Peru protesters push to stop $5 billion Newmont mine

By Mitra Taj

PEROL LAKE, Peru (Reuters) - Thousands of opponents of a $5 billion gold project of Newmont Mining circled a lake high in the Andes on Monday, vowing to stop the company from eventually draining it to make way for Peru's most expensive mine.

Lake Perol is one of several lakes that would eventually be displaced to mine ore from the Conga project. Water from the lakes would be transferred to four reservoirs that the U.S. company and its Peruvian partner, Buenaventura, are building or planning to build.

The companies say the reservoirs would end seasonal shortages and guarantee year-round water supplies to towns and farmers in the area, but many residents fear they would lose control of the water or that the mine would cause pollution.

"Hopefully, the company and the government will see the crowd here today and stop the project," said Cesar Correa, 28, of the town of Huangashanga in the northern region of Cajamarca.

He was one of many protesters who arrived at Lake Perol on foot or on horseback, some wearing ponchos, as well as traditional broad-brimmed straw hats or baseball caps.

Others carried blankets and bags of potatoes and rice - planning to camp out at the site for weeks to halt the project.

The company said about 1,000 protesters were present, though protesters said their flock swelled to 5,000 or 6,000. A Reuters witness estimated 4,000 people at the protest.

"Why would we want a reservoir controlled by the company when we already have lakes that naturally provide us water?" asked Angel Mendoza, a member of a peasant patrol group from the town of Pampa Verde.

The controversy over Conga - which many in the business sector see as essential for the country's bustling economy - has posed a major challenge to President Ollanta Humala during his nearly two years in office.

He has twice shuffled his cabinet in the face of violent protests against the project.

The protest on Monday was largely peaceful and there were no clashes with police, though a handful of protesters threw rocks and set fire to a wall near one reservoir.

Newmont and Buenaventura said in a statement: "As stated previously, we will only build the proposed Perol reservoir if we are able to secure all the necessary permits and complete an intensive public involvement process with neighboring communities."

"We respect everyone's right to safely and responsibly express their opinion, whether they oppose mining or support economic development," the statement said.

In May, a minor clash between protesters and police marked an ended nine months of relative calm when Humala's government said it would stop trying to overcome local opposition to the mine.

The new round of protests came after a top official for the Conga project, Chief Executive Roque Benavides of Buenaventura, told Reuters water from Perol would be transferred to a new reservoir later this year.

He later said the project might be in jeopardy if water from the lakes could not be transferred.

(Writing by Terry Wade; Editing by Mohammad Zargham and Bob Burgdorfer)

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Putin faces isolation over Syria as G8 ratchets up pressure

By Kate Holton and Jeff Mason

ENNISKILLEN, Northern Ireland (Reuters) - Russian President Vladimir Putin faced further isolation on the second day of a G8 summit on Tuesday as world leaders lined up to pressure him into toning down his support for Syrian President Bashar al-Assad.

Following an icy encounter between the Kremlin chief and U.S. President Barack Obama late on Monday, the G8 leaders will seek to find resolution to a war that has prompted powers across the Middle East to square off on sectarian lines.

The sticking point again will be Putin, who faced a barrage of criticism from Western leaders for supporting Assad and the Syrian's president's attempt to crush a 2-year-old uprising in which at least 93,000 people have been killed.

"It's a clarifying moment to see what kind of commitments the Russians are willing to make in a leading world forum," a British official said before the leaders met for dinner at a remote, heavily guarded golf course outside of Enniskillen.

An official close to one of the delegations said the talks over dinner had gone better than expected and that a joint communiqué with Russia on Syria now seemed more likely. However, the official declined to speculate on what Russia might be willing to sign up for.

But if consensus could not be reached, it was possible a final statement at the end of the two-day summit might be released without Russia's input and in the name of the G7 rather than the G8.

Divisions over Syria dominated the atmosphere as global leaders met in Northern Ireland, a place once rocked by decades of violence but which Britain now wants to showcase as a model of conflict resolution.

Putin and Obama appeared tense as they addressed reporters late on Monday after about two hours of talks, with Putin mostly staring at the floor as he spoke about Syria and Obama only glancing occasionally at the Russian leader.

Stung by recent victories for Assad's forces and their support from Hezbollah guerrillas, the United States said last week it would step up military aid to the rebels, including automatic weapons, light mortars and rocket-propelled grenades.

Putin said Moscow and Washington had different views on Syria but agreed the bloodshed must stop and that the warring parties should be brought to the negotiating table.

"With respect to Syria, we do have differing perspectives on the problem but we share an interest in reducing the violence and securing chemical weapons and ensuring that they're neither used nor are they subject to proliferation," Obama said.

British Prime Minister David Cameron, who is chairing the summit, will on Tuesday seek to move the conversation on to taxation and how the Group of Eight leading nations can help close international loopholes in what has become a central theme for the British prime minister.

Cameron has been stung by revelations that the likes of Google and Starbucks have sharply cut their corporate tax bills in Britain using legal loopholes.

Last week he sought to turn up the pressure on other rich economies by pressing Britain's overseas tax havens into a transparency deal and announcing new disclosure rules for British firms.

Also on the agenda will be a drive by the British to secure a commitment from all the G8 leaders that they will no longer pay a ransom to kidnappers as part of an early meeting between the leaders about counterterrorism.

(Additional reporting by Maria Golovnina, Andrew Osborn, William Schomberg, Guy Faulconbridge, Roberta Rampton and Alexei Anishchuk in Enniskillen; Writing by Kate Holton; Editing by Bill Trott)

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U.S. says it will buy Russian helicopters for Afghan military

WASHINGTON (Reuters) - The Pentagon said on Monday it will spend $572 million to buy 30 Russian-built military helicopters that will be used by Afghan security forces.

The Mi-17 helicopters will be used by Afghanistan's National Security Forces Special Mission Wing, which supports counter-terrorism, counter-narcotics and special operations missions.

The contract with Rosoboronexport, the Russian arms company, covers spare parts, test equipment and engineering support. The Pentagon said the work would be performed in Russia. It is expected to be completed by the end of 2014.

A year ago, the Defense Department purchased a dozen of the Mi-17 aircraft from Rosoboronexport for $217.7 million, as part of a larger contract originating in 2011.

(Reporting by Charles Abbott; Editing by Toni Reinhold)

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Biggest protests in 20 years sweep Brazil

By Todd Benson and Asher Levine

SAO PAULO (Reuters) - As many as 200,000 demonstrators marched through the streets of Brazil's biggest cities on Monday in a swelling wave of protest tapping into widespread anger at poor public services, police violence and government corruption.

The marches, organized mostly through snowballing social media campaigns, blocked streets and halted traffic in more than a half-dozen cities, including Sao Paulo, Rio de Janeiro, Belo Horizonte and Brasilia, where demonstrators climbed onto the roof of Brazil's Congress building and then stormed it.

Monday's demonstrations were the latest in a flurry of protests in the past two weeks that have added to growing unease over Brazil's sluggish economy, high inflation and a spurt in violent crime.

While most of the protests unfolded as a festive display of dissent, some demonstrators in Rio threw rocks at police, set fire to a parked car and vandalized the state assembly building. Vandals also destroyed property in the southern city of Porto Alegre.

Around the country, protesters waved Brazilian flags, dancing and chanting slogans such as "The people have awakened" and "Pardon the inconvenience, Brazil is changing."

The epicenter of Monday's march shifted from Sao Paulo, where some 65,000 people took to the streets late in the afternoon, to Rio. There, as protesters gathered throughout the evening, crowds ballooned to 100,000 people, local police said. At least 20,000 more gathered in Belo Horizonte.

The demonstrations are the first time that Brazilians, since a recent decade of steady economic growth, are collectively questioning the status quo.

BIG EVENTS LOOM

The protests have gathered pace as Brazil is hosting the Confederation's Cup, a dry run for next year's World Cup soccer championship. The government hopes these events, along with the 2016 Summer Olympics, will showcase Brazil as an emerging power on the global stage.

Brazil also is gearing up to welcome more than 2 million visitors in July as Pope Francis makes his first foreign trip for a gathering of Catholic youth in Rio.

Contrasting the billions in taxpayer money spent on new stadiums with the shoddy state of Brazil's public services, protesters are using the Confederation's Cup as a counterpoint to amplify their concerns. The tournament got off to shaky start this weekend when police clashed with demonstrators outside stadiums at the opening matches in Brasilia and Rio.

"For many years the government has been feeding corruption. People are demonstrating against the system," said Graciela Caçador, a 28-year-old saleswoman protesting in Sao Paulo. "They spent billions of dollars building stadiums and nothing on education and health."

More protests are being organized for the coming days. It is unclear what specific response from authorities - such as a reduction in the hike of transport fares - would lead the loose collection of organizers across Brazil to consider stopping them.

For President Dilma Rousseff, the demonstrations come at a delicate time, as price increases and lackluster growth begin to loom over an expected run for re-election next year.

Polls show Rousseff still is widely popular, especially among poor and working-class voters, but her approval ratings began to slip in recent weeks for the first time since taking office in 2011. Rousseff was booed at Saturday's Confederations Cup opener as protesters gathered outside.

Through a spokeswoman, Rousseff called the protests "legitimate" and said peaceful demonstrations are "part of democracy." The president, a leftist guerrilla as a young woman, also said that it was "befitting of youth to protest."

WIDE ARRAY OF GRIEVANCES

Some were baffled by the protests in a country where unemployment remains near record lows, even after more than two years of tepid economic growth.

"What are they going to do - march every day?" asked Cristina, a 43-year-old cashier, who declined to give her surname, peeking out at the demonstration from behind the curtain of a closed Sao Paulo butcher shop. She said corruption and other age-old ills in Brazil are unlikely to change soon.

The marches began this month with an isolated protest in Sao Paulo against a small increase in bus and subway fares. The demonstrations initially drew the scorn of many middle-class Brazilians after protesters vandalized storefronts, subway stations and buses on one of the city's main avenues.

The movement quickly gained support and spread to other cities as police used heavy-handed tactics to quell the demonstrations. The biggest crackdown happened on Thursday in Sao Paulo when police fired rubber bullets and tear gas in clashes that injured more than 100 people, including 15 journalists, some of whom said they were deliberately targeted.

Other common grievances at Monday's marches included corruption and the inadequate and overcrowded public transportation networks that Brazilians cope with daily.

POLICE SHOW RESTRAINT

The harsh police reaction to last week's protests touched a nerve in Brazil, which endured two decades of political repression under a military dictatorship that ended in 1985. It also added to doubts about whether Brazil's police forces would be ready for next year's World Cup.

The uproar following last week's crackdown prompted Sao Paulo state Governor Geraldo Alckmin, who first described the protesters as "troublemakers" and "vandals," to order police to allow Monday's march to proceed and not to use rubber bullets.

The protests are shaping up as a major political challenge for Alckmin, a former presidential candidate, and Sao Paulo's new mayor, Fernando Haddad, a rising star in the left-leaning Workers' Party that has governed Brazil for the past decade. Haddad invited protest leaders to meet Tuesday morning, but has so far balked at talk of a bus fare reduction.

The resonance of the demonstrations underscores what economists say will be a challenge for Rousseff and other Brazilian leaders in the years ahead: providing public services to meet the demands of the growing middle class.

"Voters are likely to be increasingly disgruntled on a range of public services in a lower growth environment," Christopher Garman, a political analyst at the Eurasia Group, wrote in a report.

(Additional reporting by Esteban Israel and Eduardo Simões; Editing by Paulo Prada)

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U.S. right to arm Syrian rebels, says Israeli president

By Crispian Balmer

JERUSALEM (Reuters) - Israeli President Shimon Peres has thrown his weight behind U.S. plans to arm Syrian rebels, shrugging off fears the weapons could be turned on Israel and exacerbate the conflict.

In a wide-ranging interview with Reuters before his 90th birthday, Peres dismissed the idea that Israel could launch a unilateral military strike against Iran's nuclear facilities and urged Palestinians and Israelis to forge immediate peace.

Looking at the many problems besetting the Middle East, Israel's elder statesmen, who is a Nobel Peace Prize laureate, said terror groups were ripping apart the Arab world.

After two years of uncertainty in the face of the Syrian civil war, the United States announced last week it would start to arm rebels seeking to oust Syrian President Bashar al-Assad after concluding his forces had used chemical weapons.

Many Israeli politicians have cautioned against giving weapons to the increasingly radicalized rebel fighters, fearful that the arms would sooner or later used against Israel, which shares a tense frontier with its old foe Syria.

But asked if the U.S. decision was wise, Peres said "Yes."

"They didn't have a choice," he added, sitting in the sun-soaked garden of his tranquil Jerusalem residence and speaking in quiet, measured tones.

"Unfortunately it is becoming more of a confrontation between two superpowers and (there is) a growing intervention of outside forces ... It is a tragedy," he said.

While Russia, Iran and Lebanese guerrilla group Hezbollah have thrown their weight behind Assad, radicalized Islamist groups allied to al Qaeda have increasingly taken over the rebel cause, marginalizing more moderate forces backed by Washington.

Peres said all the world's "unemployed terrorists" were heading to the region, bringing ruin in their wake.

"They are killing Lebanon, they are killing Syria, they are killing Iraq. Wherever they are around, they are endangering the Arab identities, their nationalities."

BOYCOTT

Lionized abroad for promoting Middle East peace, Peres is often a lonesome dove in Israel and wields moral authority as president rather than any real political power.

Closely associated with the political left, he has sought to avoid friction with the right-wing prime minister, Benjamin Netanyahu. But he has broken ranks over Iran, scoffing at threats from the government to attack Iranian nuclear facilities in an effort to prevent Tehran from building an atomic bomb.

"Why should Israel talk about wars and arms? We must understand there are things we cannot do," Peres said, adding that only the United States could prevent Iran obtaining nuclear weapons. Tehran says its atomic program is peaceful.

Peres is due to host an international conference this week, drawing an array of business and political leaders.

One man who will not be attending is prominent British scientist Stephen Hawking, who pulled out of the event last month to protest against Israel's occupation of territory where the Palestinians want to create an independent state.

Peres said the boycott was a mistake, but urged his government to find a way to resume peace negotiations with the Palestinians which broke down in 2010 over the issue of continued Jewish settlement building on occupied land.

U.S. Secretary of State John Kerry hopes to revive the talks and Peres said the opportunity must be seized. "I say again and again, clear and loud, we have to make peace right now."

Kerry has warned that the so-called two state solution might evaporate within two years, as Israel forges ahead with its expansion program in the West Bank and East Jerusalem, which are speckled with some 120 authorized settlements and dozens of outposts built by settlers without permission.

Ever optimistic, Peres thought the settler problem could be overcome, pointing to ideas outlined in previous negotiations.

"They were offered two options. One, the settlers that want to come back (to Israel) should come back and be compensated. There will be three blocs for the ones that want to remain ... What will be in the (next) negotiations, we will see in the future," he said.

Peres played a central role in the Oslo Accords, which were signed in 1993 after months of secrecy, laying out the promise of an independent Palestine within five years.

He shared a Nobel Peace prize for the deal, but the agreement failed to live up to expectations and is now routinely denounced by numerous Israeli and Palestinian politicians.

However, Peres refused to review his career, saying he did not want to become a "poet of regret".

"I don't look back. It is not interesting. Because what happened is over, unchangeable ... I am more interested in what will happen tomorrow. History moves forward," he said.

(Editing by Philippa Fletcher)

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Hamas looks to root out Israel's spy networks

By Nidal al-Mughrabi

GAZA (Reuters) - The alleged spy buried his face in his hands inside a Gaza jail as he admitted passing intelligence to Israel during its battles with armed Palestinian groups.

"My handlers in Israel called me and told me that collaborators in Gaza don't know one another and that each worked alone, so hide and stay as you are," the man told visiting reporters, under the watchful eye of a plainclothed Hamas security officer.

"I should have turned myself in. This is my problem now. Maybe if I had, you wouldn't find me here," he said.

The Islamist Hamas government, which is pledged to Israel's destruction by force of arms, is lauding a recent campaign to root out informants in its midst, which it hopes will deprive Israel of a subtle but effective tool.

The muscular 41-year-old, who did not give his name, missed the deadline to turn himself in and will not receive leniency when his case goes to trial, Hamas says. Fellow prisoners listened to his anguish over his unknown fate through metal windows in the concrete corridor.

The Hamas Interior Ministry says the month-long campaign which ended on April 11 was a policy shift away from harsher tactics against spies accused of passing on vital information, such as the whereabouts of arms' depots or top militants.

These tip-offs are believed to have helped Israel plan its air strikes during the eight-day conflict with Hamas last November, when Israeli jets hit some 1,450 targets, killing more than 170 Palestinians, including many civilians.

The militant group used to broadcast chilling confessions of collaborators and put the worst offenders to death.

In scenes that shocked the world, seven suspected spies were yanked from Hamas custody in Gaza during the November conflict and shot dead in the street. One corpse was dragged by motorbike through Gaza city by pistol-waving men shouting, "God is Great."

But in this latest campaign, publicized through billboards and mosque sermons, Hamas's Internal Security Service (ISS) promised to treat those who surrendered of their own volition gently.

The campaign, Hamas says, was meant to bring wayward citizens back into the fold and counter through persuasion the espionage it says Israel gains through manipulation.

"We've made a media and educational effort to inform the Palestinian public about collaboration...the worst and most dangerous tool the occupation (Israel) uses against our people," said Mohammed Lafi, the deputy ISS chief who led the campaign.

He declined to reveal how many Gazans had stepped forward, saying such information would benefit Israel. In all, Hamas says only "tens" of spies are languishing behind bars.

ISRAEL RECRUITS

Collaboration with Israel is widely reviled by Palestinians, who see spies as traitors to their people.

"Do they feel mercy for the kids who get torn into pieces and to leaders whose bodies are burnt to death? Why should I feel mercy for him?" said Huda Adel, an office secretary, voicing sentiments shared by many Gaza residents.

Locals often refuse to marry their sons or daughters to relatives of convicted or dead collaborators.

"It's horrifying how your life can turn into hell in a blink of an eye," the brother of a jailed alleged spy told Reuters, taking deep drags from his cigarette.

Sitting nervously in a Gaza cafe, the man said many people shunned his brother's family when rumors of his deeds spread.

"Will his daughter marry? Will anyone accept to marry his boy?" the brother worried.

Minister of Interior Fathy Hammad said Hamas's new policy aimed to emphasize that spying was an individual act and offered anonymity to anyone who handed themselves in to avoid the inevitable backlash from their neighbors.

"As a community we should support the family whose household fell to the devil," Hammad told Reuters.

Many confessed spies say they were offered coveted Israeli permits to move in and out of the crowded coastal enclave, which struggles under tight restrictions from neighboring Israel and Egypt. Others were in Israeli custody and agreed to become spies in exchange for commuted sentences.

Rights groups say Israel also tries to force Gazans in need of outside medical treatment to become spies.

Others simply sought cash, feeding information via secret cell phone chips or coded emails.

A senior Israeli official told Reuters the informants were necessary because "Israel faces a very real threat from Gaza, as Hamas regards every Israeli civilian as a legitimate target".

Israel pulled its troops and settlers from the territory in 2005 but has come under regular rocket attack since then. In response, it imposed a stringent blockade on Gaza and has waged two short wars in a stated effort to stop the missiles.

The official called the Hamas government a "Stalinist authoritarian regime" whose measures against suspected spies amounts to "brutal and arbitrary violence against the people of Gaza, using collaboration charges as an excuse".

FEAR AND FAVOUR

Since taking power in 2007, Hamas authorities have executed 14 people, including six convicted spies. Hammad said his ministry reserved the right to execute more spies in future.

Hamas's political rival, the Palestinian Authority which has partial control over the nearby, occupied West Bank, also comes down heavily on alleged spies. Last week, a member of the Palestinian security forces was condemned to death for being a collaborator, although his sentence will almost certainly be commuted to life in jail.

Human Rights Watch said the amnesty plan was an improvement to Hamas's usual legal practice, which it says often involves incommunicado detention and evidence extracted through torture.

"Steps by Hamas to provide an alternative to the detention and trial of alleged collaborators should be encouraged given the severe problems with its justice system," senior HRW researcher Bill Van Esveld told Reuters.

ISS deputy head Lafi, for the first time disclosing details on its jailing policy on convicted spies, said most of those already in jail whose crimes were not serious would be freed after serving two-thirds of their sentences.

The offer will not spare veteran spies, and those whose work led to the killings in Israeli bombing raids or assassinations of militant leaders, Hamas said.

But with almost one third of Gazans unemployed and 80 percent of households living below the poverty line, local NGOs believe some young Gazans will continue to be drawn to espionage in return for Israeli cash, regardless of Hamas crackdowns.

"The Gaza government should treat some of the reasons why Israel's security forces manage to get through to victims, such as poverty," said Samir Zaqout of the al-Mezan Center for Human Rights, which is based in Gaza's Jabalia refugee camp.

(Additional reporting by Noah Browning; Editing by Sonya Hepinstall)

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Kurdish rebels begin withdrawal from Turkey

By Ayla Jean Yackley

SEMDINLI, Turkey (Reuters) - Kurdish militants began to withdraw from Turkey on Wednesday, pursuing a peace process meant to end a three-decade insurgency that has killed 40,000 people, ravaged the region's economy and tarnished the country's image abroad.

Turkish security forces manned checkpoints along the mountainous border with Iraq, keeping watch as the agreed pullout started by the first small groups of up to 2,000 Kurdistan Workers Party (PKK) fighters.

The withdrawal, ordered late last month by top PKK commander Murat Karayilan, is the biggest step yet in a deal negotiated by the group's jailed leader Abdullah Ocalan with Turkish officials to end almost 30 years of conflict.

The PKK has accused the army of endangering the pullout with reconnaissance drones and troop movements they said may trigger clashes. But there was no sign of military activity in the grey skies over southeast Turkey.

"I can say the withdrawal began today based on the information we have," pro-Kurdish Peace and Democracy Party (BDP) co-leader Gultan Kisanak told Reuters. "Local sources report that the armed PKK militants are on the move."

Security sources did not confirm the withdrawal. Fighters are accustomed to moving furtively and are expected to move in groups of around half a dozen in a process likely to take several months.

"We have observed movement among (PKK) group members, but have not been able to establish whether this is regrouping or preparation for a withdrawal," a security source told Reuters.

The PKK force is small but dogged, with 3,000-4,000 fighters based in Iraq and 1,500-2,000 in Turkey, where they have targeted Turkish troops as well as bombed cities including Istanbul and beach resorts.

The withdrawal will be monitored on the Turkish side by the MIT intelligence agency and across the border by the Kurdish regional government of northern Iraq.

The first fighters were expected to arrive at PKK bases in northern Iraq within a week.

But a PKK commander for the Semdinli area told a local source that guerrillas were unable to cross into Iraq because of increased security, including new checkpoints and soldiers deployed on mountainsides.

On the road to Semdinli, where the PKK launched their insurgency with an attack on August 15, 1984, soldiers and police appeared to be mostly waving regular traffic through.

"I think this is our best chance yet for peace. On the front line, both sides want the bloodshed to stop," said a 30-year-old sergeant among a group of soldiers drinking tea behind a row of sandbags at a checkpoint.

HUGE GAMBLE

Prime Minister Tayyip Erdogan has taken a huge gamble with the process, attracting a nationalist backlash before elections next year as he seeks to end a conflict which has put a huge burden on state coffers and tarnished Turkey's image abroad.

The PKK, designated a terrorist organization by Turkey, the United States and European Union, said in a statement on Wednesday the Turkish military had bombarded areas around Semdinli with artillery and mortars on Tuesday.

It has reported a series of similar barrages in recent days, but there have been no reports of casualties. Turkey has pledged to maintain the fight against the PKK until they disarm, but Erdogan said they will not be targeted during the pullout.

Few areas have been scarred by the conflict more than Semdinli, accessible by a single road that cuts through emerald-green valleys and snowcapped mountains, and which witnessed the deadliest clashes in more than a decade last year.

"This town has never known normalcy. It has always been in the cross-hairs of war," said 30-year-old Mayor Sedat Tore. He does not remember a time in his life without the violence.

"May 8 represents an enormous opportunity to finally silence the guns. The people don't understand this process fully, but they are hopeful. They are searching for even the smallest ray of light at the end of the tunnel," he said.

Erdogan reiterated a call for the rebels to disarm before leaving. The PKK has rejected this, fearing they could come under attack, as they did in a previous pullback.

"They surely know the routes from which they have entered Turkey and can use the same routes to leave," Erdogan told reporters on Tuesday.

Karayilan has warned that PKK fighters will retaliate if the Turkish army launches any kind of operation against them.

Hugh Pope, Turkey project director for the International Crisis Group, said the withdrawal's significance was symbolic as the fighters will not have disarmed and could return, with the acid test being an absence of clashes to build confidence.

"This is the most promising peace process we've seen," he said. Success, he added, would require a series of reforms to promote reintegration including anti-terrorism laws and Kurdish language education, and amendments to parts of the constitution.

(Additional reporting by Gulsen Solaker in Ankara and Seyhmus Cakan in Diyarbakir; Writing by Daren Butler; Editing by Nick Tattersall and Mark Heinrich)

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Bangladesh braces for unrest as judges prepare war crime verdict

By Serajul Quadir

DHAKA (Reuters) - A Bangladeshi war crimes tribunal is due to pronounce judgment on a top Islamist politician on Thursday, raising fears a guilty verdict could ignite a fresh round of clashes between members of his party and security forces.

Bangladesh, reeling from a factory collapse that killed more than 700 people two weeks ago, is navigating one of its most turbulent periods since independence as a series of political conflicts converge ahead of elections due early next year.

Protests over the war crimes trials are one of the main challenges facing the government of Prime Minister Sheikh Hasina, who opened an inquiry into abuses committed during a 1971 war for independence from Pakistan in 2010.

The tribunals have angered Islamists who say they are a politically-motivated attempt to persecute the leadership of Jamaat-e-Islami, the main Islamist party in Bangladesh and a key part of an opposition coalition.

Bangladesh became part of Pakistan at the end of British colonial rule in 1947. The independence war claimed about 3 million lives. Thousands of women were raped.

Some factions in Bangladesh opposed the break with Pakistan, including Jamaat. Its leaders have denied involvement in abuses.

On Thursday, judges are due to hand down a verdict in the trial of Muhammad Kamaruzzaman, a leader of Jamaat who is accused of involvement in the murder and torture of several civilians.

Syed Haider Ali, the lead government prosecutor, said he expected the court would sentence Kamaruzzaman to death.

"On the basis of our arguments we are hopeful of getting the highest punishment," Ali told reporters.

Kamaruzzaman was arrested in a separate criminal case in July, 2010, and was charged with war crimes the following month. He has pleaded not guilty through his lawyers.

Dozens of people have been killed in clashes between security forces and protesters opposed to the tribunal since the first guilty verdict was delivered in January. Kamaruzzaman's judgment will be the fourth since the trials began.

The tribunal has been criticized by rights groups for failing to adhere to international standards. Human Rights Watch said lawyers, witnesses and investigators reported they had been threatened.

In a separate challenge to Hasina's government, tens of thousands of members of the hardline Islamist Hefajat-e-Islam movement massed in the capital Dhaka this week to demand the imposition of a new blasphemy law.

At least 20 people were killed in some of the worst violence seen in the city in decades when police used water cannons to disperse the gathering.

The Bangladesh Nationalist Party, the main opposition party, has also turned up the heat on Hasina's secular Awami League government by calling a series of strikes to demand she resign.

Bangladesh has been rocked by protests and counter-protests linked to the tribunal since January, when it handed down its first sentence by condemning an expelled Jamaat member to death. In the second case, a Jamaat leader was given life in jail.

About 60 people have been killed in protests since the tribunal's third conviction in March, when another member of Jamaat, Delwar Hossain Sayedee, 73, was sentenced to death for abuses including murder and rape during the war.

Jamaat and the BNP both accuse the prime minister of using the tribunal to persecute them. The government denies that and says justice must be served.

(Editing by Matthew Green and Andrew Heavens)

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U.S., Russia seek new Syria peace talks; rebels skeptical

By Arshad Mohammed and Erika Solomon

MOSCOW/BEIRUT (Reuters) - Russia and the United States agreed to seek new peace talks with both sides to end Syria's civil war, but opposition leaders were skeptical on Wednesday of an initiative they fear might let President Bashar al-Assad hang on to power.

Mindful the conflict may be far from over, Britain has urged fellow European Union states to lift an arms embargo, arguing it would strengthen those rebel groups favored by Western powers.

Visiting Moscow after Israel bombed sites near Damascus and as President Barack Obama also faces renewed calls to arm the rebels, U.S. Secretary of State John Kerry said late on Tuesday that Russia agreed to work on a conference in the coming weeks.

An East-West disagreement that has seen some of the frostiest exchanges between Washington and Moscow since the Cold War has deadlocked U.N. efforts to settle the Syrian conflict for two years, so any rapprochement could bring an international common front closer than it has been for many months.

Israeli air strikes, reports of the use of chemical weapons and the increasing prominence of al Qaeda-linked militants among the rebels have all added to international urgency for an end to a war that has killed more than 70,000 people.

U.N. Secretary-General Ban Ki-moon on Wednesday welcomed the announcement by Kerry and Russian Foreign Minister Sergei Lavrov.

"The Secretary-General and Joint Special Representative (Lakhdar) Brahimi have asserted from the outset their conviction that a negotiated political solution is the only way to end this prolonged and ever-deepening crisis, the U.N. statement said.

But with Syria's factional and sectarian hatreds more entrenched than ever, it is far from clear the warring parties are ready to negotiate with each other. Most opposition figures have ruled out talks unless Assad and his inner circle are excluded from any future transitional government.

"I believe the opposition would find it impossible to hold talks over a government that still had Assad at its head," said Samir Nashar of the opposition's umbrella National Coalition.

"Before making any decisions, we need to know what Assad's role would be. That point has been left vague, we believe intentionally so, in order to try to drag the opposition into talks before a decision on that is made."

In the past, the United States has backed opposition demands that Assad be excluded from any future government, while Russia has said that must be for Syrians to decide, a formula the opposition believes could be used to keep Assad in power.

Opposition members said they were concerned by comments from Kerry in Moscow, echoing Russia, that the decision on who takes part in a transitional government should be left to Syrians.

"Syrians are worried that the United States is advancing its own interests with Russia, using the blood and suffering of the Syrian people," said National Coalition member Ahmed Ramadan.

Inside Syria, where rebel groups have disparate views, a military commander, Abdeljabbar al-Oqaidi, told Reuters, "If the regime were present, I do not believe we would want to attend."

There was no immediate response from the Syrian government, which has offered reforms but dismisses those fighting it as terrorists and puppets of outside powers - the West, Turkey and Arab states opposed to Assad's ally Iran.

EU ARMS BAN

If fears of an escalation of the war are driving new peace moves, they have also set some Western powers looking again at their military options. Washington said last week it was rethinking its opposition to arming the rebels, and it emerged on Wednesday that Britain had been lobbying the EU to let it do so, too.

Several EU governments are resisting French and British efforts to get the embargo lifted, concerned the move could escalate the two-year-old conflict.

In a paper seen by Reuters, London suggested ways the ban could be amended to get arms to the National Coalition. Existing sanctions expire on June 1. With France, the other main military power in the bloc, Britain is trying to persuade Spain, Austria, Sweden and others to ease opposition to arming the rebels.

But with the prospect of the conflict spilling across a volatile region central to global energy supplies and transit routes, major powers also have, as Kerry told Putin on Tuesday, "very significant common interests" in pushing for a settlement.

"The alternative," Kerry later told a joint news conference with Lavrov, "is that Syria heads closer to an abyss, if not over the abyss and into chaos".

Both sides fear a failed state in Syria could provide a base for hostile militants willing to strike around the world.

Last June, at a conference in Geneva, Washington and Moscow agreed on the need for a transitional government in Syria, but diplomacy has foundered since then, and the mediator of the Geneva conference, former U.N. Secretary-General Kofi Annan, quit in despair, saying differences among powers were too wide.

Kerry said the conference might be held as early as this month, although no venue has been set.

Russia, backed by China, has vetoed three U.N. Security Council resolutions hostile to Assad. Alarmed at Western powers' use of a U.N. mandate to oust Muammar Gaddafi in Libya, Moscow and Beijing are wary of such interference in their own affairs.

RISK OF POWER VACUUM

Recent developments have focused minds on the risks of wider war in the Middle East.

The White House said last month that Assad's troops probably used chemical weapons - which Obama has called a "red line" that would mandate a strong, if unspecified, response. The government and rebels each accuse the other of using poison gas, a charge both sides deny. British Prime Minister David Cameron said on Wednesday there was evidence Assad's forces "continue" to use sarin gas.

But despite pleading from the opposition, Western leaders have been reluctant to weigh in by arming the rebels, especially as Islamist fighters have pledged allegiance to al Qaeda, highlighting the risk to the West that a poorly managed change of leadership in Syria could bring hostile militants to power.

Israeli air strikes in recent days - which Israeli officials said hit Iranian arms headed for Assad and Tehran's Lebanese allies Hezbollah - underlined the risk of cross-border conflict.

The violence has inflamed a confrontation between Sunni and Shi'ite Muslims in the Middle East, with Shi'ite Iran supporting Assad, and Sunni powers like Saudi Arabia backing the rebels.

Tehran warned of unforeseeable consequences if Assad were toppled and said only a political deal would avert a regional conflagration: "God forbid, if there is any vacuum in Syria, these negative consequences will affect all countries," Foreign Minister Ali Akbar Salehi said. "No one knows what will happen."

Diplomatic sources in Moscow made clear the latest push for peace was being driven by growing alarm following the Israeli air raids, the possibility of foreign arms pouring into Syria and the possible use of chemical weapons.

Moscow and Washington have also signaled they want to improve cooperation on security matters since the Boston Marathon bombings, which U.S. officials suspect was carried out by ethnic Chechens who had lived in Russia. U.S. officials said FBI chief Robert Mueller had been in Moscow on Tuesday to discuss the bombings, but gave no details.

In a further sign of Washington's efforts to improve ties with Russia, Kerry avoided any sharp public criticism of Moscow's human rights record when he met civil rights activists in the Russian capital on Wednesday before his departure.

In Syria, Internet connections and phones to the outside world were restored after a day-long blackout that officials put down to a technical fault on a cable but which opposition activists said was deliberately imposed for military operations.

(Additional reporting by Steve Holland in Washington, Suleiman al-Khalidi in Amman, Arshad Mohammed, Timothy Heritage, Alexei Anishchuk and Steve Gutterman in Moscow, and Lou Charbonneau at the United Nations; Writing by Alastair Macdonald, Timothy Heritage and Peter Graff; Editing by Will Waterman and Peter Cooney

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Analysis: Race politics may stunt reforms after Malaysia election

By Stuart Grudgings

KUALA LUMPUR (Reuters) - Malaysia's racially divisive election result has sparked a battle within the country's ruling party that is likely to slow Prime Minister Najib Razak's drive to reform the economy and roll back policies favoring majority ethnic Malays.

Najib's Barisan Nasional (BN) coalition retained power in Sunday's election in the multi-ethnic Southeast Asian nation. But the coalition lost the popular vote and turned in its worst-ever electoral performance as it was heavily abandoned by the minority Chinese and rejected by many voters of all races in urban areas.

Najib was quick to blame the outcome on the swing by Chinese voters to the opposition alliance, putting a racial interpretation on the result that has struck a chord with traditionalists in his United Malays National Organisation (UMNO).

UMNO, which dominates Barisan, now faces a leadership election in October or November that is likely to be fought between traditional and reformist wings.

"The ideological lines have been drawn within UMNO," said Khairy Jamuluddin, a reformist who heads the party's youth wing, in a posting on Twitter. "Game on."

Any major reforms are likely to be postponed until the leadership is decided, although Najib has said he will push for national "reconciliation" and press ahead with a $444 billion economic masterplan aimed at attracting investment and doubling incomes by 2020.

Conservatives have blamed ethnic polarization and Chinese "disloyalty" while reformists have urged Najib to expand steps to make UMNO more inclusive beyond its base of poor, rural Malays.

Utusan Malaysia, a newspaper controlled by UMNO, sought to portray Sunday's election result in racial terms, with one headline saying: "What more do the Chinese want?"

Malaysia's former and longest-serving prime minister, Mahathir Mohamad, a powerful figure in UMNO, was quoted by local media as saying "ungrateful Chinese" and "greedy Malays" were to blame for the result.

"It may be the starting shot of what's to come for Najib," Oi Kee Beng, deputy director of Singapore's Institute of Southeast Asian Studies, said of conservative reactions to the result. "At the same time, I think he is their (UMNO's) best asset despite everything."

FRAUD

Najib also has to deal with a strong opposition that is claiming that Barisan won the election through fraud. On Wednesday, tens of thousands of opposition activists thronged a stadium on the outskirts of the capital Kuala Lumpur in response to a call from opposition leader Anwar Ibrahim.

"This is merely the beginning of the battle between the people and an illegitimate, corrupt and arrogant government," Anwar, a former deputy prime minister, told the crowd, many of whom wore black to symbolize mourning.

Najib, the 59-year-old son of a former prime minister, had far higher approval ratings than his party in the run-up to the election and has few obviously strong rivals to replace him.

Taking power in 2009, he staked his fortunes on reforms aimed at spurring growth, increasing transparency and dismantling affirmative action policies.

But Najib's ambitions have been curbed by conservative interests within UMNO. He has failed to come up with major steps to roll back the ethnic privileges that are seen as having benefited an elite of well-connected Malays more than the poor majority.

The government does not provide an ethnic breakdown of the population, but Malays make up about 60 percent of the 28 million people, while Chinese comprise more than 25 percent. The country also has a significant minority of ethnic Indians.

Barisan won 133 seats in the 222-member parliament, but only 47 percent of the popular vote, compared to the opposition's 50 percent.

"The polarization in this voting trend worries the government," Najib said. "We are afraid that if this is allowed to continue, it will create tensions."

But Barisan has also come in for criticism from younger voters for corruption and patronage politics that critics say have been the hallmark of its 56 years in power.

Liew Chin Tong, an opposition member of parliament from the southern state of Johor, said Najib appeared to be taking the wrong message from the election result.

"It was not just the Chinese who swung against Barisan Nasional. There were many young first-time and second-time voters who voted against the BN," he told Reuters.

Najib now looks more vulnerable to traditionalists in his party who are opposed to his tentative steps to phase out the policies that favor ethnic Malays, introduced two years after traumatic race riots in 1969.

Those policies have been a pillar of UMNO's support but have been a prime cause of ethnic Chinese and Indian alienation and investors say they stunt growth and investment in Southeast Asia's third-largest economy.

Najib's efforts to roll back these policies and other politically sensitive reforms - such as the introduction of a consumption tax to reduce Malaysia's dependence on oil revenues and lowering fuel and food subsidies to tackle a chronic budget deficit - could be put on the backburner for now.

"The outlook for direct investment will remain uncertain until it becomes clearer whether or not Najib's reform-minded policies will continue," HSBC economists said in a note after the result.

The opposition's Liew said Najib's choices of cabinet members in the coming days would be a crucial indication of whether his new government would try to appeal across ethnic groups or only to its Malay base.

"His comments on the Chinese is rhetoric," Liew said. "What we need to see is who he will include in his cabinet. Will it be made up of UMNO extremists or younger members from the middle ground? We also have to see if he will include the Chinese."

(Additional reporting by Niluksi Koswanage, Siva Sithraputhran, Anuradha Raghu and Angie Teo; editing by Raju Gopalakrishnan)

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