Yemen's military said today it had killed 30 al-Qaeda and other Islamist militants who seized the southern coastal city of Zinjibar about 10 days ago, including a local al-Qaeda leader.
Fighting has flared in the city near a major sea lane for transporting oil. Local officials said separately that 15 soldiers have been killed in clashes.
Meanwhile, Yemen's representative for the UN children's agency UNICEF warned that the country is facing a humanitarian catastrophe as the fighting puts strain on a country that is already one of the poorest in the world.
People in the capital Sanaa are very scared and the country is in desperate need of water and fuel, Geert Cappelaere said.
"This country is absolutely in dire need of humanitarian assistance," he said.
"We hope that a solution to the political stalemate will come soon, but even if it comes this is not an end to the problems. We cannot emphasise that enough. Forty percent of the population lives below the poverty line and the repercussions of this are just huge."
Fighting has broken out as speculation mounts over the future of Ali Abdullah Saleh who is in Saudi Arabia for treatment for wounds suffered in an attack on his presidential palace in Sanaa - an absence that could be an opportunity to ease him out of office after nearly 33 years ruling the impoverished Arab country.
Saleh's injuries are more serious than previously reported, a Yemeni official said, raising further questions about his rule.
Saleh was initially said to have received a shrapnel wound, and his vice president was quoted yesterday saying the president would return to Yemen within days from Saudi Arabia where he is being treated.
The Yemeni official reiterated comments by a US official, saying Saleh was in a more serious condition with burns over roughly 40 per cent of his body.
Global powers worry that chaos would make it easier for the Yemen-based wing of al-Qaeda to operate and multiply risks for neighboring Saudi Arabia and other Gulf oil producers.
"We are calling for a peaceful and orderly transition," US secretary of state Hillary Clinton said yesterday, adding that this would be in the best interests of the Yemeni people.
Yemen's acting leader, vice president Abu-Rabbu Mansour Hadi, said Mr Saleh would return within days, but the position of Saudi Arabia, which has traditionally played an influential role in Yemeni politics, could now be decisive.
Saudi officials say they will not interfere in his decision to return to Yemen or not, but Western powers may want to revive a Gulf Cooperation Council-brokered transition deal that would have secured Mr Saleh's resignation.
"Saleh's departure is probably permanent," said Robert Powell, Yemen analyst at the Economist Intelligence Unit. "The Saudis, as well as the US and European Union, are pushing hard for him to stay in Saudi Arabia, as they view the prospect of his return as a catastrophe.
"Prior to his departure, the country was slipping inexorably into a civil war. However, his removal has suddenly opened a diplomatic window to restart the seemingly failed GCC-mediated proposal. It seems Saudi Arabia and other interested parties are unwilling to allow Mr Saleh to derail it this time."
Al-Qaeda in the Arabian Peninsula (AQAP), which has used its Yemen base to stage daring but abortive attacks on Saudi Arabia and the United States, seized the southern city of Zinjibar about 10 days ago with other militants. The city is near a shipping lane where about 3 million barrels of oil pass daily.
There was also fresh fighting in the city of Taiz, south of Sanaa. A Saudi-brokered truce was holding in the capital after two weeks of fighting between Saleh's forces and tribesmen in which over 200 people were killed and thousands forced to flee.
Reuters