By Mohamed Sudam and Mohammed Ghobari
SANAA (Reuters) - Huge crowds gathered in Sanaa before Friday prayers to demand the departure of President Ali Abdullah Saleh, who deployed armoured vehicles and hundreds of troops on the streets of the Yemeni capital.
Yemen, facing the near-collapse of a Gulf Arab plan agreed with formal opposition parties to lever Saleh out of office, is close to economic disaster, its oil minister said.
Witnesses said military academy students with batons had joined the soldiers facing a vast throng of demonstrators stretching seven km (four miles) down a main street in Sanaa. Flag-waving Saleh supporters assembled in another district.
Gunfire erupted in Taiz, Yemen's third city, when security forces tried to bar protesters from going to a main street to perform prayers there on what they call a "Friday of Decision". Saleh supporters were calling it a "Friday of Unity".
Saleh has refused to sign the deal mediated by the six-nation Gulf Cooperation Council (GCC) this month, enraging protesters, many of whom had anyway opposed a provision giving the president and his entourage immunity from prosecution.
Qatar pulled out of the agreement on Thursday, even as the United States and France urged all parties to sign it as the best hope for an orderly and peaceful transition of power.
Saleh's ruling party said in a text message distributed by the official Saba news agency that it welcomed the decision by Qatar, which the president has previously accused of inciting months of demonstrations aimed at unseating him.
Qatar had said its action was due to "the stalling in signing the proposed agreement ... the continued escalation, the intensity of the confrontations and a lack of wisdom".
A government source, who asked not to be identified, said: "Yemen will continue working with the rest of its brothers in the GCC for the success of the initiative."
Yet no diplomatic outcome seemed imminent in a conflict that has cost more than 160 lives, as well as disrupting oil output and crippling the economy of the Arab world's poorest country.
"CATASTROPHE BEYOND IMAGINATION"
Oil Minister Amir al-Aidarous told parliament political unrest and attacks on pipelines, including one on an oil export pipeline in Maarib province east of Sanaa, had hurt the flow of oil since mid-March and undermined investors' confidence.
"Several oil companies have quit the country and the refineries in the southwestern governorate of Aden came to a standstill a week ago," Saba quoted him as saying.
Foreign oil workers had left. Sabotage of pipelines and power lines had worsened energy shortages, he said.
"If the problem persists, the government will be unable to meet the minimum needs of the citizens. The situation will pose a catastrophe beyond imagination," Aidarous said.
Parliament decided to call a meeting with the cabinet to discuss the energy crisis and shortages of gas, diesel and gasoline as well as persistent power cuts, Saba reported.
It quoted Trade and Tourism Minister Hisham Sharaf as saying the protests, which began in late January, had cost the economy $5 billion (3 billion pounds), or about 17 percent of 2009 gross domestic product.
In the latest violence, armed tribesmen killed three soldiers in an attack on a military vehicle taking food to a checkpoint. The soldiers were from a unit under the command of General Ali Mohsen, who defected to protesters last month.
Some tribes have declared against Saleh. "We will stand with the opposition and support it until the regime leaves," Sheikh Bakil al-Sufi, leader of the Kholan tribe, told protesters in Sanaa. "Say it loudly: either victory or death."
International alarm has mounted over instability in Yemen, home to an ambitious wing of al Qaeda, whose leader has sworn vengeance for the killing by U.S. forces of Osama bin Laden.
"The United States is deeply concerned by recent violence throughout Yemen, and joins European Union High Representative (Catherine) Ashton in strongly condemning these troubling actions," State Department spokesman Mark Toner said.
Calling on all parties to sign the GCC deal for Saleh's departure, he said: "This transition must begin immediately."
France, which called for the agreement to be signed without delay, deplored "the excessive use of force against demonstrators" and urged Yemeni authorities to protect them.
(Additional reporting by Erika Solomon in Dubai and John Irish in Paris, writing by Alistair Lyon; editing by Andrew Dobbie)
