By Mohamed Sudam and Mohammed Ghobari

SANAA (Reuters) – Yemeni forces loyal to President Ali Abdullah Saleh fired at a protest march in Sanaa on Sunday, wounding at least 22 people, doctors said, as opposition leaders met Gulf Arab mediators in Saudi Arabia.
Doctors said around 200 more demonstrators were overcome by tear gas during the clashes when they marched outside their normal protest zone in the streets near Sanaa University, a hub of pro-democracy demonstrations that have lasted three months.

"We neared the Sanaa Trade Center when police confronted us with tear gas, and suddenly opened heavy gunfire on us from all directions," said Sabry Mohammed, a protester.

"A state of terror set in among the demonstrators, and some of them fled into side streets."
Both Western and Gulf Arab allies have tried without success so far to broker a resolution to a crisis over a transition of power from Saleh, who has led the Arabian Peninsula state for 32 years and says he wants a handover, but only to "safe hands."

Saudi and Western allies of Yemen fear a prolonged standoff could ignite clashes between rival military units and cause chaos that would benefit an active al Qaeda wing operating in the poor, mountainous country.
Hundreds of security forces deployed across the area near where the clashes took place on Algeria Street in Sanaa, roughly 2 km (1.2 miles) outside the normal protest zone. Some were on foot while others were in armored vehicles.

The wounded were rushed to hospital by ambulance and private car, and tear gas canisters littered the road. A protest official told anti-Saleh crowds over a loudspeaker dozens of protesters had been arrested by a nearby mosque.
A military source, however, denied either republican guard or central security forces had fired on protesters, either with bullets or tear gas.

Clashes also were reported to have taken place in Dhamar, just south of the capital.
A political survivor who has described governing Yemen as akin to "dancing on the heads of snakes," Saleh has warned of civil war and the break-up of the country if he is forced out.
More than 116 protesters have been killed in clashes with security forces since late January.

SAUDI MEETING

Gulf Arab states stepped in this month with an offer to mediate after Western-brokered talks stalled, and an opposition delegation met Gulf foreign ministers in Riyadh to lay out conditions for entering formal talks.
The opposition delegation, led by former foreign minister Mohammed Basindwa, rejected a Gulf framework for talks last week, saying it wanted Saleh out within two weeks and the Gulf plan did not include a quick or clear transition timetable.

The Riyadh meeting did not appear to produce any major breakthroughs, but Saleh's opponents did agree to continue talks with the Gulf states, a GCC statement said. The Gulf ministers would also meet separately with Saleh's representatives.
Basindwa said the opposition had agreed to meet in Riyadh at the invitation of Saudi Foreign Minister Prince Saud al-Faisal on condition no Saleh representatives would be included.

The opposition said Saleh stepping down was not negotiable, but other sensitive matters like granting him immunity from prosecution would not prove stumbling blocks to a deal.
"We are not after taking the president to trial. This issue is not on the table. The president will ask for guarantees ... and the GCC will identify the nature of the guarantees necessary for the president to step down," said Sultan al-Atwani, a member of the opposition delegation.

"We want him to step down. If he wants to remain in Yemen, let it be, and if he wants to leave, let it be."
Saleh had welcomed the Gulf plan, which appeared to promise him immunity from prosecution. Saleh accepted the Gulf talks framework the next day.

After initially offering to leave after his current term ends in 2013, Saleh subsequently said he would step down after holding elections, possibly this year.

Even before the start of the protests, inspired by the toppling of the Tunisian and Egyptian presidents, Saleh was struggling to quell a separatist rebellion in the south and cement a truce with Shi'ite Muslim rebels in the north.
(Additional reporting by Asma Alsharif in Riyadh; Writing by Reed Stevenson and Cynthia Johnston; Editing by Elizabeth Fullerton)