Donors review Ivorian aid as power struggle escalates

ABIDJAN (Reuters) - Major donors put lending to Ivory Coast under review as incumbent Laurent Gbagbo and presidential claimant Alassane Ouattara fought for political control.

A November 28 presidential election was meant to reunite the West African nation a 2002-3 civil war. But analysts warned of fresh unrest and a possible return to violence after Gbagbo and Ouattara both claimed victory in the disputed poll.

Citing a "breakdown of governance", the World Bank and the African Development Bank said they would reassess aid to the country, adding to pressure on Gbagbo who already faces calls to step down from the United Nations, neighbours and Washington.

"In line with our policies, we will continue to closely monitor developments and reassess the usefulness and effectiveness of our programs given the breakdown in governance," the banks said in a joint statement.

Ouattara named Gbagbo's former finance minister Charles Koffi Dibby to his cabinet late on Sunday in a move which would strip Gbagbo of an official praised for his handling of debt talks. Dibby was not available to confirm he had switched sides.

On Monday Gbagbo's Prime Minister Guillaume Soro, who quit on Saturday, told France's Europe 1 radio that Ouattara may include other ministers from Gbagbo's cabinet in his government if his rival steps down.

FINANCIAL IMPACT

The World Bank has tied the cancellation of $3 billion of external debt, estimated at $12.5 billion, to smooth elections. But Gbagbo's hand on the economy is strengthened by revenues from cocoa, oil and other commodities.

Benchmark ICE cocoa futures traded at a six-week high of $2,966 a tonne on Monday.

Several cocoa exporters suspended activities in the wake of election violence that has caused at least 15 deaths. But a regular industry estimate on Monday put port arrivals at around 427,000 tonnes in the season to December 5, only a few thousand tonnes lower than at the same point last year.

"When you look at the relative economic resilience it has had dating back to the civil war, if this is seen as an attempt to gain some level of traction politically it may not necessarily be the most successful option," said Rolake Akinola, an independent Africa analyst based in London.

Despite the political stand-off, Ivory Coast reopened international borders from Monday that had been sealed during a tense wait for the results, and traffic in the business district of economic capital Abidjan was nearly back to normal.

"The international community has got to play a straight game otherwise it will be a mess in this country. Ouattara's forming his government, Gbagbo's forming his -- where will it end?" said civil servant Maurice Fallet.

ARMY BACKING

Both Gbagbo and Ouattara have taken presidential oaths but Ouattara has secured broad international recognition after provisional results made him winner by a near 10-point margin.

However Gbagbo declared victory after a legal body run by a staunch ally said the vote had been rigged by pro-Ouattara rebels and cancelled most of the votes in their territory.

The army chief of staff has sworn allegiance to him and troops appear to be on his side for now.

Nicolas Sarkozy, president of former colonial power France, called Gbagbo over the weekend to appeal to him to step down.

"I said the following to him: it's up to him how he wants to go down in history. He organised elections, they went smoothly. No challenge is possible," he told reporters on a trip to India.

In Brussels, EU Commission President Jose Manuel Barroso said Gbagbo's refusal to accept defeat threatened the stability of both Ivory Coast and the region.

Mediation talks led by former South African president Thabo Mbeki and the two rivals appeared to make no breakthrough on Sunday. It was unclear whether more talks would take place.

Gbagbo has controlled the country for a decade but now faces isolation and international sanctions. Diplomats said Russia, whose Lukoil is exploring for oil there, has blocked efforts in the U.N. Security Council for a clear endorsement of Ouattara.

The crisis in Ivory Coast, once West Africa's brightest economic star, has forced up the risk premium on the country's $2.3 billion Eurobond. It is currently yielding 11.67 percent, from below 10 percent before the election. (Additional reporting by Lesley Wroughton in Washington, Tim Cocks in Abidjan, Peroshni Govender in Johannesburg, David Brough in London and Ange Aboa in Bouake; Writing by Mark John; Editing by Louise Ireland)