(Repeats story first published Feb. 23, text unchanged)
* Southern, Houthi objections exacerbate tensions
* Funding six-region plan is major concern
* West concerned about security, al Qaeda threat
By Yara Bayoumy
DUBAI, Feb 23 (Reuters) - The ink was barely dry on President Abd Rabbu Mansour Hadi's plan to stabilise chaotic Yemen before the objections started pouring in.
Leader of a nation seemingly on the brink of breakdown for years, Hadi had hoped he could appease rival political groups by creating a federal state of six regions that would give each more say over political, social, economic and security affairs.
To date, few factions appear placated, a reality that bodes ill for a country already battling endemic poverty, poor governance, regional insurgencies and al Qaeda militancy.
Restive southerners seeking autonomy, if not secession, fear the plan would weaken the south, partly by separating it from the sprawling Hadramout province, where some oil reserves lie.
Some northern Houthi rebels also have strong reservations because the proposal links the rugged mountain region they control to the Sanaa area and denies it an outlet to the sea.
Months of political haggling seem sure to follow. If those disputes turn violent, instability in Yemen, which lies near vital sea lanes as well as oil giant Saudi Arabia, will deepen.
Ravaged by multiple conflicts in the past half century, Yemen suffers food and water shortages, corruption, almost non-existent social services and security forces weakened by factional rifts. Regional conflicts and the prevalence of well-armed tribes mean much of Yemen is outside state control.
Forced to import most of its food because of a paucity of arable land in relation to its booming population, Yemen has child malnutrition rates among the highest in the world.
In the face of such towering problems, Hadi's plan was meant to create the administrative structure at least to make a start on rebuilding the country. But consensus has proved elusive.
"The federal plan was never going to please everybody," Britain's ambassador to Yemen, Jane Marriott, told Reuters.
"There are lots of things that can go wrong. So far from what we've seen in Yemen, there are lots of people trying to make this work right. The biggest challenge is one of political will, there are still people out there who have their own agendas, who are not necessarily focused on the interests of Yemen," she said by telephone from Sanaa.
Ibrahim Sharqiyeh, a conflict resolution expert at the Doha-based Brookings Centre, said the disputes could be settled peacefully, but warned of "serious problems" if they were not.
The decision to carve out six regions, with the capital Sanaa given special status, comes at a sensitive time in Yemen's efforts to escape from instability.
With the wider region increasingly split on sectarian lines by the war in Syria, internal strains make Yemen another front in a Middle Eastern "cold war" between Saudi Arabia and Iran.
Becoming a federal state is part of Yemen's planned transition to democracy under a U.S.-backed power transfer deal that finally eased former President Ali Abdullah Saleh from office in 2012 after a year of mass protests against his rule.
A federal state would decentralise authority from Sanaa, diluting the power that Saleh had consolidated over his decades-long tenure, an era plagued by endemic corruption and conflict.
Each region would have more say over its own welfare - civil and social services, health and security. And each would have its own police force, while the army protects Yemen's borders.
Southerners and Houthis - whose Zaidi sect is a distinct branch of Shi'ite Islam - do not necessarily oppose the idea of a federal state, but are unhappy with the proposed structure.
Drafting of the constitution, set to include broad outlines of the federal plan, is expected to start soon, paving the way for elections next year. But finding agreement will be hard.
Southern officials were among the first to raise objections to Hadi's plan, which he approved earlier this month.
Among its defects was a failure to define "how exactly the federal entities would be built, staffed, and what the nature of relations between the core and periphery of the country would be", Theodore Karasik, director of research and consultancy at the Gulf security and military think-tank INEGMA, wrote in an online article.
Many southerners have long demanded the restoration of the state that merged with North Yemen in 1990.
Several separatist leaders walked out of protracted national reconciliation talks before they ended last month with an agreement to transform Yemen into a federal state, but left Hadi to decide whether to opt for two regions or six.
A committee headed by Hadi decided on a plan that envisions splitting the former South Yemen into two regions, Aden and Hadramout, and the more populous former North Yemen into four.
"We should not minimise the importance or significance of the rejection ... To have both the Houthis and the southerners speaking against the proposed set-up, is a very serious challenge," said Sharqiyeh.
"I don't think this is going to kill the idea of federalism itself ... I think it will derail the transition process."
Ali Salim al-Beidh, the former president of South Yemen, who lives in Lebanon, rejected the proposal outright.
"The people of the south will continue their peaceful struggle ... (and) have the ability to foil all these federalism plans," he said in emailed remarks sent to Reuters via an aide.
Other Yemen-based southern officials have also rejected the plan and, according to Yemeni political scientist Abdulghani Iryani, a violent southern response cannot be ruled out.
"If they decide to challenge it by force, that would be very messy ... the most radical faction of Ali Salim al-Beidh has often said they will resort to violence to reach their goals and the risk of that happening is quite credible," he told Reuters.
Yemeni officials have signalled that the government is ready to adjust the borders of the six regions, but not to consolidate the south into one region instead of two.
While politicians bicker, al Qaeda in the Arabian Peninsula, which seized some southern areas in 2011 before falling back in 2012, is pursuing attacks on security forces and oil facilities, posing a grave threat to the government and Western interests.
Marriott, whose country was the colonial power in Aden and the rest of the south until it won independence in 1967, said the hope was that the federal plan might diminish that threat.
"It's central that the reach of the government of Yemen is extended and security is managed," she said.
"This is never going to be a completely secure country but (the idea is) that the levels of insecurity are managed and the space in which al Qaeda can operate disappears ultimately."
"INK ON PAPER"
The Houthis, who have waged an on-off revolt since 2004, are also unhappy with the federal plan, especially because it cuts their northern Saada region off from the Red Sea, analysts said.
"There should have been economic criteria that keep in mind an equitable distribution of resources and power," said Houthi politician Ali al-Bakhiti. He said the deal had no legitimacy.
"It will fail in practical implementation. The authority will be forced, sooner or later, to change this situation. The government will not be able to force nationals to be a part of a region. It will remain ink on paper," he said.
The plan puts Saada in the Azal region, of which Sanaa is a geographic part, though the capital will have a special status.
"By linking them, or keeping them a part of Sanaa, it makes autonomy impossible for them (the Houthis)," Sharqiyeh said.
Iryani said he did not expect the Houthis to obstruct the transition process, calling their objections "more of a bargaining position than any serious challenge to the deal".
Abderrahim Sabir, a senior U.N. political adviser in Sanaa, says funding could prove the main obstacle to federalism.
"The biggest challenge for the federal system won't be a political one, but mainly an economic one," Sabir said.
"Because we're talking about creating an entirely new political system. There will be new administrations in each region, regional elections for regional parliaments, regional governments, regional security services," he said.
Marriott said Britain shared such concerns.
"Building up the state institutions is not going to happen overnight. We're looking at a 10-year time horizon before we can judge whether this has succeeded, or failed or not," she said.
"If we start judging whether it's failed or succeeded every time a bomb goes off or in a six-month timescale, then we're going to be doomed to judging the worst." (Writing by Yara Bayoumy, Editing by William Maclean and Alistair Lyon)
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