(Adds posture of Saudi forces paragraphs 6,7)
* Houthi fighters reach Mualla port district
* Tanks, gunmen deploy across Aden's Crater district
* Suspected al Qaeda fighters launch Mukalla jailbreak
By Mohammed Mukhashaf
ADEN, April 2 (Reuters) - Yemeni Houthi fighters and their allies seized a central Aden district on Thursday, striking a heavy blow against the Saudi-led coalition that has waged a week of air strikes to try to stem advances by the Iran-allied Shi'ite group.
Hours after the Houthis took over Aden's central Crater neighbourhood, they marked another symbolic victory by fighting their way into a presidential residence overlooking the neighbourhood, residents said.
The southern city has been the last major holdout of fighters loyal to Saudi-backed President Abd-Rabbu Mansour Hadi, who fled Aden a week ago and has watched from Riyadh as the vestiges of his authority have crumbled.
By nightfall the Iran-allied Shi'ite fighters had reached the edge of Aden's port district of Mualla, they said.
The Houthis and their supporters swept into the heart of Aden despite an eight-day air campaign led by Riyadh trying to stem their advances and ultimately return Hadi to power.
Although the Saudi air strikes have had little apparent impact on halting the Houthi advance, a senior U.S. military official in Washington played down the possibility that Saudi Arabia would send in ground forces.
"I don't think they're going to do that. I think they are arraying their forces along their border to prevent a Houthi incursion," the official told a group of reporters, speaking on condition of anonymity. "They're postured defensively."
By midday on Thursday the Houthis were in control of Aden's Crater neighbourhood, deploying tanks and foot patrols through its otherwise empty streets after heavy fighting in the morning.
It was the first time fighting on the ground had reached so deeply into central Aden. Crater is home to the local branch of Yemen's central bank and many commercial businesses.
"People are afraid and terrified by the bombardment," one resident, Farouq Abdu, told Reuters by telephone from Crater. "No one is on the streets - it's like a curfew".
Hadi loyalists had few heavy weapons to halt the Houthi advance, although the remains of one smouldering tank in Crater showed they had put up a staunch defence in some places.
Aden residents reported three air strikes against a Houthi position north of Crater on Thursday, and a fourth at the presidential residence shortly after they took control of it.
Another resident said Houthi snipers deployed on a mountain overlooking Crater and fired on the streets below. Several houses caught fire after being struck by rockets, and messages relayed on loudspeakers urged residents to move out to safer parts of the city, he said.
After the advance in Crater, unidentified armed men disembarked from a vessel off Mualla. A port official said they were armed guards from a Chinese warship taking evacuees from the city. Yemeni and Saudi officials said there was no coalition ground operation in Aden.
China's Xinhua news agency said a Chinese missile frigate evacuated 225 people, all non-Chinese nationals, from Aden on Thursday to Djibouti.
"ADEN WEAK POINT"
The Houthis, who took over the capital Sanaa six months ago in alliance with supporters of former president Ali Abdullah Saleh, turned on Aden last month.
A diplomat in Riyadh said the city had come to symbolise Hadi's fading authority, meaning that Saudi Arabia could not afford to allow it to fall completely under Houthi control. But he said Riyadh's air campaign was so far geared more towards a slow war of attrition than an effective defence.
"Saleh and the Houthis are keeping the pressure on Aden, which is the weak point in Saudi strategy," he said. "I think the Saudis would put ground forces into Aden to recapture it if it falls. It is a red line for them."
The war on the Houthis is now the biggest of multiple conflicts being fought out in the Arabian Peninsula's poorest state, also grappling with a southern secessionist movement, tribal unrest and a powerful regional wing of al Qaeda.
The fighting has forced Washington to evacuate U.S. personnel from the country, one of the main battlefields in the secret American drone war against al Qaeda.
Huge street demonstrations in 2011 linked to wider Arab uprisings forced veteran leader Saleh to step down, but he has re-emerged as an influential force by allying himself with the Houthis, his former enemies.
The Houthis are drawn from a Zaidi Shi'ite minority that ruled a thousand-year kingdom in northern Yemen until 1962. Saleh himself is a member of the sect but fought to crush the Houthis as president.
Coalition jets struck a military base controlled by Houthi and pro-Saleh fighters in the Bab el-Mandeb strait, at the entrance to the Red Sea on Thursday, officials said.
In the Arabian Sea port of Mukalla, 500 km (300 miles) east of Aden, suspected al Qaeda fighters stormed the central prison and freed 150 prisoners, some of them al Qaeda detainees, sources in the local police and administration said.
They named one of the escapees as Khaled Batarfi, a provincial al Qaeda leader who was arrested four years ago. Soldiers loyal to Hadi clashed with the suspected al Qaeda fighters in Mukalla early on Thursday, residents said.
In Washington a senior military official said that although the chaos in the country had reduced U.S. counterterrorism capability it had also disrupted any plots to attack the west by al Qaeda in the Arabian Peninsula.
The Houthi advance "has caused their external plotting to be sidelined while they figure out how they are going to deal with the internal vestiges of what appears to be an emerging civil war," the official told a small group of reporters. (Additional reporting by Mohammed Ghobari in Cairo, Angus McDowall in Riyadh, Amena Bakr in Dubai, Emily Stephenson in Washington and Ben Blanchard in Beijing; Writing by Dominic Evans; Editing by William Maclean, Angus MacSwan and Ken Wills)
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