* Culture of impunity goes right to top, U.S. cable says
* Any fighting around 2012 poll could be worse than 2007/08 * Kenya developing ties to less disapproving China
By Richard Lough
NAIROBI, Dec 9 (Reuters) - A failure to call Kenya's leaders to account for abuses and see through broad political reforms could result in more bloodshed in east Africa's largest economy, a leaked U.S. diplomatic cable says.
U.S. envoy Michael Ranneberger warned in January that the next election might see worse violence than the bloodshed that convulsed Kenya after a presidential election in 2007, according to a confidential message published by the WikiLeaks website.
In August, Kenyans approved a new constitution in a referendum that should curb executive powers and strengthen civil liberties -- intended to prevent a repeat of the fighting.
But its implementation is faltering in parliament over who should sit on the commissions overseeing the process, an indication of the power of vested political interests.
"The old guard's strategy is to do just enough to placate the people, (Kofi) Annan, and us, while trying to avoid fundamental change in the system," Ranneberger said.
Former U.N. secretary general Annan brokered a power-sharing deal between President Mwai Kibaki and opposition leader Raila Odinga in March 2008 to end three months of fighting, triggered by Odinga's accusation that Kibaki had stolen the election.
Ranneberger said both Kibaki and Odinga, now prime minister, were among those who benefited from and supported an entrenched culture of impunity in the economic and political elite.
But he said that, while the old guard retained their grip on power and resources, "hairline fractures are developing in their edifice which -- if we continue to work them intensively -- will develop into broader fractures and open up the potential for a peaceful process of implementation of fundamental reforms".
"UNPRECEDENTED FREEDOMS"
Kibaki's office said his reform record, culminating in the promulgation of the new constitution, spoke for itself.
"The Kenyan people have enjoyed unprecedented political, economic and social freedoms during his tenure in office," it said in a statement.
A second cable from the U.S. embassy in Kenya dating from last February underscored American concerns about China's expanding economic and political links with Africa.
It said the Chinese government had supplied Kenya, a strategic partner of the United States, with weapons and ammunition to support its strategy in Somalia.
China also provided telecommunications and computer equipment to the Kenyan National Security and Intelligence Service, according to the cable, which was signed off by Ranneberger.
It said China was in play as a potential partner for a ${esc.dollar}5 billion deep-water seaport development in Lamu and associated regional infrastructure projects:
"China's interest in the Lamu project is reportedly linked to the presence of oil in Southern Sudan and Uganda, which could be exported via Lamu, as well as the greater export potential to Ethiopia, Southern Sudan and Uganda."
The cable said any oil or gas find in Kenya by China's CNOOC <0883.HK> could encourage the leadership to move closer to China in an effort to shield itself from Western, and in particular U.S., pressure to reform its political system. (Editing by Kevin Liffey)
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