UPDATE 1-UN council waters down Eritrea sanctions resolution
* Original draft would have banned mining investment
* Eritrea president invited to address council on Monday
* UN says Eritrea supports Somali Islamists, Asmara denies
UNITED NATIONS, Dec 2 (Reuters) - A resolution tightening sanctions on Eritrea, expected to be passed by the U.N. Security Council next week, has been watered down and no longer bans investment in the country's promising mining sector.
In an unusual arrangement, Eritrean President Isaias Afewerki has been invited to address the council on Monday morning but not to take part in an afternoon session scheduled to pass the resolution, diplomats said on Friday.
A spokesman for the U.S. mission, Mark Kornblau, said a U.S. visa for Isaias to come to New York was approved on Friday. Diplomats said it was unclear whether he would arrive, after Asmara complained the invitation had given him too little time.
The original draft of the resolution, circulated by Gabon in October, would have banned foreign firms from investing in Eritrea's mining industry, outlawed imports of its minerals and sought to block payment of a tax Eritrea puts on remittances from its nationals abroad.
The measures add to existing sanctions, including an arms embargo, passed against the Horn of Africa state two years ago in retaliation for its alleged support of Islamist rebels in Somalia. Eritrea denies the allegation.
The latest version of the text, obtained by Reuters, simply requires countries to make their companies involved in mining in Eritrea exercise "vigilance" to ensure funds derived from the sector are not used to destabilize the region.
On remittances, the draft calls on states to act to ensure Eritrea ceases "using extortion, threats of violence, fraud and other illicit means to collect taxes outside of Eritrea from its nationals." It also "condemns" Eritrea for using a remittance tax to fund mischief in the Horn of Africa.
Eritrea is seen to be on the brink of a minerals boom that could revive its struggling economy, while remittances it gets from its large diaspora in the West and Middle East are its biggest source of foreign exchange.
The country's most advanced mining project, Bisha, believed to contain gold, copper and zinc, is run by Canada's Nevsun Resources Ltd . Earlier this year, Eritrea granted Australia's Chalice Gold Mines two new exploration licenses in a nearby location.
SUPPORT TO ARMED GROUPS
The push for new sanctions follows a report by a U.N. monitoring group in July that found Eritrea continued to provide political, financial, training and logistical support to al Shabaab and other armed groups in Somalia.
Eritrea's U.N. ambassador, Araya Desta, told Reuters the allegations were "ridiculous" and the draft resolution "outrageous."
The Inter Governmental Authority on Development, or IGAD, which groups seven East African states, called in July for more sanctions to hit the Eritrean mining sector and remittances.
Diplomats said Russia and China opposed such sanctions and that some European countries and the United States also felt the original draft was too tough and could penalize the Eritrean people.
Eritrea has blamed its rival, Ethiopia, from which it split away in 1993, for the sanctions drive.
Eritrea asked in October that Isaias be allowed to address the Security Council to express his opposition to sanctions. The 15-nation body had been discussing the request since then and finally issued an invitation this week.
Asmara responded that Monday was too soon and requested a postponement. But Russian Ambassador Vitaly Churkin, this month's council president, said there would be no delay. "What is clear is that the whole thing is going to take place the way it was agreed," he told reporters.
He said Moscow still had reservations about aspects of the resolution, but he did not suggest it would not go through.
Diplomats said officials from other countries in the region that are not on the council - possibly including Ethiopia, Kenya, Uganda and Djibouti - were expected to address the council on the issue by video-link on Monday.