UPDATE 3-Guinea Bissau president dies in France
* President had been in Paris since November
* Prime Minister Gomes best placed to win resulting election
* Country racked by drug smuggling, and history of coups
By Alberto Dabo
BISSAU, Jan 9 (Reuters) - Guinea Bissau President Malam Bacai Sanha died on Monday in a Paris hospital, his office said, raising fears of a fresh power struggle in the chaotic West African state.
Sanha had been in poor health since coming to power in 2009 and left Guinea Bissau in late November for treatment abroad.
The U.S. embassy in Dakar warned its citizens on Monday that there was an "an increased potential for political instability and civil or military unrest" as a result of reports of Sanha's death. The coastal state is notorious as a stopoff for cocaine being smuggled into Europe from South America and has suffered several coups since independence from Portugal in 1974.
"With pain and sadness, the president's office reports to the people of Guinea Bissau and to the international community the death of His Excellency the President, Malam Bacai Sanha, this morning, Jan. 9, at Val de Grace Hospital where he was being treated," the statement said.
It did not disclose the cause of death but the 64-year-old was believed to be suffering from diabetes, and a foreign ministry source told Reuters he was placed in an artificial coma during his treatment in Paris.
Senegal President Abdoulaye Wade said Sanha's death could spark unrest in neighbouring Guinea Bissau, and invited armed factions to mediation in Senegal. Rival groups in Guinea Bissau's military have fought repeatedly in the past.
"We are worried that with this death factions will clash," Wade told Reuters. "Senegal is interested in stability in Guinea Bissau. Put down your weapons, come to Senegal and spend some time discussing with one another," he said.
Burkina Faso President Blaise Compaore had also accepted a request by the African Union to broker a peace deal between Guinea Bissau's rival factions after a gunbattle erupted in the capital on Dec. 26.
The streets of the seaside capital were calm late on Monday, but tension was palpable.
"(Sanha's) death worries me a great deal because we know there are many bad people who want to take over power at all costs," said Souleymane Sadio, a Bissau resident.
Over the last few years U.S. and European intelligence and security services have focused more attention on West Africa's Atlantic seaboard to head off problems of cocaine-trafficking, illegal migrant flows and the southward creep of militant Islam.
Sanha came to power in July 2009 elections after the assassination of his predecessor, Joao Bernardo Vieira.
New elections to replace Sanha must be held within 90 days according to the constitution, and are likely to pit Prime Minister Carlos Gomes Junior against rivals, including former president Kumba Yala, who enjoys support from fellow ethnic Balanta in the military.
President of the National Assembly Raimundo Pereira is meant to act as interim president during the transition.
Gomes has effectively been running the country since Sanha's departure and has managed to draw millions of dollars in donor support from Angola for army reform while also winning allies in the military, including army chief General Antonio Indjai.
His main rival in the military, Navy head Bubo Na Tchuto, was arrested in late December after clashes in the capital that the government called a coup attempt. But Na Tchuto, who is believed by the United States to be a top drugs trafficker in Bissau, retains some support within the army.
"This new step in (Gomes') growing hegemony might induce some radicals into action, but my guess is he has a very strong hand right now," said Vincent Foucher, an analyst at International Crisis Group in Dakar.
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