By Daniel Wallis

NAIROBI, Jan 5 (Reuters) - Washington's top diplomat for Africa hopes to meet both sides in Kenya's political crisis on Saturday to seek an end to ethnic unrest that has killed more than 300 and shattered the country's peaceful image.

U.S. Assistant Secretary of State Jendayi Frazer arrived in Nairobi overnight in the latest attempt at mediation by world powers horrified by the turmoil in what was seen as one of the continent's most stable democracies.

"I'm here to talk to people, we'll see," Frazer told Reuters at the airport when asked how she saw the situation.

Opposition protests subsided on Friday and the government said it would accept a re-run of the Dec. 27 polls, if a court ordered it. The opposition say President Mwai Kibaki's team rigged his re-election to lead east Africa's biggest economy.

The disputed result triggered a wave of riots and tribal violence that the United Nations says has displaced 250,000 people -- far more than previously feared.

U.N. officials were scrambling on Saturday to get food to 100,000 terrified people facing starvation after fleeing violence in the west of the country that included the burning to death of 30 people barricaded in a church.

The World Bank has warned the unrest could hurt Kenya's impressive economic gains and harm neighbouring countries that rely on it as the region's business and transport hub.

Uganda, Rwanda and Burundi are suffering fuel shortages. The U.N. World Food Programme says its main problem in getting food to the displaced has been moving trucks to western Kenya.

Given Kenya's reputation as a beacon of stability in a volatile region, Frazer is more used to visiting east Africa to mediate in persistent trouble spots like Somalia or Sudan.

A U.S. State Department spokesman said she hoped to meet both Kibaki and opposition leader Raila Odinga -- who was due to visit supporters in his party's western heartland on Saturday.

"NEW VOTE?"

International observers say last week's election fell short of key democratic standards, especially the counting process.

The State Department spokesman said talks about a new vote were part of "different suggestions that are being generated by the Kenyan political system, and that's as it should be."

But the opposition says the odds of winning such a court order are against it. It says Kenya's judiciary is loaded with Kibaki loyalists and that the legal appeals could take years.

Odinga's Orange Democratic Movement is insisting Kibaki step down, an internationally recognised body mediate and a "transitional arrangement" -- not government -- be set up prior to a new vote within three months.

Both sides have traded allegations of genocide and ethnic cleansing, and the violence has dented the country's image.

"Kenya's leaders need to know the seriousness with which the international community views the situation," British Foreign Secretary David Miliband said in a statement.

South African Nobel peace laureate Desmond Tutu, who has met both sides to explore common ground, said on Friday that Kibaki was open to the idea of forming a coalition government.

But Ghana's President John Kufuor, chairman of the African Union, has shelved plans to visit the country for talks because the authorities in Nairobi did not give him clearance. (Additional reporting by Andrew Cawthorne, Nicolo Gnecchi, Katie Nguyen, Wangui Kanina, Helen Nyambura-Mwaura, George Obulutsa, Joseph Sudah, Duncan Miriri, Bryson Hull; Dan Wilchins in New York; editing by Richard Williams)

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