Yemen army and Houthi fighters clash in capital

(Reuters) - The Yemeni army and Houthi fighters clashed near the presidential palace in the capital Sanaa on Monday, a Reuters witness said, in the sharpest escalation of tensions since the Shi'ite Muslim movement took over the city in September.

Gunfire and explosions were heard across the city and in close proximity to the palace of President Abd-Rabbu Mansour Hadi and the residence of the national security chief. It was not immediately clear whether Hadi was in the palace.

Automatic rifles and rocket-propelled grenades were being used, and security officials shut roads leading to the area.

Heavy gunfire and explosions could also be heard from Hadda district, in the diplomatic quarter in the south of the city. A Reuters witness said he could see gunmen in Al-Khamseen street, home to some senior government security officials, including the defense minister.

No further details were immediately available, and authorities were not available to comment.

The Houthis, who demand more rights for the country's Zaydi Shi'ite Muslim sect and say they are campaigning against corruption, seized Sanaa in September and advanced into central and western parts of the country where Sunnis predominate.

A deal signed in September between political parties and the Houthis called for the formation of a new unity government followed by the withdrawal of Houthi fighters from the capital. The fighters have remained in place.

In attempt to defuse the clashes, Saleh al-Sammad, a member of the Houthi group appointed by Hadi as a political adviser in September, issued a statement with a list of conditions addressed to the government.

The conditions include having a "fair" and inclusive partnership with Ansarallah, the political wing of the Houthi movement, and omit sections of the draft constitution that violate September's political agreement.

"If the previous agreement is not honored, there is commitment to escalate the situation...and it is difficult to undo the escalation which will come at a big cost," al-Sammad said in a statement.

The Houthis, who have launched attacks on al Qaeda's Yemen branch, are viewed as Shi'ite Iran's ally in its regional struggle for influence with Saudi Arabia. The kingdom has suspended most of its financial aid to Yemen since the Houthis arrived.