(Recasts, adds Somali opposition, British envoy)

By Louis Charbonneau

DJIBOUTI, June 2 (Reuters) - Somalia's government said it hoped for a peace agreement with the opposition at U.N. talks that began on Monday, but the opposition said the withdrawal of Ethiopian troops from Somalia would have to be settled first.

Somalia's Information Minister Ahmed Abdisalan said an agreement at U.N.-brokered talks in Djibouti would directly improve the security situation, despite the absence from the talks of al-Shabaab Islamist militants and some factions of the opposition Alliance for the Re-Liberation of Somalia (ARS).

"I believe that when the Somali government and the ARS group who are here agree on a cessation of hostilities that we can influence and have an impact on the ground," he told reporters after meeting with the U.N. Security Council.

At least 6,500 people were killed last year and more than a million Somalis displaced by fighting between Islamist insurgents and Ethiopian-backed government troops.

Hundreds of thousands have died of war, famine and disease since the collapse of a dictatorship brought anarchy in 1991. U.S. and other Western security officials fear al Qaeda could exploit Somalia's instability and lack of governance to create a safe haven there.

The Security Council came to encourage all sides in the U.N.-brokered talks taking place in neighbouring Djibouti in a bid to persuade Somalia's disparate factions to help bring peace to the lawless Horn of Africa nation.

The Security Council meetings are in Djibouti as near-daily attacks in Somalia make it too dangerous to meet there.

Diplomats from the 15-nation Security Council, on the first leg of a tour of African trouble spots such as Sudan, Chad and Ivory Coast, met Somali President Abdullahi Yusuf and other members of the interim government based in Somalia.

WITHDRAWAL TIMETABLE

Later they met with Sheikh Sharif Ahmed, the head of the Eritrea-based ARS and other members of the opposition alliance, which made it clear that a timetable for the withdrawal of Ethiopian troops fighting alongside Somali government forces would be key to any deal with the transitional government.

ARS vice chairman Abdulrahman Abdishkakur Warsame said this was a condition for face-to-face talks with the government.

"If addressed as a timetable and timeframe for Ethiopian withdrawal, we don't mind to sit with the other party" for face-to-face talks, he told reporters after the meeting.

Asked if the ARS would be willing to sign an agreement on the cessation of hostilities without settling the Ethiopian question first, Warsame said: "I don't think so."

President Yusuf told the council that Ethiopia's withdrawal would be "contingent on the deployment of the United Nations peacekeeping force and the cessation of hostilities."

The U.N. Security Council last month adopted a resolution that said the council would consider sending U.N. troops to replace African Union peacekeepers, known as AMISOM, but only if the political and security situation improved.

Despite the differences between the two sides, Britain's U.N. Ambassador John Sawers said he came away from Monday's meetings with a feeling that some progress was being made.

"The fact that the parties are here, the fact that they are staying at the same hotel, they're prepared to engage through the same mediator, I think this is a step forward from where we have been before," he told reporters. (Additional reporting by Abdi Sheik in Mogadishu; Writing by Louis Charbonneau and Jack Kimball; Editing by Ralph Boulton) (For full Reuters Africa coverage and to have your say on the top issues, visit: http://africa.reuters.com/)

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