Sat Feb 9, 2008

By Daniel Wallis

NAIROBI (Reuters) - Kenya's feuding parties look on the verge of striking a power-sharing deal to end a deadly political crisis after narrowing their differences over the disputed re-election of President Mwai Kibaki.

Opposition leader Raila Odinga has accused Kibaki of rigging the December 27 poll, triggering riots and ethnic attacks that have killed more than 1,000 people and smashed the country's image as a peaceful business, tourism and transport hub.

Former U.N. boss Kofi Annan, who is leading talks to end the turmoil, seemed on Friday to have made significant progress.

"Apparently, there was a newfound spirit of camaraderie among the negotiators ... giving hope to Kenyans and the world that the resolution was in sight," Kenya's main Daily Nation newspaper said in an editorial on Saturday.

"This goodwill should be exploited to the maximum."

Quoting sources in the discussions, local media said both parties had made concessions, paving the way for power sharing.

When talks resume on Monday, delegates will debate how that might work over a two- to three-year period, the Nation said. It said a truth, justice and reconciliation commission would also be set up to heal the wounds caused by the violence.

Proposals for a recount or swift re-run of the election have been set aside because of persistent security fears and the number of voters uprooted from their homes, the reports said.

Annan's mediators were due to address a special session of parliament on Tuesday to brief legislators on the developments.

Odinga's Orange Democratic Movement (ODM) is no longer calling on Kibaki to step down, local media said, while Kibaki's Party of National Unity (PNU) has dropped its demand that the opposition take any grievances over the polls to court.

"They have reached a deal in principle to share power, but they have yet to work out the precise details," a source close to the Annan team told Reuters.

TOUGH TALKS AHEAD

In a statement, Odinga said he was confident the talks would bear fruit, and Kibaki's office said the president was satisfied the mediation was going well.

Despite the apparent progress, a lasting deal was still far from certain. Kenya's bloodshed has exposed deep divisions over land, wealth and power sown during British colonial rule and stoked by politicians ever since.

In a sign of the tough talks still to come, the opposition-leaning Standard newspaper said Odinga's side was insisting that the make-up of any interim government reflect the strength of the parties in parliament. The ODM won 99 seats to the PNU's 43 in parliamentary elections also held on December 27.

Annan says he hopes delegates will end their discussions on settling the political issues by early next week. But he cautioned journalists against listening to rumors or leaks.

"In negotiations, a deal is not done until it is done," he said on Saturday. "All must understand that selective leaks in the middle of negotiations are not to anyone's benefit."

Both sides have agreed on principles to end the violence and help refugees. Annan had given them until mid-February to resolve a third item: what should be done about the disputed election.

The former U.N. chief hopes talks on the deeper underlying issues, such as land grievances, will be tackled within a year.

The unrest has displaced some 300,000 people, horrifying Kenyans, neighboring states and world powers alike. That has led to a bigger and faster international response than has been seen elsewhere in Africa.

The latest dignitary to arrive, U.N. aid boss John Holmes, met displaced people in the Rift Valley towns of Nakuru and Molo on Saturday, the sites of some of the worst violence.

"We need to make sure that no one community is being favored over the other and everyone is getting aid," he said.

Clement Omondi, a 25-year-old attacked by a mob that broke both his arms, told Holmes he wanted to return to his ancestral home in western Kenya, but had no way to get there.

"I have lost my livelihood. I have lost my house. I have no future," Omondi said. "Nakuru is no longer my home."

Odinga was also in a Rift Valley town, Kericho, for the funeral of an ODM lawmaker shot dead by a policeman last week.

(Additional reporting by Andrew Cawthorne; Editing by Caroline Drees)

(For special coverage from Reuters on Kenya's crisis see:

http://africa.reuters.com/elections/kenya/)