By Tim Cocks and David Lewis
ABIDJAN (Reuters) - Former South African leader Thabo Mbeki failed on Monday to settle an election row between Ivory Coast's presidential claimant Alassane Ouattara and incumbent Laurent Gbagbo, but appealed to both for a peaceful solution.
Mbeki had hoped to defuse a power struggle enveloping the country since an election which the electoral commission and international observers say Ouattara won -- a decision reversed by the Constitutional Council, backed by the armed forces chief.
Gbagbo refused to concede defeat after the election commission said the November 28 poll, meant to reunite the region's former economic powerhouse after a 2002-03 civil war, had been won by Ouattara with 54.1 percent of the vote.
Analysts warned the dispute could now pit the army against pro-Ouattara rebels, who told Reuters they would defend themselves against any attack, or even divide the army itself.
"The African Union is very keen that peace can be sustained and every effort should be made to ensure this transition to democracy succeeds," Mbeki told journalists at Gbagbo's house before leaving, adding he would file a report to the union.
"Cote D'Ivoire (Ivory Coast) needs peace and needs democracy ... We indeed hope that the leadership of this country will do all that it can to ensure peace is maintained."
The United Nations is temporarily moving 460 non-essential staff from its mission in Ivory Coast out of the country because of security concerns, a spokesman in New York said.
Ouattara's team at the Golf Hotel, where he is holed up under U.N. protection, held its first 'council of ministers'.
"Everything except the departure of the old president is on the table for negotiation," said Patrick Achi, Ouattara's spokesman, adding that he thought the crisis could be resolved internally, rather than through international sanctions.
Small groups of Ouattara supporters burned tires and blocked roads in Abidjan on Monday as police in riot gear patrolled the streets. There were no reports of violence. At least 10 people were killed in clashes in the previous two weeks.
The military extended a curfew for an extra week, until Sunday, but relaxed the hours to 10 p.m. to 5 a.m.
The political deadlock gripped the world's top cocoa grower after the Constitutional Council -- run by a Gbagbo ally -- scrapped hundreds of thousands of votes from Ouattara strongholds, reversing provisional results giving him victory.
President Barack Obama has backed Ouattara, leading calls from the United Nations, France, the European Union, the African Union and West African bloc ECOWAS on Gbagbo to accept the election commission ruling. ECOWAS leaders are due to hold an emergency summit on Ivory Coast on Tuesday.
REBELS ON ALERT
Gbagbo has scorned the international rejection as an affront to Ivorian sovereignty and has threatened to expel the U.N. Ivory Coast envoy for interference in internal affairs.
Citing a "breakdown of governance," the World Bank and the African Development Bank said they would reassess aid.
Ouattara has named Gbagbo's former finance minister, Charles Koffi Dibby, to his cabinet, 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.
The World Bank tied $3 billion of external debt, estimated to total $12.5 billion, to smooth elections. But Gbagbo's hand on the economy is strengthened by cocoa and oil revenues.
Benchmark ICE cocoa futures traded at a four-month high of $3,028 a metric ton on Monday on fears of supply disruptions.
Despite the stand-off, Ivory Coast reopened its borders on Monday that had been sealed during a tense wait for results.
The army chief of staff has sworn allegiance to Gbagbo and troops appear to be on his side. Ouattara has the open support of the New Forces rebels occupying the north.
"We've put our troops on alert," New Forces spokesman Seydou Ouattara told Reuters. "If we are attacked we will defend our zones and we will take the rest of the Ivorian territory."
Gbagbo has been in power for a decade but faces isolation, though diplomats said Russia, whose Lukoil is exploring for oil in Ivory Coast, has blocked U.N. Security Council efforts to back Ouattara.
The crisis in what was once West Africa's brightest star has forced up the yield on the country's $2.3 billion Eurobond to 11.67 percent, from below 10 percent before polls.
(Additional reporting by Lesley Wroughton in Washington, Loucouamen Coulibaly in Abidjan, Ange Aboa in Bouake, Peroshni Govender in Johannesburg, David Brough in London; Writing by Richard Valdmanis and Mark John; editing by Tim Pearce)