FACTBOX-Key political risks to watch in Uganda

KAMPALA, June 1 Wed Jun 1, 2011 5:52am EDT

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KAMPALA, June 1 (Reuters) - Anti-government protests over soaring prices that plunged the start of President Yoweri Museveni's fourth term into crisis appeared to fizzle but opposition activists were planning more to regain lost momentum.

Rights groups said at least nine people had been killed by the security forces since the outset of the demonstrations that began on April 11.

The government's heavy-handed response that landed opposition leader Kizza Besigye in a Kenyan hospital drew international condemnation.

Fierce riots erupted across the capital, Kampala, on April 29, a day after television pictures showed Besigye, who had become the face of the protests, being doused with pepper spray and dragged away by police. [ID:nLDE73S0PH]

Museveni has blamed drought and global oil prices for the leap in consumer prices, which pushed the rate of inflation UGCPIY=ECI to 16.0 percent in May.

The veteran leader's latest crackdown on dissent will firm his critics' conviction that Museveni's leadership is displaying an increasingly autocratic streak.

Uganda, east Africa's third largest economy, has taken a step closer to becoming a significant oil producer after British oil explorer Tullow Oil (TLW.L) agreed to sell stakes in its operations there to France's Total (TOTF.PA) and China's CNOOC (0883.HK) for $2.9 billion. [ID:nLDE72E1GE].

Museveni surprised political analysts last month when he appointed a political rookie finance minister and handed another relative unknown the energy portfolio. [ID:nLDE74R07R]

PROTESTS FIZZLE OR LULL?

Huge crowds welcomed Besigye back from Kenya on May 13, overshadowing Museveni's swearing in the same day. Security forces teargassed his supporters and shot dead one man who got too close to the presidential convoys leaving the inauguration.

There has been no significant unrest since then, with Besigye confined to his house by police on a number of protest days and deciding not to protest on others.

The one-time close ally of Museveni is now in the United States for more treatment to his eyes.

In his absence, the protests have wilted. The latest campaigns urging motorists to honk their car horns at 5pm each day and to march on parliament have made little impact.

What to watch:

-- Besigye. He is key to galvanising the widespread discontent over prices, but how much appetite does he have to take on the security troops who have displayed unwavering loyalty to Museveni?

-- Market reaction. To date Uganda's shilling UGX= has appeared relatively unfazed by the unrest. However, traders warn more violence could unsettle foreign investors and weaken the local currency through the psychological level of 2,400 per dollar.

NEW OIL ROW, NEW CABINET

Museveni named Maria Kiwanuka, a well-known entrepreneur who owns a radio station and has never been a minister or legislator, finance minister, while a former head of the state-run electricity utility, Irene Muloni, was handed responsibility for the energy and mineral resources ministry.

Their appointments were intended to reassure investors worried about what is perceived as an entrenched culture of corruption in the country. Critics fear they will be walk-overs.

"Kiwanuka comes with no baggage. But she is a clean swimmer jumping into a dirty pool because the whole financial system in Uganda has problems - nepotism, bribery, corruption," said political analyst Nicholas Ssengoba.

Museveni also appointed Amama Mbabazi as prime minister, a move that caught analysts off guard because Mbabazi had been named in leaked U.S. cables as having taken bribes from Italian oil firm Eni (ENI.MI).

Mbabazi has denied the claims.

In Uganda's oil sector, Tullow's sale of a one third interest in fields around Lake Albert to each of Total and CNOOC has paved the way for a $10 billion project to develop the reserves.

Meanwhile, Heritage Oil HOIL.L started arbitration proceedings against the Ugandan government to seek the release of $405 million held in relation to the sale of its Ugandan assets to Tullow.

What to watch:

- How the row between Heritage and Uganda plays out? Analysts said a similar dispute between the government and Tullow had risked hurting Uganda's reputation.

-- More accusations of corruption.

-- Uganda plans to open a new petroleum exploration licensing round for blocks in its oil-rich Albertine Rift basin in 2011. Investors will be watching out for any changes to legislation.

SECURITY THREAT

Somalia's al Shabaab Islamist rebels have threatened more attacks along the lines of the twin suicide-bomb blasts in Kampala in July last year, which killed 79 people.

The latest alert saw police warn that the militants, or their sympathisers, might strike football fans watching last week's Champions League final. The attacks failed to materialise.

The insurgents have vowed to target Uganda and nearby Burundi until they withdraw their peacekeeping troops from Somalia's capital, Mogadishu. The troops are all that stop insurgents from toppling the weak Somali government, many experts say.

What to watch:

-- More attacks could deter foreign investment inflows, send the shilling UGX= south, disrupt the business tempo, hurt tourism and knock the economy.

(Editing by Richard Lough)

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