(Adds Reporters Without Borders)

By Guled Mohamed

MOGADISHU, Oct 25 (Reuters) - Increasingly assertive Somali Islamists are stopping fuel shipments reaching Baidoa, dealers and officials said on Wednesday, cutting off supplies to the weakened government's base in the city.

Tensions are fast rising in the Horn of Africa nation between the Islamists and the Western-backed government as the religious movement extends its authority across southern Somalia, effectively flanking the administration on three sides.

Under Islamist control, Mogadishu is the main hub from where fuel brought in by businessmen from the Gulf States is then transported to other southern towns such as Baidoa.

One fuel dealer said his truck was stopped overnight in Buur Hakaba, a strategic town the Islamists retook on Monday after government troops chased away their allies over the weekend.

"This is an economic embargo by the Islamists aimed at crippling the interim government," Abdi Ahmed told Reuters by telephone from Buur Hakaba, where his truck was still being held. "This will have a major impact on Baidoa."

Buur Hakaba is only 30 km (18 miles) from the government's sole outpost, Baidoa.

Ahmed said the Islamists were only stopping trucks carrying fuel and had let through those carrying food and passengers. An Islamist source in Buur Hakaba who declined to be named confirmed the move.

Somali Deputy Defence Minister Salad Ali Jelle in Baidoa said those worst affected by the Islamists' move were civilians: "We have enough supply of fuel. We had planned in advance and knew they would resort to such acts."

Many fear the standoff between the Islamists and government troops witnesses say are backed by Ethiopian soldiers could erupt into a region-wide war, sucking in Addis Ababa and its rival Eritrea -- which denies charges of aiding the Islamists.

JIHAD IN 'SELF-DEFENCE'

On Wednesday, Islamist leader Sheikh Sharif Ahmed said Ethiopian Prime Minister Meles Zenawi's admission that military trainers were in Somalia was a vindication of Islamist accusations previously denied by Addis Ababa.

"He has admitted his troops are in Somalia which shows that they were all along inside our country. He is responsible for the troubles in Somalia," Ahmed told Reuters.

Meles told Reuters on Tuesday his country, Somalia's traditional rival, was technically at war with the Islamists and confirmed a few hundred trainers were there.

Ahmed said the Islamists had only declared holy war against Ethiopia to get the soldiers out, not to attack Ethiopia. Addis Ababa says the Islamists are led by terrorists and have designs on invading Ethiopia's ethnically Somali Ogaden region.

"We are not at war with Ethiopia. Our declaration of jihad was purely for self-defence purposes only and not an attack on their territory," Ahmed said. "We will not fire a single bullet at them if they go back to their border."

Reports that Ethiopians had helped briefly seize Buur Hakaba in early October prompted Ahmed to call for jihad. The Islamists blame Ethiopia for propping up the fractious government.

Ethiopia says it is merely defending its own security and following the mandate of regional body IGAD, which shepherded the peace process that produced the government, to help it establish authority in a country that has defied since 1991.

This government is the 14th attempt at establishing central rule since dictator Mohamed Siad Barre was ousted that year.

International press freedom group Reporters Without Borders on Wednesday called for the immediate release of three journalists arrested by militia loyal to the government after they filmed Ethiopian soldiers in Somalia.

Quoting a political source, it said the three were caught in possession of a digital camera containing footage of the body of an Ethiopian soldier of Somali origin killed in Buur Hakaba. (Additional reporting by Hassan Yare and Sahal Abdulle in Mogadishu)

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