Yemen kills militants it says threatened embassies

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* Yemeni forces battle al Qaeda militants

* Clinton says Yemen treat to regional and global security

* Pentagon studies increasing security assistance

By Mohamed Sudam

SANAA, Jan 4 (Reuters) - Yemeni forces on Monday killed at least two al Qaeda militants they said were behind a threat that forced the U.S. and European embassies to close, as concern grew about the poor Arab country's stability.

The raid took place after the attempted bombing of a U.S.-bound plane on Christmas Day thrust Yemen into the foreground of the U.S.-led war against Islamist militants.

U.S. Secretary of State Hillary Clinton said fighting in Yemen was a threat to regional and global stability.

"We see global implications from the war in Yemen and the ongoing efforts by al Qaeda in Yemen to use it as a base for terrorist attacks far beyond the region," she said.

The West and Saudi Arabia fear al Qaeda will take advantage of Yemen's instability to spread its operations to the neighbouring kingdom, the world's biggest oil exporter, and beyond. Yemen itself produces a small amount of oil.

A Yemeni security official told Reuters militants targeted in Monday's raid were behind the threats to the U.S. embassy.

"Security authorities had been monitoring them for several days and struck today," he said.

Agents were hunting Mohammed al-Haniq, a local al-Qaeda leader, but he was able to get away, state media reported.

The U.S. embassy in Sanaa stayed shut for a second day in response to what it said was al Qaeda threats. Britain's embassy has also been closed since Sunday.

Clinton said a decision on reopening the U.S. embassy would be taken "as conditions permit".


Other European countries, including France and Italy, limited access to their embassies on Monday, as did Japan.

The Dutch Foreign Ministry said it had temporarily closed the consular and visa sections of its embassy.

A Yemeni security official denied a BBC report that six trucks belonging to the security forces and loaded with arms and explosives had gone missing.

Security has been high in a residential area of Sanaa that houses several embassies since before the latest threats, with army vehicles blocking several streets.

Al Qaeda in the Arabian Peninsula (AQAP), the regional wing of Osama bin Laden's network, said it was behind the Dec. 25 attempt to blow up a U.S. passenger plane carrying 300 people from Amsterdam to Detroit.

It said the attempt was in retaliation for U.S. involvement in Yemen and its support for the government's offensive against the militants.

AQAP also called last month for attacks on embassies, military bases and "fleets in the waters of the Arabian Peninsula and the surrounding territory".

Yemeni President Ali Abdullah Saleh said on Monday Yemen was "ready to confront and defeat anyone thinking of harming the country and its security", state media said.

U.S. President Barack Obama has said it was a priority to help the Yemeni government strike al Qaeda.

General David Petraeus, head of U.S. Central Command, said last week the United States would more than double its $70 million security assistance for Yemen. The Pentagon on Monday cautioned that no decision had been made.

"There are a number of proposals from U.S. Central Command, and they have to be evaluated, prioritised. And we're not quite there yet," Pentagon spokesman Bryan Whitman told reporters.

Umar Farouk Abdulmutallab, a 23-year-old Nigerian accused of trying to blow up a plane as it approached Detroit, spent time in Yemen last year where U.S. officials believe he received training from a militant group.


The events have swung the focus of Washington's war on Islamist militants to Yemen while U.S. forces are fighting a strengthening Taliban insurgency in Afghanistan and are still committed in Iraq.

Placed strategically on the Arabian Peninsula's southern rim, Yemen, the poorest Arab country, has shrinking oil reserves and faces a water crisis. Its population of 23 million is expected to double in the next 20 years.

A Shi'ite rebellion in the north and separatist unrest in the south have flared up in recent days.

In the southern port of Aden on Monday, one soldier was killed and three were wounded in clashes with protesters, a security official said. A pro-southern website said troops had opened fire on demonstrators and shot the soldier by mistake.

Separatists want independence for south Yemen, which united with the north in 1990 and failed to secede in a 1994 war.

In the north, Shi'ite rebels, who complain of social, economic and religious marginalisation, said air strikes by Saudi planes killed 16 Yemenis in the past two days.

Saudi Arabia was drawn into the conflict in November when rebels carried out a cross-border incursion. Saudi Defence Ministry officials could not immediately be reached for comment.

Economic weakness is adding to Yemen's security problems.

"Terrorist networks stand to benefit if the state gets weaker but it's not terrorism that will undermine the government, it's the economic crisis forced by declining oil revenues," said Ginny Hill, of London's Chatham House think tank.

"Yemen's patronage system has held the country together for several decades but oil production in Yemen is falling now, which means there's less and less money to go round, and that's creating an economic crisis with multiple political implications."

(Additional reporting by Phil Stewart in Washington, Avril Ormsby in London, Tamara Walid in Dubai, and Mohammed Mokhashaf in Aden; Writing by Robin Pomeroy and Firouz Sedarat; editing by Andrew Dobbie)

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