By Barry Moody NAIROBI, Nov 19 (Reuters) - A sealed envelope in foreign hands will decide Kenya's future as it stands at the crossroads between a progressive new direction and ethnic-based politics that provoked the country's worst bloodshed early this year. The violence broke out after a disputed presidential election but was rooted in long-standing ethnic and land issues and the huge divide between rich and poor in Kenya, the region's biggest economy and a vital gateway to a swathe of east and central African countries. After around 1,300 people were killed and 300,000 driven from their homes in ethnic cleansing, the crisis ended in April with the creation of a bloated national unity government dividing power between President Mwai Kibaki and opposition leader Raila Odinga, now the prime minister. Kibaki and Odinga have worked well together despite their previous emnity and have won praise for several difficult decisions that ignored the old regional and tribal pressure groups and revived foreign investor confidence. The badly damaged economy has begun to recover and tourists are returning to Kenya, although analysts say only eradication of the causes of the bloodshed, including constitutional and land reforms, will avoid a repeat. But the release of an official report into the violence last month set off a political storm. It accused unnamed senior political leaders and business figures of systematically planning murderous ethnic attacks. The police were also charged with gross incompetence, rape and murder. The report, produced by a commission chaired by judge Philip Waki, said Kenya could become a failed state unless it underwent fundamental change. Agriculture Minister William Ruto, political leader of the big Kalenjin ethnic group, has threatened to pull his Rift Valley group of lawmakers out of Odinga's ODM movement, saying the Waki report is based on hearsay and accusing the prime minister of betraying some of his most loyal supporters. Ruto has demanded that Odinga rescind orders to remove illegal settlers from Ruto's own Kipsigis sub group of the Kalenjin from the western Mau forest, a vital water catchment whose destruction threatens Kenya's whole economy. POLITICAL TURNING POINT? Odinga's previous refusal to budge from that decision in the national interest, despite political pressure, has been seen as one of the clearest signs than Kenya has turned the page on its traditional corrupt and venal politics. As Ruto applied old-style political pressure, the European Union -- one of the biggest donors to Kenya -- threatened to withhold budget support unless the Waki report was implemented. This is a powerful lever at a time when the country has a projected budget deficit of $1.6 billion and its plans to raise $500 million on international capital markets by floating its first eurobond may be jeopardised by the global economic crisis. In a move to avoid the fate of previous inquiries that were swept under the carpet and to end a "cycle of impunity", Waki placed the names of 10 politicians and businessmen accused of planning and organising the violence in a sealed envelope. This was handed to former U.N. Secretary-General Kofi Annan, who led the foreign mediation that ended the crisis. Waki said that if a special tribunal to try those guilty of crimes against humanity was not agreed by mid-December and established by the end of January, the envelope would be handed to the International Criminal Court in The Hague. This deft move has created a deep dilemma for Kenya's politicians and the tide seems to be turning against Ruto, a skilful political operator who won his spurs as an enforcer for former, Kalenjin, President Daniel arap Moi. He has been widely condemned, including by some politicians from his own community, and most analysts believe the government will survive Ruto's rebellion. "There is a realisation among certain people ... that they cannot simply go back to the old way of doing things. If they do this, there is a very big price to pay," said Kenyan analyst Ambok Andere, adding Ruto had little support from other regions. Odinga told lawmakers: "Some decisions may not be popular, but we must go ahead with them if they are in the best interest of the country. This is not time to go into our ethnic cocoons." Like Waki, Odinga recalled that a report into ethnic clashes in the 1990s, which laid many of the seeds for this year's bloodshed, was buried and its recommendations never followed. Tom Cargill, from London's Chatham House think tank, said Ruto's challenge was the biggest test of "whether the new approach to politics is going to win over the old". But Kenyans were desperate to avoid a repetition of the violence: "There is no way that this agreement can fall apart. Kenyans are convinced it needs to be there," he said. Ruto charges the Waki report is tougher against ODM politicians than those from Kibaki's PNU party, despite a section in the report alleging some of the worst attacks were planned by senior government leaders in a meeting at the president's office. Andere said Kibaki's supporters may be more relaxed about setting up a domestic tribunal because they believe the Kikuyu political establishment will be able to manipulate the legal process better than groups from ODM who have less influence. But he warned there was still a danger of more violence if Kalenjin angry over the report tried to block resettlement of Kikuyus driven out of the Rift Valley during the violence. (Editing by Mark Trevelyan)
Somali pirates are arraigned in the law courts of Kenya's coastal town of Mombasa, November 18, 2008. The pirates were handed over to the Kenyan police after they were arrested by ...
