(Adds Ethiopia comment, paragraph 11)

By Jack Kimball

ASMARA, Sept 6 (Reuters) - Militant Somali Islamist leader Sheikh Hassan Dahir Aweys, in hiding since a war drove his sharia courts movement out of south Somalia at the end of 2006, appeared on Thursday at an opposition conference in Eritrea.

The bespectacled cleric, who some believe is behind an anti-government insurgency in Mogadishu, sat in a grey suit at the front at the opening of the meeting of Somali opposition figures in a conference hall in Asmara.

As the talks began with Koranic prayers, Aweys -- who is on U.S. and U.N. lists of al Qaeda suspects -- was flanked by another Islamist leader, Sheikh Sharif Ahmed, the former Somali parliamentary speaker and Somalia's former interior minister.

Ahmed called on Washington to engage with the Somali opposition, and rejected charges of terrorism he said had been fabricated by Ethiopia.

"There were a lot of accusations thrown at us, false accusations designed to implement a half-finished project, which was to invade Somalia," Ahmed said.

"We call upon the United States to play a more positive role in the Somali conflict ... U.S. foreign policy towards Somalia has been a strangely confrontational one."

Some 300 guests, including representatives of the United Nations, France, Israel and the European Commission, were present at the start of the meeting in Asmara, where many Somali Islamists and opposition leaders have been based recently.

Aweys, seen as more hardline than Ahmed, did not speak.

A U.N. report last year accused the 72-year-old of running militant training camps and of receiving weapons from Eritrea, which was hoping to frustrate its arch-foe Ethiopia.

JIHADISTS "DELIGHTED"

Ethiopia supports Somalia's interim government, which held its own peace conference that ended last week.

In Addis Ababa, senior official Bereket Simon accused Eritrea of supporting "terrorists bent on fomenting the destabilisation of the Horn (of Africa)". Asmara denies the charges.

Experts said Aweys' appearance in Asmara was significant.

"The jihadists will be delighted to see him there," said one Somali analyst who asked not to be named.

"These two conferences seem to be polarising the situation, making it worse, rather than bringing people together."

Aweys, whose beard is coloured orange with henna like many Somali elders, is one of Somalia's survivors. He was a colonel in the army of former dictator Mohamed Siad Barre and was decorated for bravery in a war against Ethiopia in 1977.

By the 1990s, he was leading Somalia's biggest militant Islamist group, al-Ittihad al-Islami. But he was defeated by Ethiopian forces and Somalia warlords backed by Addis Ababa, among them Somalia's current interim president, Abdullahi Yusuf.

Aweys' fighters seized Mogadishu and much of the south last year, and the remnants of his movement are now blamed for an Iraq-style insurgency targeting government and Ethiopian forces, mostly with roadside bombs. He denies links to terrorism.

U.S. officials in the region had no immediate comment on the re-emergence of Aweys, who is thought to have spent most of this year hiding in remote southern Somalia, near the Kenyan border.

Somalia's government lashed out at Eritrea for hosting the talks, accusing it of meddling in Somali affairs, while former interior minister Hussein Aideed said he remained sceptical.

"This meeting honestly is not a meeting of Somali angels" the ex-warlord said. "I hope we're not here to rubber-stamp someone's, or some of the groups' present selfish power interests." (Additional reporting by Andrew Cawthorne in Nairobi, Aweys Yusuf in Mogadishu and Tsegaye Tadesse in Addis Ababa)

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