state into chaos and led to the Islamist occupation of the north, has said he intends to hold elections by July 31.

But he faces splits within the divided Malian army, where rival units are still at loggerheads.

(Additional reporting by Tiemoko Diallo and Adama Diarra in Bamako; Writing by Joe Bavier and Pascal Fletcher; Editing by Kevin Liffey)

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Israel's Lieberman says Palestinian peace accord impossible

JERUSALEM (Reuters) - Israel has no chance of signing a permanent peace accord with the Palestinians and should instead seek a long-term interim deal, the most powerful political partner of Prime Minister Benjamin Netanyahu said on Saturday.

The remarks by Avigdor Lieberman, an ultranationalist whose joint party list with Netanyahu narrowly won a January 22 election while centrist challengers made surprise gains, seemed designed to dampen expectations at home and abroad of fresh peacemaking.

A spring visit to Israel and the Palestinian territories by U.S. President Barack Obama, announced this week, has stirred speculation that foreign pressure for a diplomatic breakthrough could build - though Washington played down that possibility.

In a television interview, ex-foreign minister Lieberman linked the more than two-year-old impasse to pan-Arab political upheaval that has boosted Islamists hostile to the Jewish state.

These include Hamas, rivals of U.S.-backed Palestinian President Mahmoud Abbas, who control the Gaza Strip and spurn coexistence with Israel though they have mooted extended truces.

"Anyone who thinks that in the center of this socio-diplomatic ocean, this tsunami which is jarring the Arab world, it is possible to arrive at the magic solution of a comprehensive peace with the Palestinians does not understand," Lieberman told Israel's Channel Two.

"This is impossible. It is not possible to solve the conflict here. The conflict can be managed and it is important to manage the conflict ... to negotiate on a long-term interim agreement."

Abbas broke off talks in late 2010 in protest at Israel's settlement of the occupied West Bank. He angered Israel and the United States in November by securing a U.N. status upgrade that implicitly recognized Palestinian independence in all the West Bank, East Jerusalem and Gaza.

Israel insists it will keep East Jerusalem and swathes of West Bank settlements under any eventual peace deal. Most world powers consider the settlements illegal because they take up land seized in the 1967 Middle East war.

Lieberman, himself a West Bank settler, said the ball was "in Abu Mazen's (Abbas') court" to revive diplomacy.

Abbas has demanded Israel first freeze all settlement construction. With two decades gone since Palestinians signed their first interim deal with Israel, he has ruled out any new negotiations that do not solemnize Palestinian statehood.

Netanyahu's spokesman Mark Regev noted that Lieberman, in the Channel Two interview, had said he was expressing his own opinion.

Asked how Netanyahu saw peace prospects for an accord with the Palestinians, Regev referred to a speech on Tuesday in which the conservative prime minister said that Israel, while addressing threats by its enemies, "must also pursue secure, stable and realistic peace with our neighbors".

Netanyahu has previously spoken in favor of a Palestinian state, though he has been cagey on its borders and whether he would be prepared to dismantle Israeli settlements.

Lieberman's role in the next coalition government is unclear as he faces trial for corruption. If convicted, he could be barred from the cabinet. Lieberman denies wrongdoing and has said he would like to regain the foreign portfolio, which he surrendered after his indictment was announced last year.

(Writing by Dan Williams; Editing by Stephen Powell)

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Japan may release data proving Chinese radar incident: media

TOKYO (Reuters) - Japan may release data it says will prove a Chinese naval vessel directed its fire control radar at a Japanese destroyer near disputed islands in the East China Sea, local media reported.

Japan has said a Chinese frigate on January 30 locked its targeting radar on a Japanese destroyer - a step that usually precedes the firing of weapons - but China insists that its vessel used only ordinary surveillance radar.

The incident has added to tensions between the two nations over the disputed islands.

Japan will consider how much normally classified data it can release, the media reports said, citing comments by Japan Defence Minister Itsunori Onodera on local television.

"The government is considering the extent of what can be disclosed," Kyodo news agency quoted Onodera as saying.

China has accused Japan of smearing its name with the accusations, and on Saturday, the official Xinhua news agency continued the war of words.

"By spreading false accusations and posing as a poor victim, Japan had intended to tarnish China's image so as to gain sympathy and support, but a lie does not help," it said in an English language commentary.

"China has been exercising maximum restraint and stayed committed to solving the dispute through dialogue and consultation."

Japan and China have been involved in a series of incidents in recent months in the East China Sea where Chinese and Japanese naval vessels regularly shadow each others movements.

Both countries claim a small clusters of islands, known as Diaoyu in China and Senkaku in Japan, believed to be rich in oil and gas. Controlled by Japan, possession of the uninhabited outcrops and the sea surrounding them would provide China with easier access to the Pacific.

Hopes had been rising for an easing in tensions, including a possible summit between Japanese Prime Minister Shinzo Abe and Chinese Communist Party chief Xi Jinping. But the radar issue has seen China and Japan engage in a fresh round of invective.

China's Defence Ministry on Thursday said Japan's complaints did not "match the facts". The Chinese ship's radar, it said, had maintained regular alerting and surveillance operations and the ship "did not use fire control radar".

Japan's position against China has hardened since Abe led his conservative party to a landslide election victory in December, promising to beef up the military and stand tough in territorial disputes.

The commander of U.S. forces in the Asia-Pacific said the squabble between Japan and China underlined the need for rules to prevent such incidents turning into serious conflict.

China also has ongoing territorial disputes with other Asian nations including Vietnam and the Philippines over islands in the South China Sea.

(Reporting by Tim Kelly; Additional reporting by Ben Blanchard in BEIJING; Editing by Michael Perry)

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Opposition leader's funeral brings day of reckoning for Tunisia

TUNIS (Reuters) - Tunisia's political crisis looked likely to deepen on Friday with strikes and protests planned around the funeral of assassinated opposition politician Chokri Belaid.

Belaid's killing on Wednesday has brought thousands of people onto the streets of the capital Tunis and other cities in violence-marred protests.

Unions have called a general strike for Friday, setting the stage for further confrontation two years on from the pro-democracy revolution that inspired the Arab Spring.

Tunisia is riven by tensions between the dominant Islamists and their secular opponents, and by disillusionment over the lack of social progress since the overthrow of dictator Zine al-Abidine Ben Ali in January 2011.

In response to Belaid's assassination, Prime Minister Hamdi Jebali, an Islamist, said on Wednesday he would dissolve the government, name a non-partisan cabinet of technocrats and hold early elections. But his partners opposed the move and it is yet to be approved by parliament.

No one has claimed responsibility for the killing of Belaid, a lawyer and secular political figure, who was shot by a gunman as he left home for work on Wednesday.

But a crowd set fire to the headquarters of Ennahda, the Islamist party of Prime Minister Jebali, who leads a coalition with two junior secularist parties. Ennahda denies any involvement.

While Belaid had only a modest political following, his criticism of Ennahda policies spoke for many Tunisians who fear religious radicals are bent on snuffing out freedoms won in the first of the revolts that rippled through the Arab world.

"Criminals assassinated Chokri's body, but will not assassinate Chokri's struggle," his widow Besma said on Thursday.

"My sadness ended when I saw thousands flocking to the streets...at that moment I knew that the country is fine and men and women in my country are defending democracy, freedom and life."

All three ruling parties and sections of the opposition rebuffed Jebali's plan to create a small, technocrat government to take over day-to-day matters until elections could be held, demanding they be consulted before any such move.

"In the likely event that there is no agreement, civil unrest will increase, reaching a level that cannot be contained by the police," said Firas Abi Ali of the London-based Exclusive Analysis think-tank.

"If unrest continued for more than two weeks, the army would probably reluctantly step in and back a technocrat government, as well as fresh elections for a new Constituent Assembly."

The economic effect of political uncertainty and street unrest could be serious in a country which has yet to draft a post-revolutionary constitution and which relies heavily on the tourist trade.

The cost of insuring Tunisian government bonds against default rose to its highest level in more than four years on Thursday and ratings agency Fitch said it could further downgrade Tunisia if political instability continues or worsens.

(Writing by Robin Pomeroy; Editing by Angus MacSwan)

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Tunisian government dissolved after critic's killing causes fury

TUNIS (Reuters) - Tunisia's ruling Islamists dissolved the government and promised rapid elections in a bid to restore calm after the killing of an opposition leader sparked the biggest street protests since the revolution two years ago.

The prime minister's announcement late on Wednesday that an interim cabinet of technocrats would replace his Islamist-led coalition came at the end of a day which had begun with the gunning down of Chokri Belaid, a left-wing lawyer with a modest political following but who spoke for many who fear religious radicals are stifling freedoms won in the first of the Arab Spring uprisings.

During the day, protesters battled police in the streets of the capital and other cities, including Sidi Bouzid, the birthplace of the Jasmine Revolution that toppled Zine al-Abidine Ben Ali in January 2011.

In Tunis, the crowd set fire to the headquarters of Ennahda, the moderate Islamist party which won the most seats in an legislative election 16 months ago.

Calls for a general strike on Thursday could bring more trouble though Belaid's family said his funeral, another possible flashpoint, might not be held until Friday.

Prime Minister Hamdi Jebali of Ennahda spoke on television on Wednesday evening to declare that weeks of talks among the various political parties on reshaping the government had failed and that he would replace his entire cabinet with non-partisan technocrats until elections could be held as soon as possible.

It followed weeks of deadlock in the three-party coalition. The small, secular Congress for the Republic, whose leader Moncef Marzouki has served as Tunisia's president, threatened to withdraw unless Ennahda replaced some of its ministers.

Wednesday's events, in which the Interior Ministry said one police officer was killed, appeared to have moved Jebali, who will stay on as premier, to take action.

"After the failure of negotiations between parties on a cabinet reshuffle, I have decided to form a small technocrat government," he said.

"The murder of Belaid is a political assassination and the assassination of the Tunisian revolution," he said earlier.

It was not clear whom he might appoint but the move seemed to be widely welcomed and streets were mostly calm after dark.

A leader in the secular Republican Party gave Jebali's move a cautious welcome.

"The prime minister's decision is a response to the opposition's aspirations," Mouldi Fahem told Reuters. "We welcome it principle. We are waiting for details."

Beji Caid Essebsi, leader of the secular party Nida Touns, who was premier after the uprising, told Reuters: "The decision to form a small cabinet is a belated move but an important one."

DIVISIONS

The widespread protests following Belaid's assassination showed the depth of division between Islamists and secular movements fearful that freedoms of expression, cultural liberty and women's rights were under threat just two years after the popular uprising ended decades of Western-backed dictatorship.

"This is a black day in the history of modern Tunisia. Today we say to the Islamists, 'get out', enough is enough," said Souad, a 40-year-old schoolteacher outside the ministry.

"Tunisia will sink in blood if you stay in power."

Ennahda, like its fellow Islamists in Egypt's Muslim Brotherhood, benefited from a solid organization that survived repression by the old regime.

And as in Egypt, the Islamists have faced criticism from secular leaders that they are trying to entrench religious ideas in the new state. A constitution is still due to be agreed before a parliamentary election which had been expected by June.

Belaid, 48, was shot at close range as he left for work by a gunmen who fled on the back of a motorcycle. Within hours, crowds were battling police, hurling rocks amid volleys of tear gas in scenes reminiscent of clashes in Egypt last month.

World powers, increasingly alarmed at the extent of radical Islamist influence and the bitterness of the political stalemate, urged Tunisians to reject violence and see through the move to democracy they began two years ago, when their revolution ended decades of dictatorship and inspired fellow Arabs in Egypt and across North Africa and the Middle East.

As in Egypt, the rise to power of political Islam through the ballot box has prompted a backlash among less organized, more secular political movements in Tunisia. Belaid, who made a name for himself by criticizing Ben Ali, led a party with little electoral support but his vocal opinions had a wide audience.

The day before his death he was publicly lambasting a "climate of systematic violence". He had blamed tolerance shown by Ennahda and its two, smaller secularist allies in the coalition government toward hardline Salafists for allowing the spread of groups hostile to modern culture and liberal ideas.

On Wednesday, thousands demonstrated in cities including Mahdia, Sousse, Monastir and Sidi Bouzid, the cradle of the revolution, where police fired tear gas and warning shots at protesters who set cars and a police station on fire.

While Belaid's nine-party Popular Front bloc has only three seats in the constituent assembly, the opposition jointly agreed to pull its 90 or so members out of the body, which is acting as parliament and writing the new post-revolution charter. Ennahda and its fellow ruling parties have some 120 seats.

Since the uprising, Tunisia's new leaders have faced many protests over economic hardship and political ideas; many have complained that hardline Salafists may hijack the revolution.

Last year, Salafist groups prevented several concerts and plays from taking place in Tunisian cities, saying they violated Islamic principles. Salafists also ransacked the U.S. Embassy in September, during international protests over an Internet video.

The embassy issued a statement condemning Belaid's killing and urging justice for his killers: "There is no justification for this heinous and cowardly act," it said. "Political violence has no place in the democratic transition in Tunisia."

ECONOMIC TROUBLES

Declining trade with the crisis-hit euro zone has left the 11 million Tunisians struggling to achieve the better living standards many had hoped for following Ben Ali's departure.

Its compact size, relatively skilled workforce and close ties with former colonial power France and other European neighbors across the Mediterranean has raised hopes that Tunisia can set an example of economic progress for the region.

Lacking the huge oil and gas resources of North African neighbors Libya and Algeria, Tunisia counts tourism as a major currency earner and further unrest could scare off visitors vital to an industry only just recovering from the revolution.

Jobless graduate Mohamed Bouazizi set himself on fire in December 2010 in the city, 300 km (180 miles) southwest of Tunis, after police confiscated his unlicensed fruit cart, triggering the uprising that forced Ben Ali to flee to Saudi Arabia less than a month later, on January 14, 2011.

President Moncef Marzouki, who last month warned the tension between secularists and Islamists might lead to "civil war", cancelled a visit to Egypt scheduled for Thursday and cut short a trip to France, where he addressed the European Parliament.

"There are political forces inside Tunisia that don't want this transition to succeed," Marzouki said in Strasbourg. "When one has a revolution, the counter revolution immediately sets in because those who lose power - it's not only Ben Ali and his family - are the hundreds of thousands of people with many interests who see themselves threatened by this revolution."

Belaid, who died in hospital, said this week dozens of people close to the government had attacked a Popular Front group meeting in Kef, northern Tunisia, on Sunday. He had been a constant critic of the government, accusing it of being a puppet of the rulers of wealthy Gulf emirate Qatar.

DENIES INVOLVEMENT

Human Rights Watch called his murder "the gravest incident yet in a climate of mounting violence".

Ennahda leader Rached Ghannouchi denied any involvement by his party in the killing.

"Is it possible that the ruling party could carry out this assassination when it would disrupt investment and tourism?" Ghannouchi told Reuters.

He blamed those seeking to derail Tunisia's democratic transition: "Tunisia today is in the biggest political stalemate since the revolution. We should be quiet and not fall into a spiral of violence. We need unity more than ever," he said.

He accused opponents of stirring up sentiment against his party following Belaid's death. "The result is burning and attacking the headquarters of our party in many areas," he said.

Witnesses said crowds had also attacked Ennahda offices in Sousse, Monastir, Mahdia and Sfax.

French President Francois Hollande said he was concerned by the rise of violence in Paris's former dominion, where the government says al Qaeda-linked militants linked to those in neighboring countries have been accumulating weapons with the aim of creating an Islamic state across North Africa.

"This murder deprives Tunisia of one of its most courageous and free voices," Hollande's office said in a statement.

(Additional reporting by John Irish in Paris; Writing by Alison Williams and Alastair Macdonald; Editing by Giles Elgood)

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