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MOGADISHU, July 28 (Reuters) - Hardline Somali Islamist Sheikh Hassan Dahir Aweys said on Monday the exiled opposition would not negotiate with a rival faction that signed a peace deal with Somalia's transitional government.

Splits in the Eritrea-based Alliance for the Re-Liberation of Somalia (ARS) could further complicate peace prospects in the Horn of Africa nation, which has suffered 17 years of civil war that has killed hundreds of thousands.

"Reconciliation would be good, but we and the Djibouti group have reached a point of no return," said Aweys, who is on U.S. and U.N. lists of al Qaeda associates.

"It's obvious they will not come back and join us," he told Reuters from the Eritrean capital Asmara.

A faction led by moderate Sheikh Sharif Ahmed signed a pact in Djibouti with the interim government in June, outlining the withdrawal of Ethiopian troops and the deployment of U.N. peacekeepers. The formal signing is to take place in Mecca.

But Aweys, some other ARS officials and insurgents in Somalia have rejected the deal.

Aweys said last week that he had taken charge of the exiled opposition, but U.N. envoy for Somalia Ahmedou Ould-Abdallah dismissed Aweys' announcement and said Sheikh Sharif remained the recognised leader.

Rebels have been battling Ethiopian and Somali government troops since early 2007 after Addis Ababa sent thousands of soldiers to help Somalia's administration oust the Islamic Courts movement led by Aweys and Ahmed.

Since then, near-daily violence of roadside bombs, mortar attacks and assassinations have wrecked the Somali capital. In the latest violence, mortars killed five people in northern Mogadishu in overnight clashes.

Insecurity and attacks in southern Somalia have forced many aid groups to scale down or halt humanitarian operations for one of the world's worst emergencies.

At least 2.6 million Somalis were in need of emergency aid at the start of this year, according to the United Nations. An estimated 1 million more will need assistance by the end of 2008, it warned this month.

In the breakaway state of Somaliland, which enjoys relative peace compared to the rest of Somalia, Agriculture Minister Aden Ahmed Elmi said more than 750,000 people were now in need of food aid.

"The soaring prices of essential food items, drought, the scarcity of rain and insects that destroyed what was sown are the reasons why we appeal to the international community for food aid," he told journalists on Sunday. Elmi said Somaliland expected less than 70 percent of the usual annual harvest. (For full Reuters Africa coverage and to have your say on the top issues, visit: http://africa.reuters.com/)

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