(Recasts with govt minister, adds US quote)
By Katie Nguyen and Wangui Kanina
NAIROBI, Jan 14 (Reuters) - A powerful Kenyan minister on Monday rejected mediation by former U.N. Secretary-General Kofi Annan to try to end unrest over a disputed election that has killed hundreds, saying there was no problem to be solved.
Leading a group of "Eminent Africans", Annan was due in Kenya on Tuesday to try to kickstart dialogue between President Mwai Kibaki and his rival Raila Odinga, who have not met since a Dec. 27 vote the opposition says was rigged.
"If Kofi Annan is coming, he’s not coming at our invitation," Roads and Public Works Minister John Michuki said.
"As far as we are concerned, we won an election. We don’t have a problem to be solved here," he told reporters.
The hardline stance taken by a member of Kibaki’s inner circle is likely to make Annan’s task of reconciling the feuding sides even tougher.
He steps in after African Union head John Kufuor, and other foreign figures, including Washington’s top diplomat for Africa Jendayi Frazer, failed to bring them together last week.
The crisis has dented Kenya’s democratic credentials and resurgent economy, hit supplies to east and central African neighbours, and rattled Western donors.
Official figures put the death toll from the post-election violence at 612. But local media said it was higher, at 693.
"We expect all people to work hard to find a solution," Annan said in a statement before his departure. "Pending this, no party should create facts on the ground or engage in acts that complicate the search for a negotiated solution."
Kibaki, 76, has said he is prepared to speak to Odinga, 63, about a possible power-sharing arrangement.
But Odinga who helped Kibaki win a 2002 election before splitting with him three years later, says he will only meet through an international mediator and wants the election re-run.
"NO BUSINESS AS USUAL"
The seasoned diplomat starts his mission as the two sides prepare for a new showdown in parliament and on the streets.
Kibaki has entrenched his position by naming half a cabinet, convening parliament and continuing with state functions.
But the opposition has more seats in the new assembly and Tuesday’s opening session promises to be a bruising affair.
Opposition Orange Democratic Movement (ODM) legislators are threatening to sit on government seats they say are rightfully theirs. The first business will be to name a new speaker.
At the weekend, the European Union and United States said there could be "no business as usual" with Nairobi unless a political compromise was agreed that restored stability.
Despite international pressure for a breakthrough, Michuki was quoted as saying the government may sever ties with countries questioning the president’s win.
"We are just turning a blind eye, but we can just one day wake up and tell them to leave the country," he was reported as saying in the Daily Nation newspaper.
Many Kenyans made the most of a lull in the fighting to try to get their children back to school after a week’s delay.
Others, however, were still fleeing the tea-growing area of Eldoret, fearful the opposition’s call for three days of nationwide protests from Wednesday would stoke more bloodshed in the east African nation. Police have banned the rallies.
U.S. State Department spokesman Sean McCormack urged restraint on all sides, and said people should be allowed to peacefully express their points of view.
"The fact that you have the possibility of violence breaking out at the smallest possible provocation is an indicator that they need to come together to resolve politically the situation," he said.
Most of the deaths have come from fighting between clashes between police and protesters, rival ethnic communities, as well as looting and mob violence.
Human Rights Watch said it was concerned by the number of people injured or killed by gunshot wounds "which appear to have been inflicted by police" in the western town of Kisumu. (Additional reporting by Bryson Hull, Wangui Kanina, Tim Cocks; Madeleine Chambers in Berlin; Jonathan Lynne in Geneva; Washington bureau, editing by Mary Gabriel)