* Largest number of killings by rebels at one time

* Government blames rebellion on foreign fighters, money

* U.N. rights head says al Shabaab uses bombs, human shields

(Adds victim's wife, Somali statement, details)

MOGADISHU, July 10 (Reuters) - Somalia's hardline Islamist rebels beheaded seven people on Friday for being "Christians" and "spies" in the latest imposition of strict sharia, Islamic law, by the al Qaeda-linked al Shabaab group, witnesses said.

Al Shabaab, which controls large tracts of south Somalia and parts of the capital Mogadishu, has carried out such executions before, but the beheadings on Friday were believed to be the largest number of killings at one time, Somalis say.

"Al Shabaab told us that they were beheaded for reasons they described as being Christian followers and spies," said one relative, who gave his name only as Aden, after the killings in the south-central town of Baidoa.

The group, which western security services say is a proxy for al Qaeda in Somalia, beheaded three people in the same region last month.

Al Shabaab, which means "Youth" in Arabic, has vowed to rule the majority Muslim nation by a hardline interpretation of Islamic law. The group has dug up Sufi graves, forced women to wear veils, closed down movie halls and cut off limbs for theft.

"My husband was missing up to 20 days. Al Shabaab confirmed to us that he and six others were beheaded. We are waiting for his dead body," said Maryan, the wife of one of the victims.

Somalia's government has been unable to beat back al Shabaab militants who are making guerrilla-style attacks on Somali troops and an African Union (AU) force there.

FOREIGN WAR

The government says the insurgency is being led by foreign fighters in al Shabaab's ranks. The United Nations and the AU say hundreds of jihadists have flocked to Somalia to battle the government led by ex-rebel leader Sheikh Sharif Ahmed.

"The current war is a foreign war led and supported by outside forces. The money and ideologies are foreign-based. Somalis all support the government," Somali Foreign Minister Mohamed Abdullahi Omaar told reporters in the Ethiopian capital.

"This is not a war between Somali clans. It is a war against foreign forces who come into the country to overthrow the government that has been elected constitutionally by the Somali people and supported by the international community."

On Thursday, the U.N. Security Council warned Eritrea that it would consider action against anyone undermining peace prospects in Somalia, which has been devastated by civil conflict since 1991 [ID:nN09472865].

Asmara has repeatedly denied claims that the Red Sea state was providing support to insurgents battling the western-backed government, also supported by Eritrea's arch-enemy Ethiopia.

The AU, which has 4,300 peacekeepers in the Somali capital, has called for sanctions against Asmara.

Ethiopian tanks and troops crushed an Islamist movement in Somalia in late 2006, but since then a revived insurgency has killed 18,000 civilians and displaced hundreds of thousands.

U.N. human rights chief Navi Pillay accused al Shabaab on Friday of extrajudicial killings, setting off bombs in residential areas and using civilians as human shields in their fight against Ahmed's administration. [ID:nLA443362]

The insurgents say they are nationalists seeking to rid Somalia of a western-imposed government which has no popular support. (Additional reporting by Tsegaye Tadesse in Addis Ababa and Stephanie Nebehay in Geneva; writing by Jack Kimball; editing by Tim Pearce)

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