Egypt floods Gaza tunnels to cut Palestinian lifeline

GAZA (Reuters) - Egyptian forces have flooded smuggling tunnels under the border with the Palestinian-ruled Gaza Strip in a campaign to shut them down, Egyptian and Palestinian officials said.

The network of tunnels is a vital lifeline for Gaza, bringing in an estimated 30 percent of all goods that reach the enclave and circumventing a blockade imposed by Israel for more than seven years.

Reuters reporters saw one tunnel being used to bring in cement and gravel suddenly fill with water on Sunday, sending workers rushing for safety. Locals said two other tunnels were likewise flooded, with Egyptians deliberately pumping in water.

"The Egyptians have opened the water to drown the tunnels," said Abu Ghassan, who supervises the work of 30 men at one tunnel some 200 meters (yards) from the border fence.

An Egyptian security official in the Sinai told Reuters the campaign started five days ago.

"We are using water to close the tunnels by raising water from one of the wells," he said, declining to be named.

Dozens of tunnels had been destroyed since last August following the killing of 16 Egyptian soldiers in a militant attack near the Gaza fence.

Cairo said some of the gunmen had crossed into Egypt via the tunnels - a charge denied by Palestinians - and ordered an immediate crackdown.

The move surprised and angered Gaza's rulers, the Islamist group Hamas, which had hoped for much better ties with Cairo following the election last year of Egyptian President Mohamed Mursi, an Islamist who is ideologically close to Hamas.

A Hamas official confirmed Egypt was again targeting the tunnels. He gave no further details and declined to speculate on the timing of the move, which started while Palestinian faction leaders met in Cairo to try to overcome deep divisions.

CRITICISING CAIRO

Hamas said on Monday the Egyptian-brokered talks, aimed at forging a unity government and healing the schism between politicians in Gaza and the occupied West Bank, had gone badly but had not collapsed.

While Gaza's rulers have been reluctant to criticize Mursi in public, ordinary Gazans are slightly more vocal.

"Egyptian measures against tunnels have worsened since the election of Mursi. Our Hamas brothers thought he would open up Gaza. I guess they were wrong," said a tunnel owner, who identified himself only as Ayed, fearing reprisal.

"Perhaps 150 or 200 tunnels have been shut since the Sinai attack. This is the Mursi era," he added.

The tunnellers fear the water being pumped underground might collapse the passage ways, with possible disastrous consequences.

"Water can cause cracks in the wall and may cause the collapse of the tunnel. It may kill people," said Ahmed Al-Shaer, a tunnel worker whose cousin died a year ago when a tunnel caved in on him.

Six Palestinians died in January in tunnel implosions, raising the death toll amongst workers to 233 since 2007, according to Gazan human rights groups, including an estimated 20 who died in various Israeli air attacks on the border lands.

Israel imposed its blockade for what it called security reasons in 2007. The United Nations has appealed for it to be lifted.

At one stage an estimated 2,500-3,000 tunnels snaked their way under the desert fence but the network has shrunk markedly since 2010, when Israel eased some of the limits they imposed on imports into the coastal enclave.

All goods still have to be screened before entering Gaza and Israel says some restrictions must remain on items that could be used to make or to store weapons.

This ensures the tunnels are still active, particularly to bring in building materials. Hamas also prefers using the tunnels to smuggle in fuel, thereby avoiding custom dues that are payable on oil crossing via Israel.

(Additional reporting by Youssry Ahmad in Egypt; Editing by Crispian Balmer and Angus MacSwan)

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Insight: Divided Damascus confronted by all-out war

DAMASCUS (Reuters) - MiG warplanes roar low overhead to strike rebels fighting to oust President Bashar al-Assad on the fringes of Damascus, while artillery batteries pound the insurgents from hills overlooking a city divided between all-out war and a deceptive calm.

Whole families can be obliterated by air raids that miss their targets. Wealthy Syrians or their children are kidnapped. Some are returned but people tell grim tales of how others are tortured and dumped even when the ransom is paid.

People also tell of prisoners dying under torture or from infected wounds; of looting by the government's feared shabbiha militias or by rebels fighting to throw out the Assad family.

That is one Damascus. In the other, comprising the central districts of a capital said to be the oldest continually inhabited city in the world, the restaurant menus are full, the wine is cheap and the souks are packed with shoppers.

Employees report for work, children go to school and shops are open, seemingly undeterred by the din and thud of war.

The two cities exist a few miles apart - for now.

For Damascus and its outskirts are rapidly descending into civil war and everything that comes with it - lawlessness, looting, kidnapping and revenge killings. Like the rest of the country, the capital and its suburbs are crawling with armed gangs.

"Anybody can come to you pretending he is security and grab you in broad daylight, put you in a car and speed off and nobody dares interfere or rescue you," says Lama Zayyat, 42. "A girl in the 7th grade was kidnapped and her father was asked to pay a big ransom. The same happened to other children," she said.

Nobody really knows who is behind the kidnappings. In one gang, one brother is in charge of abductions while another brother negotiates with the victims. The fear is palpable.

NO SECT HAS BEEN SPARED

The war has not yet reached the heart of the capital, but it is shredding the suburbs. In the past week, government troops backed by air power unleashed fierce barrages on the east of the city in an attempt to flush out rebel groups.

Most of central Damascus is controlled by Assad's forces, who have erected checkpoints to stop bomb attacks. The insurgents have so far failed to take territory in the center.

Just as loyalist forces seem unable to regain control of the country, there looks to be little chance the rebels can storm the center of Damascus and attack the seat of Assad's power.

For most of last week the army rained shells on the eastern and southern neighborhoods of Douma, Jobar, Zamalka and Hajar al-Aswad, using units of the elite Republican Guard based on the imposing Qasioun mountain that looms over the city.

The rebels, trying to break through the government's defense perimeter, were periodically able to overrun roadblocks and some army positions, but at heavy cost.

Jobar and Zamalka are situated near military compounds housing Assad's forces, while Hajar al-Aswad in the south is one of the gateways into the city, close to Assad's home and the headquarters of his republican guard and army.

Since the uprising began two years ago, 70,000 people have been killed, 700,000 have been driven from Syria and millions more are displaced, homeless and hungry. No section of society has been spared, whether Christians, Alawites or Sunnis, but in every community it is the poor who are suffering most.

Electricity is sporadic. Hospitals are understaffed as so many doctors - often targeted on suspicion of treating rebel wounded - have fled. Hotels and businesses barely function.

Outside petrol stations and bakeries, queues are long and supplies often run out, meaning people have to come back the next day. Those who can afford it pay double on a thriving black market.

The scale of the suffering can be seen in the ubiquitous obituary notices on the walls of Damascus streets - some announcing the deaths of whole families killed by shelling.

As if oblivious of these private daily tragedies, the government insists the situation is under control, while the rebels say the Assads' days are numbered.

NOWHERE NEAR OVER

Ordinary Syrians are convinced their ordeal is nowhere near over. While they believe Assad will not be able to reverse the gains of the rebels, they cannot see his enemies prevailing over his superior firepower, and Russian and Iranian support.

"The regime won't be able to crush the revolution and the rebels won't be able to bring down the regime," said leading opposition figure Hassan Abdel-Azim. "The continuation of violence won't lead to the downfall of the regime, it will lead to the seizure of the country by armed gangs, which will pose a grave danger not only to Syria but to our neighbors".

"Right now no one is capable of winning," said a Damascus-based senior Arab envoy. "The crisis will continue if there is no political process. It is deadlock."

Other diplomats in Damascus say the United States and its allies are getting cold feet about arming the rebels, fearing the growing influence of Islamist radicals such the al-Nusra Front linked to al-Qaeda, banned last year by Washington.

Some remarks recur again and again in Damascus conversations: "Maybe he will stay in power, after all", and, above all, "Who is the alternative to Assad?"

"At first I thought it was a matter of months. That's why I came here and stayed to bear witness to the final moments," said Rana Mardam Beik, a Syrian-American writer. "But it looks like it will be a while so I am thinking of going back to the U.S."

Loyalty to Assad is partly fed by fear of the alternative. Facing a Sunni-dominated revolt, Syria's minorities, including Christians and Assad's own Alawites - an offshoot of Shi'ite Islam - fear they will slaughtered or sidelined if the revolution succeeds and Sunni fundamentalists come to power.

MINORITIES' FEAR

Many Christians are already trying to emigrate to countries such as Sweden, diplomats say.

"The minorities have every right to be frightened because no one knows what is the alternative. Is it a liberal, civic, pluralistic and democratic state, or is the alternative an Islamist extremist rule that considers the minorities infidels and heretics?" said Abdel Azim.

The government tells the minorities the only alternative to Assad is Islamism. Loyalist brutality against the Sunni majority is in danger of making this a self-fulfilling prophecy, by sucking in jihadi extremists from Libya to Saudi Arabia.

"I am not with the regime but we are sure that if Bashar goes the first people they will come for are the Alawites, then the Shi'ites and then us Christians. They are fanatics," said George Husheir, 50, an IT engineer.

At the Saint Joseph Church in Bab Touma, the old Christian quarter of Damascus, Christians in their dozens, mostly middle-aged and older couples, gathered for mass on a Friday morning.

"We don't know what the future holds for us and for this country," said the priest in his sermon. "The Christians of Syria need to pray more."

Nabiha, a dentist in her 40s, said: "Bashar is a Muslim president but he is not a fanatic. He gave us everything. Why shouldn't we love him. Look at us here in our church, we pray, we mark our religious rituals freely, we do what we like and nobody interferes with us."

The fear of the Christians extends to the Alawite and minority Shi'ites. "If Bashar goes we definitely have to leave too because the Sufianis (Sunni Salafis) are coming and they are filled with a sectarian revenge against us," said one wealthy middle class Shi'ite.

COSTLY WAR

Alongside sectarian hatreds, class and tribal acrimony is also surfacing. Wealthy Sunnis in the capital are already in a panic about poor Sunni Islamists from rural areas descending on their neighborhoods.

"When they come they will eat us alive", one rich Sunni resident of Damascus said, repeating what a cab driver dropping him in the posh Abou Roummaneh district told him: "Looting these houses will be allowed."

Yet many activists feel protective of the revolution, despite the brutal behavior of some Islamist rebels.

"People talk about chaos and anarchy after Assad, but so what if we have two years of a messy transition? That is better than to endure another 30 years of this rule," said Rana Darwaza, 40, a Sunni academic in Damascus.

Prominent human rights lawyer Anwar al-Bunni said the suffering is a price that had to be paid. "Those on the ground will continue to fight even with their bare hands", he said.

He said there are thousands of prisoners in horrific conditions in Assad's jails. Some suffocate in overcrowded cells while others die under torture or from untreated wounds. "They don't give them medical treatment or pain killers or antibiotics. They leave them to die," he said.

Close watchers of Syria predict that if there is no settlement in a few months the conflict could go on for years. Yet the economy is collapsing, leaving the government to rely on dwindling foreign reserves, private assets and Iranian funds.

There is no tourism, no oil revenue, and 70 percent of businesses have left Syria, said analyst Nabil Samman. "We are heading for destruction, the future is dark", he added.

Added to the religious animosity between the Sunni majority and the Alawite minority who took control when Hafez al-Assad seized power in 1970 are social and economic grievances fuelled by the predatory practices of the elite.

This resentment extends to young middle class Syrians who feel they have lost a way of life and that their country is being used by regional powers for proxy war.

"All the regional point-scoring is taking place in Syria. We have Libyan fighters and Saudis fighting for freedom in Syria, why are they here? Let them go and demand freedom in their own countries?," said banker Hani Hamaui, 29.

Two years into the uprising, Assad is hanging on. Some will always back him and others want him dead. But many just want an end to the fighting. They may have to wait for some time.

Signs daubed on the gates to the city by Assad's troops are a reminder that the battle for Damascus will be costly. "Either Assad, or we will set the country ablaze", they say.

(Editing by Giles Elgood)

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Ten Afghans killed in NATO air strike: officials

KUNAR, Afghanistan (Reuters) - A NATO air strike killed 10 Afghan civilians, including five children, in eastern Afghanistan on Wednesday, local officials said, a toll that if confirmed is likely to raise tension between President Hamid Karzai's government and U.S.-led NATO forces.

The strike, in the Shigal district of Kunar province, was condemned by Karzai, who expressed his condolences to the families and announced the deaths would be investigated by Afghan authorities.

NATO's International Security Assistance Force (ISAF) said it was aware of the reports of civilian deaths but could not confirm them.

"Foreign forces carried out the attack by themselves without informing us," Kunar Governor Fazlullah Wahidi told Reuters.

Four Taliban fighters were also killed in the strike and five civilians wounded, he said. The strike occurred in the village of Chawgam and the 10 dead civilians were from two local families, Wahidi said.

In a statement, Karzai confirmed the incident and reiterated his view that air strikes on Afghan villages were not the solution to fighting terrorism.

"In Wednesday's air strike which was carried out by NATO forces, two houses were targeted where 10 civilians including women and children were martyred and four more wounded," the statement said.

There have been tensions between Karzai and his foreign backers following his October comments that the U.S. and its allies should go after those in Pakistan who support terrorism, and not fight the war in Afghan villages.

"We take all allegations of civilian casualties seriously and we are currently assessing the incident to determine more facts," an spokesman for ISAF said.

ISAF regularly states that it has reduced civilian casualties in recent years, and that insurgents such as the Taliban are now responsible for 84 per cent of all such deaths and injuries.

The air strike came within hours of U.S. President Barack Obama's declaration that he would be withdrawing half the U.S. troops in Afghanistan - 34,000 - by the end of this year.

That would be followed by further troop withdrawals next year which would lead to the end of the U.S. war in Afghanistan, he said.

(Reporting by Mohammad Anwar and Mirwais Harooni; Writing by Dylan Welch; Editing by Michael Holden)

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Pope confident his resignation will not hurt Church

ROME (Reuters) - A visibly moved Pope Benedict tried to assure his worldwide flock on Wednesday over his stunning decision to become the first pontiff in centuries to resign, saying he was confident that it would not hurt the Church.

The Vatican, meanwhile, announced that a conclave to elect his successor would start sometime between March 15 and March 20, in keeping with Church rules about the timing of such gatherings after the papal see becomes vacant.

"Continue to pray for me, for the Church and for the future pope," he said in unscripted remarks at the start of his weekly general audience, his first public appearance since his shock decision on Monday that he will step down on February 28.

It was the first time Benedict, 85, who will retire to a convent inside the Vatican, exchanging the splendor of his 16th century Apostolic Palace for a sober modern residence, had uttered the words "future pope" in public.

Church officials are still so stunned by the move that the Vatican experts have yet to decide what his title will be and whether he will continue to wear the white of a pope, the red of a cardinal or the black of an ordinary priest.

His voice sounded strong at the audience but he was clearly moved and his eyes appeared to be watering as he reacted to the thunderous applause in the Vatican's vast, modern audience hall, packed with more than 8,000 people.

In brief remarks in Italian that mirrored those he read in Latin to stunned cardinals on Monday he appeared to try to calm Catholics' fears of the unknown.

He message was that God would continue to guide the Church.

EXAMINATION OF CONSCIENCE

"I took this decision in full freedom for the good of the Church after praying for a long time and examining my conscience before God," he said.

He said he was "well aware of the gravity of such an act," but also aware that he no longer had the strength required to run the 1.2 billion member Roman Catholic Church, which has been beset by a string of scandals both in Rome and round the world.

Benedict said he was sustained by the "certainty that the Church belongs to Christ, who will never stop guiding it and caring for it" and suggested that the faithful should also feel comforted by this.

He said that he had "felt almost physically" the affection and kindness he had received since he announced the decision.

When Benedict resigned on Monday, the Vatican spokesman said the pontiff did not fear schism in the Church after his decision to step down.

Some 115 cardinals under the age of 80 will be eligible to enter a secret conclave to elect his successor.

Cardinals around the world have already begun informal consultations by phone and email to construct a profile of the man they think would be best suited to lead the Church in a period of continuing crisis.

The likelihood that the next pope would be a younger man and perhaps a non-Italian, was increasing, particularly because of the many mishaps caused by Benedict's mostly Italian top aides.

Benedict has been faulted for putting too much power in the hands of his friend, Secretary of State Cardinal Tarcisio Bertone. Critics of Bertone, effectively the Vatican's chief administrator, said he should have prevented some papal mishaps and bureaucratic blunders.

ILL-SERVED POPE

"These scandals, these miscommunications, in many cases were caused by Pope Benedict's own top aides and I think a lot of Catholics around the world think that he was perhaps ill-served by some of the cardinals here," said John Thavis, author of a new book The Vatican Diaries.

Benedict's papacy was rocked by crises over sex abuse of children by priests in Europe and the United States, most of which preceded his time in office but came to light during it.

His reign also saw Muslim anger after he compared Islam to violence. Jews were upset over rehabilitation of a Holocaust denier. During a scandal over the Church's business dealings, his butler was accused of leaking his private papers.

"When cardinals arrive here for the conclave ... they are going to have this on their mind, they're going to take a good hard look at how Pope Benedict was served, and I think many of them feel that the burden of the papacy that finally weighed so heavy on Benedict was caused in part by some of this in-fighting (among his administration)," Thavis told Reuters.

Vatican spokesman Father Federico Lombardi urged the faithful to remain confident in the Church and its future.

"Those who may feel a bit disorientated or stunned by this, or have a hard time understanding the Holy Father's decision should look at it in the context of faith and the certainty that Christ will support his Church," Lombardi said.

Lombardi said that on his last day in office, Benedict would receive cardinals in a farewell meeting and after February 28 his ring of office, used to seal official documents, would be destroyed just as if he had died.

Later on Wednesday, an Ash Wednesday Mass that was originally scheduled to have taken place in a small church in Rome, has been moved to St Peter's Basilica so more people can attend.

Unless the Vatican changes the pope's schedule, it will be his last public Mass.

(Reporting By Philip Pullella; Editing by Giles Elgood)

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Maldives ex-president in Indian embassy to avoid arrest

MALE (Reuters) - Former Maldives president Mohamed Nasheed took refuge in the Indian High Commission in the capital Male on Wednesday as police attempted to arrest him, raising the prospect of protests by supporters who say he was ousted a year ago in a coup.

Nasheed, the Maldives' first democratically elected leader, was removed from office in contested circumstances and his supporters have frequently clashed with security forces in the Indian Ocean archipelago, famous as a luxury tourist resort.

"Mindful of my own security and stability in the Indian Ocean, I have taken refuge at the Indian High Commission in Maldives," Nasheed wrote on his Twitter page.

Riot police barricaded the street outside the High Commission after Nasheed's arrival at noon, as his supporters began to gather.

India's External Affairs Ministry said in a statement that Nasheed had sought India's assistance and that the High Commission was in touch with Maldivian authorities.

A court ordered Nasheed's arrest after he missed a February 10 court appearance in a case relating to accusations that he illegally detained a judge during the last days of his rule, police spokesman Hassan Haneef said.

"We have received the order and we will be trying to carry it out in accordance with the Maldivian constitution and the order itself."

Imad Masood, spokesman for Maldives President Mohamed Waheed Hussain Manik, said the police would wait for Nasheed to come out. "If he doesn't come, then police will begin to talk to High Commission officials," he added.

Nasheed says he was forced from power at gunpoint after opposition protests and a police mutiny. A national commission last August said the toppling of his government was not a coup, a ruling that triggered several days of large demonstrations.

If he is found guilty in the court case, Nasheed could be barred from standing in a presidential election on September 7. His party says the trial is an attempt to exclude him from the contest and has challenged the court's legitimacy.

India said it had "expressed concern over the ongoing political instability in Maldives and called upon the government and all political parties to adhere strictly to democratic principles and the rule of law, thereby paving the way for free, fair, credible and inclusive elections".

The Maldives held its first free elections in 2008. Nasheed defeated Maumoon Abdul Gayoom, who had ruled for 30 years and was accused by opponents and international human rights groups of running the country as a dictator.

(Reporting by J.J. Robinson in Male and Shihar Aneez and Ranga Sirilal in Colombo; Editing by Kevin Liffey)

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German challenger attacks Merkel in feisty Ash Wednesday speech

BERLIN (Reuters) - Angela Merkel's main challenger in this year's German election attacked her record in a combative speech on Ash Wednesday, accusing the chancellor of stealing policy ideas and cynically profiting from reforms introduced by his Social Democrats (SPD).

Peer Steinbrueck, a former finance minister whose campaign to unseat the popular Merkel got off to a disastrous start last year, tried to reassure the SPD faithful about their prospects in the September vote, vowing to fight for victory and showing off the sardonic wit and feistiness for which he is known.

"The voters need to decide whether they want a politician whose edges have been filed back to nothing, or someone who isn't afraid to speak out for what they believe in," said Steinbrueck, mocking Merkel's cautious leadership style.

The one-hour speech was one of several being given across Bavaria on what is known in Germany as "Political Ash Wednesday", a long-standing tradition in which politicians spar with each other to mark the end of carnival season.

The verbal exchanges became a national phenomenon in the mid-1970s thanks to Franz-Josef Strauss, the bullish former leader of the Christian Social Union (CSU), whose colorful attacks on the opposition were legendary.

"It's not true that I eat a Social Democrat for breakfast every day," the corpulent Strauss once barked. "I only eat what I like."

This year, the war of words was expected to be unusually scrappy. In addition to the federal election, voters in Bavaria will also go to the polls in September to pick a regional government.

The SPD is fighting an uphill battle. While Merkel is hugely popular thanks to her defense of German interests in the euro zone debt crisis, Steinbrueck's ratings have slid after a series of gaffes and outrage over his lucrative speaking engagements.

A Forsa poll for Stern magazine released on Wednesday showed support for Merkel's conservatives, which include her Christian Democrats (CDU) and the CSU, at a seven-year peak of 43 percent.

Steinbrueck's party stands at just 25 percent, only a couple points above their 2009 result, which was a post-war low.

Most analysts expect either a return of Merkel's center-right coalition with the liberal Free Democrats (FDP), or a Merkel-led "grand coalition" of her conservatives and the SPD.

Steinbrueck served under Merkel as finance minister in just such a right-left partnership between 2005 and 2009, but has vowed not to do so again.

"I'm not betting on a grand coalition, I'm betting on victory, not any other scenario," he said on Wednesday.

CLAIMING CREDIT

Steinbrueck, 66, said Merkel's successes in her first term, when Germany weathered the ravages of the global financial crisis, were largely down to the SPD. He claimed credit for a decision at the height of the crisis to guarantee German savings deposits and a cash-for-clunkers car scheme that shielded the country's automakers.

He also praised Gerhard Schroeder, Merkel's SPD predecessor, for introducing the "Agenda 2010" labor market reforms that many economists say are responsible for Germany's current economic strength.

The measures ended up dividing the center-left SPD, hitting Schroeder's popularity and helping Merkel to power. Ever since then, she has benefited from the economic gains the reforms have delivered.

At the same time she has moved her CDU to the left, turning the SPD's most potent positions - on nuclear power, the environment, education, childcare and wages - into her own. This has made the big parties virtually indistinguishable for many voters, a trend the SPD is trying hard to reverse.

Steinbrueck said only the SPD would deliver a minimum wage, secure German pensions, deliver education for all and push back against rising income inequality.

But in a sign of just how hard the SPD must work to differentiate itself, Steinbrueck also felt the need to harkens back to the Iraq war a decade ago.

Schroeder banded together with France and Russia to oppose the U.S.-led war, a stance that helped him win re-election in 2002. Merkel, then opposition leader, made a trip to the United States at the time and gave a newspaper interview criticizing Schroeder's refusal to back President George W. Bush.

"We remember Schroeder's position on Iraq and how he refused to follow the United States and participate in this war," Steinbrueck said. "Have you forgotten who tried to discredit him? It was Angela Merkel in the United States."

(Reporting by Noah Barkin; Editing by Jon Boyle)

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Iran says it has begun upgrading uranium centrifuges

DUBAI (Reuters) - Iran said on Wednesday it had started installing a new generation of machines for enriching uranium, an announcement likely to annoy the West and complicate efforts to resolve a decade-old dispute over its nuclear program.

It came on the day the U.N. nuclear watchdog began talks in Tehran to try to advance a long-stalled investigation into suspected military dimensions of the program.

Iran had already told the International Atomic Energy Agency (IAEA) that it planned to introduce new IR2-m centrifuges to its main enrichment plant near the central town of Natanz - a step that could significantly speed up its accumulation of material that the West fears could be used to develop a nuclear weapon.

"From last month the installation of the new generation of these machines started," Fereydoun Abbasi-Davani, head of Iran's Atomic Energy Organisation, was quoted as saying by the Iranian Students' News Agency (ISNA).

"We have produced the machines as planned and we are carrying out the installation gradually ... to complete the tests."

One diplomat accredited to the Vienna-based IAEA, which regularly monitors Iranian nuclear sites including the one at Natanz, said he was surprised by the Iranian announcement.

"My understanding until (Abbasi-Davani's statement) was that they hadn't started installation," the envoy said.

Enriched uranium can fuel nuclear power plants, Iran's stated aim, or, if refined to a high degree, provide material for bombs, which the West suspects is Tehran's real purpose - something Iran strenuously denies.

If deployed successfully, new-generation centrifuges could refine uranium several times faster than the model Iran now has.

It was not clear how many of the new centrifuges Iran aimed to install at Natanz, which is designed for tens of thousands; an IAEA note to members implied it could be up to 3,000 or so.

Abbasi-Davani said the new machines were specifically for lower-grade enrichment of uranium to below 5 percent purity.

STOCKPILE FEARS

Iran has been enriching some uranium up to a concentration of 20 percent fissile material, only a short step from weapons grade of 90 percent, and it is this stockpile that has prompted Israel and the United States to warn that they will do whatever is necessary to prevent Iran being able to build a bomb.

The major world powers have imposed sanctions to try to press Tehran to give up nuclear activities with a possible military dimension, while Iran wants them to recognize what it sees as its right to refine uranium for peaceful purposes.

The big powers' next talks with Iran are scheduled for February 26, although few expect any movement from Tehran before its presidential election in June.

The announcement of the new centrifuges "could be perceived as an effort prior to any negotiation by Iran to collect as many as bargaining chips as it can", said nuclear proliferation expert Mark Hibbs at the Carnegie Endowment think tank.

"It doesn't necessarily mean they are shutting the door."

The IAEA has been trying for over a year to secure the access that its inspectors say they need to investigate suspicions of nuclear weapons research.

Its immediate priority is to visit the Parchin military base southeast of Tehran, where it suspects explosives tests relevant to nuclear weapons may have taken place, perhaps a decade ago, an accusation Tehran denies.

Iran is ready to come to a "comprehensive agreement" with the IAEA if its nuclear rights were recognized, and this could include a Parchin visit, the Foreign Ministry said on Tuesday.

But Abbasi-Davani played this down on Wednesday.

"Currently there is no talk about a visit to Parchin or any other site, " he said, according to the Fars agency.

Iran on Tuesday confirmed a Reuters report that it had begun converting small amounts of its 20-percent enriched uranium into reactor fuel, a move that, if expanded, could slow the growth in its stockpile.

But Abbasi-Davani said on Wednesday that the conversion was only taking place to feed the Tehran Research Reactor.

"This is not aimed at limiting the stockpiles of the 20 percent uranium and will not be," he said, according to Fars.

(Additional reporting by Zahra Hosseinian in Zurich and Fredrik Dahl in Vienna; Editing by Kevin Liffey)

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Syrian troops bombard rebel posts around capital

AMMAN (Reuters) - President Bashar al-Assad's forces bombarded the southeast of Damascus with air strikes and artillery on Wednesday to try and dislodge rebel fighters who have gained a foothold in the Syrian capital, opposition activists said.

A Middle East diplomat following the military situation described battles in and around Damascus as a "major engagement", with fighting going back and forth between the two sides.

"The opposition is hitting Damascus from a multiple of directions and the regime is trying to stop it," he said.

Jets bombed Jobar, a neighborhood adjacent to the main Abbasid Square, and the suburb of Daraya on the highway to Jordan to the south, sources in the capital said.

The two areas are part of interconnected Sunni Muslim districts in and around Damascus that have been at the forefront of the 22-month uprising against four decades of family rule by Assad and his father.

Rebels entered Jobar last week after breaching the army's defense lines at the ring road and overrunning several army and pro-Assad militia positions in the district.

The road, a supply line for elite army units dug in in the center of the city, separates the capital from the mostly rebel-held expanse of Sunni towns and suburbs known as eastern Ghouta.

"By being all over Jobar, the rebels are at striking distance in Damascus, but the big question is whether they will be able to hold it," said an opposition activist from the Damascus Media Centre opposition monitoring group,

To the southwest, near the main highway to Jordan, heavy bombardment was reported on the suburb of Daraya, where the army advanced in the last few days, breaking a two-month rebel hold.

The rebels remain entrenched in the south of the district near the main highway leading to Jordan, said Abu Hamza, a member of the Daraya Local Council, which has been administering the suburb since it was taken over by the opposition.

"Daraya is being hit with cluster bombs, vacuum bombs and rockets and we are receiving people for treatment from suffocation in the field hospital,' he said.

"The fighting is fierce on the edge of the town and in the area where regime forces managed to make incursions," he added.

Daraya is part of Muaddamiya, a heavily populated working class Sunni Muslim district, one of multiple Sunni neighborhoods on the edge of the capital that have been at the forefront of the 22-month uprising.

The ruling elite is dominated by members of Assad's family, belonging to the Alawite sect, an offshoot of Shi'ite Islam.

Core Alawite forces from the Republican Guards and the Fourth Division, under the command of Assad's feared brother Maher, have been shelling Sunni areas of the capital and suburbs from the Qasioun Mountain in the center of the city and surrounding hills and also from the Mezze Military airport located near the highway to Beirut to the west.

The rebel strategy appears to target cutting the troops' supply lines, which pass through the ring road and the suburb of Adra to the north east.

The army and a plethora of security forces remain entrenched in fortress-like bases in Damascus and the provincial capitals, where their advantages in air power and heavy weaponry have kept the opposition from taking over the major cities.

The head of the state arms exporter said on Wednesday Russia is still delivering weapons to Syria and will continue to do so.

The Syrian uprising is the bloodiest of the Arab revolts that toppled four autocrats in Libya, Egypt, Tunis and Yemen. The war has deepened the Middle East's Shi'ite-Sunni divide.

Navi Pillay, the U.N. High Commissioner for Human Rights, said on Tuesday the death toll in Syria is likely approaching 70,000 with civilians paying the price for the U.N. Security Council's lack of action to end the war.

(Reporting by Khaled Yacoub Oweis; Editing by Peter Graff)

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Tsvangirai says Zimbabwe elections expected in July

HARARE (Reuters) - Zimbabwe's Prime Minister Morgan Tsvangirai said on Wednesday he expected presidential and parliamentary elections in July after a nationwide vote on a new constitution next month.

Tsvangirai also said he did not fear a repeat of violence that overshadowed disputed polls in 2008 which led to a power-sharing government between his Movement for Democratic Change (MDC) and rival President Robert Mugabe's ZANU-PF party.

When questioned about the date for the elections at a human rights forum to discuss the constitution approved by parliament last week, Tsvangirai said simply "July".

ZANU-PF's chief spokesman Rugare Gumbo said the timetable Tsvangirai outlined was in line with the framework Mugabe, the 88-year-old political veteran who has ruled the country since independence from Britain in 1980, was working around.

"That time frame is in tandem with what we as a party have been working with, but the confirmation and actual dates will be fixed by the president," he told Reuters.

For months, the entrenched president has said he wants fresh polls by mid-year before the destitute southern African country hosts a global conference on tourism, which analysts say Harare wants to use to rebrand itself after years of isolation.

Before Tsvangirai's comments at the human rights forum, Constitutional Affairs Minister Eric Matinenga told reporters the power-sharing government had set March 16 as the tentative date for the referendum on the constitution.

Finance Minister Tendai Biti, worried that there might not be enough money for the referendum and the elections, has approached donors for help.

By law, the next elections are due when the current presidential and parliamentary terms expire at the end of June although there has been speculation ZANU-PF and the MDC could extend it while working on more political reforms.

POLL VIOLENCE

The last polls were marred by violence and allegations of vote-rigging, blamed mostly on Mugabe's war veteran supporters and ZANU-PF youth brigades.

Tsvangirai, 60, dismissed fears the coming elections would see a repeat of the 2008 violence, saying a strict code of conduct and supervision by regional and international observers would help deliver a free vote.

"I am not budgeting for chaos. I am certainly bullish about the way things will go in the elections," he said, adding that human rights watchdogs should not be overly worried over isolated incidents of intimidation and harassment.

A confident Tsvangirai said he was looking forward to the end of the government of national unity (GNU) as it had limited capacity to fix an economy critics say was destroyed by Mugabe's policies.

The economy has recovered slightly due to political stability brought about by the power-sharing deal after being crushed about five years ago by hyperinflation.

"I don't expect the next elections to produce a hung parliament. Four years of this GNU have been torture and I do not wish for another GNU," he said.

Mugabe faces a stiff challenge in the polls after his long stay in power and policies that have left more than 80 percent of the adult population jobless.

(Editing by Jon Herskovitz and Michael Holden)

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EU urges Iran to be flexible at nuclear talks with big powers

UNITED NATIONS (Reuters) - European Union foreign policy chief Catherine Ashton urged Iran on Wednesday to show flexibility at this month's talks between Tehran and six world powers aimed at defusing tensions over the Iranian nuclear program.

The five permanent U.N. Security Council members - the United States, Britain, France, Russia and China - and Germany will meet with Iran in Kazakhstan on February 26 for the latest round of talks in a 7-year-old attempt by the six powers to end the decade-long nuclear standoff with Tehran.

"We hope that Iran will come to this negotiation with flexibility and that we can make substantial progress," Ashton told the 15-nation Security Council during a meeting on the United Nations' cooperation with regional organizations.

"We're engaging in intensive diplomatic efforts to seek a negotiated solution that meets the international community's concern about the Iranian nuclear program," she said.

Ashton has been taking part in and coordinating the so-called P5-plus-one group's fitful negotiations with Iran.

The Islamic Republic has faced four rounds of U.N. sanctions and more draconian EU and U.S. sanctions due to its refusal to halt its enrichment program as demanded by the Security Council. Ashton said the EU was committed to continuing a dual-track strategy of combining pressure with dialogue.

"There is no doubt that the pressure of sanctions has been instrumental in bringing Iran back to the negotiating table," she said. "But sanctions cannot be an end in themselves. The key is for Iran to comply fully with its international obligations."

Iran's U.N. mission reacted swiftly to Ashton's remarks, saying in a statement that the "dual-track approach currently pursued by a number of countries is a futile exercise in the sense that ... exerting pressure on Iran will definitely derail the efforts on the diplomatic track."

"So (for) any negotiations to be successful (they) must be conducted in a cooperative, constructive and positive spirit," it said. It reiterated that Iran's right to an enrichment program should be "fully recognized" by the six powers.

OBAMA LEAVES DOOR OPEN TO FORCE

Iran denies that it is seeking a weapon and says its nuclear program serves only peaceful purposes such as electricity generation and the production of medical isotopes.

"The Islamic Republic of Iran is serious about those talks and expects the other side to be serious and forthcoming so that the next round of negotiations ... in Kazakhstan would lead to positive and fruitful results," the Iranian statement said.

In his annual State of the Union address, U.S. President Barack Obama said world powers were united in their desire to use diplomacy to prevent Iran from developing atomic weapons, though he left a door open to non-diplomatic avenues like force.

"The leaders of Iran must recognize that now is the time for a diplomatic solution, because a coalition stands united in demanding that they meet their obligations, and we will do what is necessary to prevent them from getting a nuclear weapon," Obama said on Tuesday night.

U.S. Secretary of State John Kerry said last week that the six powers were ready to respond if Iran came to the talks prepared to discuss "real substance."

Iranian Foreign Minister Ali Akbar Salehi has said Iran was "counting on there being positive and constructive steps made to resolve this problem at the upcoming meeting."

So far, Iran has refused to suspend its nuclear enrichment program, which the United States, EU and their allies suspect is aimed at producing fuel for weapons. Iran says enrichment is a sovereign right under the nuclear Non-Proliferation Treaty and demanding a halt to the program illegal.

(Editing by Doina Chiacu)

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