Violence may flare again in Kenya: think-tank

NAIROBI (Reuters) - Armed groups are still mobilizing in Kenya's political standoff and violence could flare again if talks fail to solve the worst crisis since independence in 1963, a think-tank said on Thursday.

"Calm has partly returned but the situation remains highly volatile ... Armed groups are still mobilizing on both sides," said the Brussels-based International Crisis Group (ICG).

"Kenya has been in its worst political crisis since independence," the ICG said in a report.

A disputed December 27 presidential election triggered political and tribal violence in the former British colony in which more than 1,000 people were killed and 300,000 were displaced.

Representatives of President Mwai Kibaki and opposition leader Raila Odinga are now holding talks mediated by former U.N. head Kofi Annan in an effort to resolve the standoff in the East African country, the region's biggest economy.

The ICG called on the United States, European Union nations, South Africa and other countries to make economic aid to Kenya conditional on successful negotiations.

It also urged them to expand travel bans and other sanctions on Kenyans deemed to be behind the violence.

"The violence has shattered Kenya's reputation for stability," said the ICG.

"The grisly images ... illustrated the fragility of a national fabric in which the disparity between rich and poor remains one of the world's biggest."

(Editing by Ralph Gowling)