Myanmar pro-democracy leader Suu Kyi freed

YANGON (Reuters) - Myanmar democracy champion Aung San Suu Kyi walked out of her home to rapturous cheers from thousands of supporters on Saturday after the country's military rulers released her from seven years of house arrest.

"People must work in unison. Only then can we achieve our goal," the Nobel Peace Prize-winner said, smiling as she clenched the top of the red-iron gate bordering her crumbling lakeside mansion, her hair pinned with flowers from a supporter.

"When the time comes to talk, do not be quiet," she added.

Nevertheless, the 65-year-old faces an uncertain future in a changing political landscape in which loyal comrades have defied her by courting public support and participating in last Sunday's first election in 20 years.

Suu Kyi's allies rejected the vote in which an army-backed party won in a choreographed landslide.

The slightly built, soft spoken Suu Kyi has been held under house arrest or in prison for 15 of the past 21 years due to her steadfast opposition to nearly half a century of military rule.

Her latest house arrest term expired on Saturday, but it was not clear she would be freed until evening when police withdrew from their posts outside her home, removed barricades of cement and razor wire and let her meet supporters.

In August of last year a court extended her arrest after ruling that she had broken a law protecting the state against "subversive elements" by allowing an American intruder to stay at her home for two nights.

Known simply as "The Lady" by her countrymen, Suu Kyi gives Myanmar a powerful pro-democracy voice days after a widely criticized election.

Her release is sure to rekindle debate over Western sanctions against the resource-rich country of 50 million people nestled strategically between China and India.

After speaking to supporters, the daughter of assassinated independence hero General Aung San returned to her home for the first meeting with her National League for Democracy party in seven years.

It was unclear whether she will now face restrictions on her movements. Through a lawyer, she said on Wednesday she would only agree to be freed if all restrictions were dropped.

World leaders applauded her release and urged the military junta in the former Burma to free all of its estimated 2,100 political prisoners.

"The United States welcomes her long overdue release," President Barack Obama said in a statement. "It is time for the Burmese regime to release all political prisoners, not just one."

European Commission President Jose-Manuel Barroso urged Myanmar to allow Suu Kyi to participate in the political process. U.N. Secretary-General Ban Ki-moon expressed regret that she was excluded from last Sunday's election.

Supporters gathered near her house throughout the day, many chanting "Release Aung San Suu Kyi" and "Long live Aung San Suu Kyi." Some wore T-shirts emblazoned with messages pledging to stand with her.

WESTERN SANCTIONS

Suu Kyi led her National League for Democracy to a landslide in the last election in 1990, a result the military ignored, and she remains capable of drawing big crowds to the gates of her home in Yangon.

Although last Sunday's vote could trigger a review of Western sanctions on the reclusive country, a few words from Suu Kyi could rob them of any semblance of legitimacy. She plans to meet supporters at her party's headquarters on Sunday.

Myanmar experts say the junta would likely need to release more political prisoners before the West lifts sanctions, which largely target Myanmar's leaders in a country where the military leadership controls nearly every industry.

Suu Kyi previously backed sanctions -- heavily criticized as ineffective -- but has since reviewed her stance. Some analysts say she could mediate between the generals and Western states that could face pressure from multinational companies to roll sanctions back after her release.

Myanmar is rich in natural gas, timber and minerals and had enormous infrastructure needs. But it also ranks among the world's most corrupt countries with ethnic militias overseeing the world's second-largest opium crop after Afghanistan and about a third of the population living below the poverty line.

China, Thailand, India and Singapore are already big investors and official statistics show Chinese companies poured in $8 billion from January to May, mostly in the energy sector.

"Suu Kyi could hold consultations with diplomats about this," Derek Tonkin, a former British ambassador to Thailand and prominent Myanmar analyst, said of Suu Kyi's possible role in mediating between the junta and the West.

"U.S. policy depends on whatever she says and the EU will follow closely. Her reappearance is something that will be utilized by them at a time when the U.S. and EU are looking for some kind of engagement," he added.

(Additional reporting by Martin Petty in Bangkok; Writing by Jason Szep; Editing by Jon Boyle)