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* Kagame has wielded power since 1994 genocide
* Racked by genocide guilt, West treads cautiously
* Rwanda denies sending hit squads to South Africa
* West suspended some aid over Congo rebel charges
By Edmund Blair and Jenny Clover
KIGALI, April 5 (Reuters) - Rwandan President Paul Kagame may dress in the sharp suits of a company CEO, but his language can be more like a drill sergeant when he grills his cabinet on its performance.
"When you speak I find myself becoming impatient, almost to the point of being annoyed," the former military intelligence commander publicly berated a minister last month at an annual meeting of top officials on modernising the tiny African state.
Western nations offer only modest remonstrations over what they see as democratic shortcomings in Rwanda, thankful for the oasis of order that has replaced the genocide they failed to prevent 20 years ago this month.
But they quietly express concern that Kagame's assertive style at home is being translated into brazen meddling in a volatile region and threatening a potential model for Africa.
In 2012, a U.N. report accused Kagame's government of backing a rebel group in eastern Democratic Republic of Congo, prompting the West to halt some aid; economic growth took a hit.
Now Rwanda is blamed for sending hit squads to assassinate opponents in South Africa, killing one of two alleged targets.
"It seems to me that they are getting less risk averse," said one senior Western diplomat, who asked not to be named so he could speak more openly. "The risk they run is sowing the seed for rupture with the international community."
Rwanda, which insists the government that has reformed the still aid-dependent economy is democratically accountable, vigorously denies both accusations of foreign meddling.
Public comments from Kagame and other officials have done little to change Western views of Rwanda's complicity, but criticism has remained muted, and more so with the anniversary of the genocide that Kagame is credited with ending.
"There is an upswing of international guilt about 1994," the diplomat said. "There is pressure. I don't think it is increasing and this year there is a dip."
After exiled former spy chief Patrick Karegeya was found dead in a Johannesburg hotel in January, Kagame said "traitors" should expect consequences. A Rwandan website quoted Defence Minister James Kabarebe saying: "When you choose to be a dog, you die like one."
In March, armed men broke into the Johannesburg home of former Rwandan army chief General Faustin Kayumba Nyamwasa, another exiled critic. Nyamwasa, who survived an attempt on his life in South Africa in 2010, was not in his house at the time.
Diplomats and analysts said the killing and attempted assassination in short succession showed Kagame feared exiled opponents were trying to unseat him using links inside Rwanda.
"His number one threat is potential military dissidents in his own party," said central Africa expert Jason Stearns.
South Africa, a regional superpower, expelled three Rwandan diplomats over the attacks. Kigali, which said South Africa had produced no evidence, reciprocated by throwing out six.
The U.S. special envoy to the region, Russ Feingold, said in a brief statement he was "very concerned about the tension", but was unavailable for further comment when asked by Reuters.
Rwanda lives in an unstable neighbourhood, next to war-ravaged east Congo and politically troubled Burundi, which endured decades of ethnic massacres into the 1990s. Nearby are South Sudan and the Central African Republic, both mired in conflict.
Behind closed doors Western feathers have been ruffled. Diplomats, who have described Rwanda's foreign policy as "reckless", worry Kigali could target opponents in exile in Europe or elsewhere, action that would draw tougher sanction.
"On the security side, there are more and more countries warning them off," said another diplomat, He said the private U.S. message was: "Don't do anything like this in the States."
Critics of Western policy say such warnings are too little, too late. Rwanda is assertive abroad because the West has not reined in the president's authoritarian ways at home, they say.
"There hasn't been much reaction to things that happened inside Rwanda," said Filip Reyntjens, a Rwanda expert and professor at the University of Antwerp, who says he has been banned from travelling to Kigali. "That emboldened the regime."
Rwanda dismisses such criticisms. Shyaka Anastase, head of the Rwandan Governance Board, a state agency that licences political parties and assesses everything from civil liberties to corruption, said Rwanda's system was based on consensus.
That helped Kagame win re-election in 2010 with 93 percent of the vote, he said, while Western critics were too conditioned by their politics where parties often win just 40 percent.
"We feel there is a lot of unfairness," he told Reuters, adding Rwanda's system was healing ethnic, religious and regional rifts which fuelled the ethnic slaughter in 1994 of 800,000 people, mostly minority Tutsis but also moderates from the Hutu majority.
Foreign Minister Louise Mushikiwabo denied a Rwandan role in the South Africa cases but, via Twitter, said Pretoria harboured "dissidents responsible for terrorist attacks in Rwanda".
Rwandan officials have in the past blamed sporadic grenade attacks, often fatal, in the capital and elsewhere on exiled and other opponents. One former presidential bodyguard, who lived in Uganda, is now on trial in Kigali over involvement in such assaults. Exile opposition deny any role in such attacks.
When asked for further comment on the South Africa attacks, the president's office again denied any role and said Rwanda "cannot be expected to mourn the death of someone actively involved in carrying out violence against innocent citizens".
It added that talk of "extrajudicial assassinations on foreign soil is both outlandish and false".
Even as diplomats express private frustrations, public Western criticism is muted, tempered by genocide guilt and Rwanda's role as an example for Africa on the efficient use of the West's aid.
Achievements are plain to see. Residents describe jumping over corpses in the capital in 1994 but now few, if any, African cities can rival the order and tidiness of Kigali, where small groups of women trim grass verges on the sides of new roads.
Rwanda is pitching to be a regional financial hub, an idea unimaginable a few years ago, while the World Bank assesses the tiny nation of 11 million people as the easiest place to do business in continental Africa. Ranked No. 32 globally, it is above some European nations such as its former colonial power Belgium. http://www.doingbusiness.org/rankings
It still relies heavily on aid for two-fifths of government spending. When aid flows stopped in 2012, growth in 2013 tumbled sharply to 4.6 percent, down from the 7 to 8 percent it had averaged in previous years, even though aid resumed in 2013.
Britain's overseas aid department DFID, one of Rwanda's top benefactors, talks of "impressive and fast-improving public financial management system" but notes political restrictions.
To burnish Rwanda's political credentials, Anastase's governance board now produces a scorecard on issues from rule of law to transparency - ticking boxes that win allies in the West. Rwanda, says one diplomat, is "obsessed with indicators".
Swayed in part by visible development, the West also worries about upsetting the fragile balance maintained by Kagame - president since 2003 and power behind the throne since his Rwandan Patriotic Army marched into Kigali in 1994 to halt the killings that mainly targeted Kagame's own Tutsi group.
The government wants to bury the idea of ethnic loyalties, saying everyone is "Rwandese". But tensions sometimes emerge including during the "I Am Rwandan" campaign that began last year and which urged Hutus to apologise for the killings.
"It encourages people to feel guilty because of their ethnicity," said a middle-aged Hutu, asking not to be named and commenting on the voluntary countrywide meetings. "But what can you do? We still go along (with the idea)."
Hutus accept their group is to blame for the genocide, but grumble that Hutus who were also massacred are often ignored.
Such concerns give Western nations pause. "The worry at the back of Western minds is you end up with an ethnic bloodbath," said the senior diplomat. "That is why people in the West are prepared to put up with the political situation as it is."
Some politicians now talk of changing the constitution to allow Kagame stand for a third term in 2017. The West murmurs disapproval, while opponents in Rwanda struggle to be heard.
"We do not have a personal problem with the president but we would not wish that the constitution is changed," said Frank Habineza, head of the Democratic Green Party, which registered last year and is the only party not aligned with the government.
"Kagame is not naturally a democrat," said a regional Western diplomat. "We just wish he was embracing a little bit more of the concepts of democracy." (Writing by Edmund Blair; editing by Philippa Fletcher)
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