REUTERS

SANAA: Yemen has been mired in political deadlock since a June bomb attack on its embattled leader, but tensions could boil over if President Ali Abdullah Saleh, currently convalescing in Saudi Arabia, fulfils his vow to return home. 
Mass protests demanding an end to Saleh's 33-year rule have dragged into their seventh month. As clashes between opposition groups and Yemeni forces loyal to the president continue, many warn that the impoverished Arabian Peninsula state may soon be plunged into a broader armed conflict. 

In the volatile southern province of Abyan, Islamist militants have seized several cities as the army struggles to regain control against gunmen they say are linked to al Qaeda. 
Some 90,000 people have fled the bloodshed, seeking refuge in the nearby strategic port city Aden, which has seen a handful of militant attacks on army checkpoints in recent months. 

The United States and Saudi Arabia, both targets of foiled attacks by al Qaeda's Yemen-based wing, fear the rising turmoil gives room to the militant group to operate. They have continued to push for the signing of a Gulf-brokered transition plan, even though Saleh backed out of signing it three times. 
But continued mayhem in Yemen, on the doorstep of oil giant Saudi Arabia and sitting along a vital shipping strait, raises risks for world oil supplies. 

FRUSTRATED OPPOSITION 
When Saleh was whisked away to Riyadh for eight surgeries after the June assassination attempt, tens of thousands of Yemeni protesters celebrated what they thought was the end of the 69-year-old leader's dominance of the country. 

But several television appearances of a bandaged, but healing Saleh vowing to return to lead a national dialogue and early elections has infuriated his political opposition and street protesters anew. They argue Saleh is stalling in order to cling to power until he can either weaken their fragile alliance against him or place his son at the helm. 
Seeking to thrust change upon Saleh's family and his government, opposition groups have announced two different transitional government councils. But the competing groups hint that the fragmented opposition may yet crumble against the wily political survivor Saleh. 

Protesters have vowed to escalate their protests in recent days, a move which has raised anxieties in the capital Sanaa where both government troops and defected army units are heavily armed. After a period of relative calm when Saleh left for Riyadh, the fighting is becoming more frequent. 

Top general Ali Mohsen, who defected to protesters earlier this year, warned in a television appearance that his troops could play a similar role to the armed Libyan rebels who have overthrown Muammar Gaddafi. 

Deteriorating security across the country has prompted several embassies to close or withdraw diplomats. 
Demonstrations, led by students and activists and fuelled in part by soaring unemployment, have remained large despite increasing frustration with the movement's stalled progress, drawing in Islamists, southern separatists, tribal groups and mainstream political opposition parties. 

Saleh has long used patronage to keep the support of tribal and military forces, but his grip has slipped as some key backers defect to protesters, oil resources dwindle and foreign donors shun him. 
Central government control, never very strong, is now absent or contested in many parts of Yemen.  

WHAT TO WATCH: 
- Any sign Saleh is imminently returning to Yemen 
- Rise in clashes around the capital 
- Further U.S. and Saudi pressure on Saleh to quit 
- More hints of taking up arms by opposition, government 

AL QAEDA AND ISLAMIST MILITANCY 
Washington and ally Riyadh had seen Saleh as an important, if inconstant, partner in counter-terrorism efforts against Al Qaeda in the Arabian Peninsula (AQAP), the most active and dynamic franchise of the global militant network. 

Opponents of Saleh say he has turned U.S.-funded counter-terrorism units against protesters. They accuse him of letting his forces ease their grip around militant strongholds to spark fear among the international community that only his rule can stop a militant takeover.  AQAP, which has scant appeal for most Yemenis, has barely featured in the protests, but has sought to exploit the unrest. 

Despite a fierce offensive launched by the army two months ago to try and recapture militant-controlled parts of Abyan, security forces have lost more ground when militants took a third city in August. 
Militants now hold Shaqra, Jaar and Zinjibar, the capital of Abyan, which lies east of a strategic shipping lane where some 3 million barrels of oil pass daily. 
The army has reported killing dozens of al Qaeda operatives, including senior members, but has rarely released numbers of its own dead. 

There have been several reports of U.S. drone strikes on suspected AQAP strongholds in Yemen in recent months. These raids have angered local civilians who say they suffer the most from them. Some analysts argue that drones have driven many locals into the arms of AQAP. 

Apart from its attempts to bomb U.S .-bound airliners, AQAP has vowed to bleed U.S. resources with small, cheap attacks that force the West to spend billions of dollars to guard against. 

WHAT TO WATCH: 
- Increasing clashes in Abyan, more seized territory 
- More AQAP moves to fill gaps left by central authority 
- Any AQAP retaliation for Osama bin Laden's killing in Pakistan this year 
- Rising humanitarian crisis as refugees flee Abyan 

SOUTHERN AND NORTHERN REVOLTS 
The protests against Saleh have for now eclipsed earlier challenges to his rule by northern Muslim Shi'ite rebels and southern secessionists, who share the goal of toppling Saleh. 

Their grievances, however, will pose a challenge for any post-Saleh government and failure to deal with them equitably could lead to further violence and instability. 

North and South Yemen formally united under Saleh's leadership in 1990. But many southerners complain northerners have discriminated against them and usurped their resources -- most of Yemen's fast-declining oil reserves are in the south. 

In the north, a ceasefire with the Shi'ite rebels has mostly held since February 2010 but they have joined the opposition protests against Saleh. More recently, they have had sporadic clashes with the Sunni Islamist party Islah in fighting that killed dozens.  

WHAT TO WATCH: 
- Further territorial fragmentation during current turmoil 
- Saleh, opponents attempts to woo north and south rebels 

DECLINING ECONOMY, RESOURCE CRUNCH 
Prolonged turmoil has crippled the economy of the Arab world's poorest country. Officials say unrest amid months of protest has cost Yemen $4 billion this year, and it still needs $1.5 billion in foreign aid to meet development commitments. 

Even before protests, a third of Yemen's 23 million suffered chronic hunger and 40 percent lived on less than $2 a day. In a country where jobs are scarce and corruption thrives, four in 10 Yemenis are unemployed and a youth bulge is growing.

The country also faces an imminent water crisis -- Sanaa is expected to be the first capital to run dry, in around a decade. Currently, it is grappling with a severe fuel shortage crisis due to recent unrest. 

Tribesmen in March cut Yemen's main pipeline in Maarib province, halting all crude exports and domestically triggering severe shortages in cooking gas and gasoline. 
Despite restarting the pipeline last month, shortages in Yemen are still problematic. Clashes at filling stations are frequent, and several have died in gunfights over fuel. 

Aside from the impact of unrest on Yemen's energy sector, crude output is declining steadily to 298,000 barrels per day in 2009, from a peak of 457,000 bpd in 2002, according to BP.