| SAADA, Yemen
SAADA, Yemen Their faces bruised and limbs scarred by bullet wounds, scores of young men writhed in agony on shabby mattresses at a Yemeni hospital in Saada, victims of a conflict largely hidden from the world.
Shi'ite Muslim rebels in Yemen's northern mountains near Saudi Arabia had fought government forces for years until an uprising against President Ali Abdullah Saleh this year gave them a free hand in the lawless frontier province of Saada.
In recent months the conflict, next door to the world's top oil exporter, has taken on a dangerous sectarian twist.
The Houthis, as the rebels are known after the clan of their leaders, have been fighting Salafis, a hardline Sunni Islamic group whose creed is similar to that of Saudi Arabia.
Each side offers conflicting accounts on everything from air strikes to motives.
The Houthis accuse the Salafis of receiving funds and arms from Saudi Arabia, while the Salafis say their religious schools have been shelled by the Shi'ite rebels.
The Houthis deny charges by the Yemeni government and some of its regional allies that they have ties to non-Arab, mostly Shi'ite Iran. The Houthis adhere to the Zaydi sect of Shi'ite Islam, doctrinally distinct from that practiced in Iran.
In the Saudi-funded hospital, Salafi and Houthi fighters lay side by side, nursing wounds from renewed clashes in the Salafi stronghold Damaj that coincided with a visit to Houthi leaders this month by U.N. envoy Jamal Benomar.
Some muttered prayers to themselves and stared vacantly at the ceiling. Most were unwilling or unable to talk. A man named Ali, with a pale face and a thick black beard who identified himself as a "supporter" of the Salafis in Damaj, accused the Houthis of trying to "exterminate Sunnis from Saada."
Although Saleh has signed a deal to hand power to his deputy after 10 months of protests, Yemen is still roiled by a southern separatist movement and al Qaeda-linked militants who have seized territory in the south, as well as the Houthi revolt.
While Saudi Arabia was worried by the potential breakup of Yemen, it was particularly alarmed by the prospect of a Shi'ite mini-state springing up on its border, said Hasan Zaid of Yemen's Shi'ite-dominated al-Haq party.
"They hope by funding the Salafis they can weaken the growing strength and popularity of the Houthi movement," he said.
Saudi Arabia intervened militarily against the Houthis in 2009 before a ceasefire took hold last year.
ANTI-U.S., ANTI-ISRAELI SLOGANS
Residents said the latest bout of sectarian violence erupted in early October when a boy walked into a Salafi-controlled medical center brandishing a Houthi protest sign.
The boy was assaulted by the Salafis, residents said, triggering an armed conflict, which has continued sporadically in spite of nearly a dozen mediation attempts.
"Negotiations have reached a dead end," said Mohammed Abdul-Azizi, a youth activist who accompanied an eight-person delegation from Sana'a to mediate.
"Too many people have interests in this conflict."
With the government distracted by months of mass protests demanding an end to Saleh's 33 years in office, the Houthis have been able to extend their grip over most of Saada province.
Although the latest round of fighting between government forces and the Houthis officially ceased in 2010, the human and financial toll on Saada is still plain to see.
Lean-looking children on crutches, maimed by shrapnel, hobble frantically in lines of moving traffic, begging drivers for food and money. Local doctors estimate that 2,000 men, women and children have been handicapped as a result of the war.
Years of air raids have virtually demolished Saada's old town, once a proud symbol of Yemen's ancient architecture. Hundreds of houses, their mud-brick walls pocked with bullets, lie empty in a tangle of floorboards, rusting refrigerators and broken stairwells.
As Benomar toured Saada city last week, Houthi slogans were everywhere, stenciled in red and green on billboards, government buildings and mosques: "God is Greatest. Death to America. Death to Israel. Damned be the Jews. Victory to Islam."
Although Yemen has a Sunni majority, most northerners are Zaydis. The two communities have a tradition of peaceful coexistence, but the sectarian aspect of the conflict in the north has prompted fears of a wider confrontation.
Following his rare meeting with Houthi leaders, Benomar said they were willing to "engage in political negotiations" with the new government and enter a process of national dialogue.
Yemen's wealthy Gulf Arab neighbors, with Benomar's help, brokered the power transfer deal with Saleh which led to the formation of a national unity government tasked with preparing for presidential election in February.
Like southern separatists, the Houthis are hoping that a federal system will emerge under the new constitution which will grant them more autonomy, Benomar said after talks with the rebels' 35-year-old leader, Abdel Malik al-Houthi.
"The Houthis sense there is a new political situation evolving, one which they can potentially be part of," Benomar told Reuters.
"For years they have been complaining about exclusion and marginalization and their main concern now is that the new political deal should not be limited to the traditional political parties."
(Writing by Mahmoud Habboush; Editing by Sami Aboudi and Sonya Hepinstall)