U.S. says funds flow in from Saudi Arabia to Somalia

WASHINGTON, June 30 (Reuters) - Funds are flowing into Somalia from Saudi Arabia and Yemen to support the Islamic Courts movement that seized the capital Mogadishu this month, said a senior U.S. official on Thursday.

The State Department's point person on Africa, Jendayi Frazer, told a hearing on Capitol Hill that the United States and others were reaching out to the Arab League about the flow of funds into Somalia from Arab countries.

"I don't want to say the Saudi government is supporting any particular (Islamic) court but I do know that there is money coming in from Saudi Arabia," Frazer told the House of Representatives International Relations Committee.

"There is money coming in from Yemen and arms from Eritrea and other places (into Somalia)," she said, adding that some of the funds came from Somali businessmen based in Saudi Arabia.

Asked what the United States was doing to put pressure on Saudi Arabia to curb the flow of funds, she said "we definitely want to reach out to the governments of Saudi Arabia, Yemen and others in the Middle East."

Frazer said conflicting messages were coming from the Islamic courts, which has extended its power outside of the capital, with its "moderate face" Sheikh Sharif Ahmed writing a conciliatory letter to Washington.

However hard-line cleric Sheikh Hassan Dahir Aweys, who is on a U.S. list of al Qaeda associates and was named head of the Council of the Islamic Courts last weekend, had showed "aggression" towards the United States, she said.

The rise of Aweys has alarmed the United States, which fears the Islamists want to establish Taliban-style rule in Somalia, despite repeated denials by Ahmed.

The United States has been criticized for its support of a group of self-styled anti-terrorism warlords who were driven from Mogadishu by the Islamists on June 5.

Frazer defended U.S. policy and said the main goal was to ensure Somalia did not become a haven for terrorists, in addition to boosting the credibility of the transitional government which is too weak to enter the capital.

She said the United States would also encourage dialogue between the transitional government and the Islamic Courts.

"The strategic objective here is to prevent an attack on Baidoa," said Frazer, referring to the southern provincial town where the interim government is based.

Pressed on whether the United States would deal directly with the Islamists, she said it was important that Washington not help create an alternative to the transitional government.

"Opening a dialogue there is not necessarily in our interests," said Frazer.

Earlier this week, the State Department made clear that it would have no dealings with Aweys but would reserve judgment on dealing with the group as a whole.