* Southern movement reinvigorated by fall of strongman Saleh
* U.S. sees Iran's hand in south Yemen separatism
* Southerners: unity a failure, we can handle al Qaedaourselves
* But personality, policy disputes may limit breakaway bid By Andrew Hammond
ADEN, Oct 10 (Reuters) - Yemeni separatist leaders,exploiting a weakening of central authority and freer politicalatmosphere since a national uprising last year, have returnedfrom exile to rally support for reviving the state of SouthYemen.
Secessionists in the south, Houthi Islamist tribal rebels inthe north and al Qaeda militants all benefited from the popularupheaval in the Arabian Peninsula country that ousted veteranstrongman president Ali Abdullah Saleh in February.
But there is now serious international concern that alQaeda's strongest regional wing will use the disorder in Yemento entrench itself in some areas especially t h e south, m enacingtop oil exporter Saudi Arabia next door and Western interests inthe Middle East, notably oil shipping through nearby sea lanes.
Southern separatist leaders say al Qaeda would lose tractionand be neutralised more easily in an independent south whereresentment would no longer fester over what they call a corrupt,repressive and tribally defined system run from the north.
Some senior separatists have returned to south Yemen of lateto drum up grassroots backing via street rallies, tours ofsouthern provinces and the creation of umbrella groups.
The cause appears to captured hearts and minds in Aden. Oncethe capital of South Yemen, the ancient seaport at the foot ofdesert mountain outcrops is covered in pro-independence graffitiand flags of the old southern state hang from many lampposts.
Meanwhile, the U.S.-backed Yemeni government based in Sanaa,in the north, is planning a national dialogue starting inNovember on reforming the political system and thrashing outissues such as balance of power and division of resources.
Western nations suspect that some southern leaders, whosemovement is known as al-Hirak, are less interested in thedialogue and more in breaking away, possibly with the backing ofIran, arch-foe of the Saudis and Americans.
But personality and policy disputes abound within thesouthern movement and these may limit any breakaway bid.Separatist leaders have not said if they will join the dialogue.
"The Hirak has a crisis of leadership and unity of itsranks," said Yemeni political commentator Madyan al-Maqbas.
"One trend wants a federal state, which it could get, butanother wants independence, and others among them wantindependence but without Iranian or U.S. interference."
Western diplomats in the Yemeni capital Sanaa say Iran andits Lebanese militant ally Hezbollah have forged links withsouthern secessionists as part of a broader struggle forregional predominance with Saudi Arabia.
Yemeni President Abd-Rabbu Mansour Hadi said last month thatSanaa had broken up six Iranian cells in Yemen this year,prompting Tehran to summon Yemen's charge d'affaires in protest.
Western and Gulf Arab states sponsoring the post-uprisingtransition in Yemen are considering sanctions on figures seen ashindering a June U.N. Security Council resolution backing thereform process, diplomats and officials say.
CONCERN OVER AL-BEIDH
One figure drawing attention is Ali Salem al-Beidh, theBeirut-based south Yemeni leader who failed in a 1994 civil warto reverse a 1990 deal merging the former South Yemen with thenorth. Beidh now runs a pro-independence satellite TV station.
"We know that Iran is interested in promoting some of themore extreme elements of the secessionist movement, providingfunding to Beidh," a senior Western diplomat in Sanaa said.
"Beidh is in Beirut with the intention of destabilising thesituation in the south, trying to block implementation of thenational dialogue and creating an anti-Yemen programme insouthern Yemen."
Beidh sent a representative to the former southern capitalAden in August, a former ambassador of united Yemen who wasbriefly arrested on arrival.
"Threats like this will cause injustice to southerners andfrankly will not be effective," said Beidh's envoy Ahmedal-Hasani, referring to possible sanctions. "We have no money ormillions that we fear for in foreign banks."
Beidh supporters organised some protests in Aden whichHasani says the authorities have suppressed. Aden authorities,led by a governor from the Sanaa-based Islamist Islah party,deny that, saying protests are allowed in designated areas.
South Yemen emerged as an independent state, separate fromNorth Yemen, when Britain withdrew in 1967 from areas itcontrolled along the Arabian Peninsula's southern coastline.
Conflict between the political systems of the tribal Northand Marxist South led to war in 1979. But when its major patronthe Soviet Union fell apart, the South merged in 1990 with themilitarily stronger Yemeni Arab Republic based in Sanaa.
UNITED YEMEN A MISTAKE?
Now Hirak politicians say unity with Sanaa was a historicmistake that led to appropriation of public land by Saleh andhis cronies, dismantling of southern institutions including thearmy, and dismissal of tens of thousands of administrators.
They say Saleh ruined what was a well-functioning state,proud of its efforts in education and empowering women.
Northern politicians say they recognise the grievances butthey should be addressed within a united post-Saleh Yemen. Somehave threatened force to stop any future separatist moves.
Hasani said he had little faith in the national dialogueplanned by Hadi. "We think the solution is negotiations betweenthe occupied south and the Sanaa regime under international andregional supervision, with one aim - independence," he said.
"Our struggle is peaceful. But it remains the right of ourpeople to defend itself by all means available ... (Beidh) isthe legitimate president of the south."
GRASSROOTS SEPARATISM
Mohammed Ali Ahmed, a former South Yemen interior minister,has also been touring southern provinces since his March returnfrom a decade in Britain in an effort to unify diaspora andinternal Hirak ranks under a new "National Coalition".
But Ahmed said he found sentiment on the ground was moreradical than southern leaders exiled abroad - who had agreed topush Sanaa for a federal southern entity - anticipated.
"I found people believing in return of the southern stateand an immediate breaking of contact with north," he said. "Itried to convince people but found no way. What people foundacceptable was freedom, self-determination and return of state."
While the south is more sparsely populated than the north,politicians say it boasts mineral, oil and gas and touristpotential for a flourishing economy.
The Yemeni Socialist Party, which once ruled South Yemen,formally favours a federal system that recognises all of the oldsouthern state as one region. Some socialist and Hirak figuresare mooting the idea of a southern referendum after five years.
One card southern leaders say they could play to theiradvantage with international powers is al Qaeda, which hasspread in the south despite a socialist legacy of secularpolitics. They say Aden could curb al Qaeda better than Sanaa.
"We hope they understand that an independent state will be afactor for security, stability and peace in this part of theworld," Hasani said. "The south is ready to set up a modernstate and rebalance the region in a way that ensures stability."
(Additional reporting by Dhuyazen Mukhashaf; Editing by MarkHeinrich)
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Keywords: YEMEN SOUTH/SEPARATISM