Somalia braces for war as talks break down

MOGADISHU, July 22 (Reuters) - Somalia's Islamists refused talks with the government on Saturday, as witnesses said Ethiopia deployed more troops over the border to defend the government's provincial base against an Islamist advance.

A second round of talks had been scheduled to take place in the Sudanese capital Khartoum in a bid to stop an increasingly belligerent standoff between the two sides from spiralling into war.

"We do not negotiate with a government which is being helped by the enemy of Somalia," senior Islamist leader Sheikh Sharif Ahmed said in a letter to Islamist delegates to the talks.

Diplomats fear Somalia is on the verge of conflict after Islamist militia moved their closest to the government's provincial base in Baidoa this week amid daily reports of new Ethiopian military movements in the country.

The Islamist leadership, vowing holy war, has called on the Horn of African nation of 10 million to prepare to fight against the foreign troops, as Addis Ababa threatened to crush any attack on President Abdullahi Yusuf's government.

Analysts believe Ethiopia, the Horn's dominant power, has sent up to 5,000 troops into Somalia, and is massing more on the border to deter Islamist advances.

A source close to Somali government leaders admitted the presence of Ethiopian troops on Somali soil.

"They are there, but not in the big numbers people are saying. But believe me, if the Islamists attack, they will come," said the source, who did not wish to be named.

"Our national army is not set up yet, and they have many militias, so we need assistance."

Several residents in Baidoa said more Ethiopian forces and armoured vehicles arrived overnight to help guard the parliament, presidential palace and airport.

"Ten more Ethiopian military vehicles arrived last night with around 300 troops," said former militiaman and Baidoa resident Abdirizak Adan.

"The Ethiopian troops have changed their uniforms and are now wearing the same clothes as the Somali government soldiers."

The government imposed a curfew on the hill town three days ago, Adan said.

More than 50 pickup trucks mounted with heavy arms left Mogadishu, the Islamist stronghold which they captured from U.S.-backed warlords last month, various residents said.

They said the Islamist militia were accompanied by Eritrean and Ethiopian rebel forces and were heading towards Baidoa and Buur Hakaba.

The reported movements could not be independently verified.

Traditionally Christian Ethiopia fears a hardline Muslim state on its doorstep and possible Islamist aspirations to create a "Greater Somalia" that would incorporate Ethiopia's southeastern ethnically Somali Ogaden region.