Islamist militias control most of southern Somalia

The Union of Islamic Courts wants Kenya's role as mediator to end, while the government insists it stays.

Fighters from the two sides are now less than 30km apart, leading to fears of direct clashes.

Observers further fear a regional conflict, as Ethiopia backs the government and its rival Eritrea is accused of backing the Islamists.

Before arriving in Khartoum, the Islamist delegation said they would not take part in the talks unless Ethiopian troops leave Somalia.

It is too early to say the peace conference is collapsing

Francois Fall

UN envoy to Somalia

In order to break the impasse over who chairs the talks, diplomats have suggested Sudan.

While the UIC objects to Kenya, the government accuses the other co-chair, the Arab League, of bias.

UN envoy to Somalia Francois Fall, however, says he remains optimistic.

"It is too early to say the peace conference is collapsing... There are a lot problems facing the conference which will gradually be resolved."

Stand-off

Observers say both sides are preparing for battle.

UIC forces are on the outskirts of Bur Hakaba, a strategic town on the road from Islamist-controlled Mogadishu to the government base in Baidoa.

Pro-government forces, which have twice taken Bur Hakaba recently, remain 22km outside Baidoa.

Eritrea has previously been accused of arming the Islamists but denies the claims.

The UN report also says there are between 6-8,000 Ethiopian troops, according to AP.

These are the third round of talks the Arab League has organised in Khartoum.

The two sides have previously agreed a ceasefire but the UIC has continued to gain ground.

The UIC has rapidly taken control of most of southern Somalia since seizing the capital, Mogadishu, in June.

The government only controls the territory around Baidoa.

Somalia has been in the grip of warlords and militias for years and has not had a functioning national government since 1991.