By Daniel Wallis

ADDIS ABABA, Jan 30 (Reuters) - Kenya's bloody turmoil will dominate an African summit in Ethiopia this week, underlining how quickly the neighbouring nation has gone from apparently stable regional anchor to the continent's most urgent crisis.

Summits of the 53-nation African Union have been regularly dominated by Darfur, Somalia and other chronic conflicts, with Kenya seen as a stable peacemaker rather than cause for concern.

All that changed a little over a month ago after a disputed election on Dec. 27 unleashed a cycle of political and ethnic violence that has killed 850 people and threatens to spiral out of control.

Regional power South Africa says Kenya's crisis could be disastrous for the whole continent.

Top U.S. Africa diplomat, Jendayi Frazer, in Addis Ababa for the summit, said on Wednesday ethnic cleansing was taking place in the Rift Valley. She warned of an imposed international solution if Kenyan politicians could not end the violence.

Rwanda's president, Paul Kagame, suggested Kenya may have to call in the army to stop the bloodshed.

The crisis has also exposed the limits of the AU's own influence -- an early peace mission by the organisation's chairman, John Kufuor of Ghana, failed.

So far, heavy pressure by Western powers and mediation by former U.N. boss Kofi Annan have failed to stop the bloodshed.

Kufuor handed the baton to a panel of "Eminent Africans" led Annan, which is making slow progress in pushing negotiations between President Mwai Kibaki and opposition leader Raila Odinga, who says the election was stolen.

Discussions at the three-day summit starting on Thursday are likely to be stormy.

Odinga, who says the country is drifting into anarchy, has called on African leaders not to recognise Kibaki, who has so far only been accepted by a small string of nations.

Kenyan Foreign Minister Moses Wetangula told Reuters on Tuesday the AU would not let Odinga's Orange Democratic Movement send officials to the meeting. The AU declined to comment.

BAD YEAR FOR AFRICA

The summit comes at a bad time for Africa.

The AU faces a crippling lack of resources for its peacekeepers in hot-spots like Somalia while Kenya's slide into chaos began months after badly flawed elections in Nigeria.

In Sudan's Darfur, a small AU peacekeeping unit failed for years to stop the bloodshed and a new 26,000-strong joint force with the U.N. is not expected to deploy until late 2008.

On the doorstep of AU headquarters in Addis Ababa, rising border tensions between Ethiopia and Eritrea also cause concern.

Another subject for debate at the summit will be who assumes the AU's rotating chair after Ghana.

A year ago in Addis, African leaders rejected Sudan in favour of Accra because of continuing violence in Darfur.

This year, Sudan has abandoned its candidacy and endorsed Tanzania. Egypt and Zambia have also been mentioned.

The theme of the summit, expected to attract 40 heads of state, is industrial development.

But top of the agenda behind closed doors is sure to be the Kenyan crisis, which has deepened in recent days with fresh tribal killings in western towns and the capital Nairobi.

Although outside intervention has failed to bear fruit in Kenya, analysts say they already dwarf attempts to resolve turmoil elsewhere on the world's poorest continent, reflecting concern over losing a stable hub for trade and tourism.

"If the crisis in the Democratic Republic of Congo had received half the attention that Kenya has attracted ... two million Congolese lives might have been saved," says New York-based Kenyan historian Ali Mazrui. (Additional reporting by Tsegaye Tadesse and Barry Malone; Editing by Barry Moody)

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