* Hizbul Islam gives one hostage to al Shabaab

* Gov't says rebels demand ransom

* Analyst sees Frenchmen as bargaining chip

(Adds foreign minister comment)

By Abdiaziz Hassan and Abdi Sheikh

NAIROBI, July 16 (Reuters) - A Somali Islamist group has handed one of two French hostages over to al Qaeda-linked al Shabaab militants, and captors have begun negotiating for a ransom, senior officials and rebels said on Thursday.

A faction in President Sheikh Sharif Ahmed's security forces seized the two on Tuesday, then handed them to Hizbul Islam rebels. But al Shabaab -- which is also fighting the government -- demanded that Hizbul Islam give the Frenchmen to them.

"We shared the two men to avoid clashes between Islamists," an al Shabaab official told Reuters by telephone.

Foreign Minister Mohamed Abdullahi Omaar told Reuters in an interview that the government had received a ransom demand for the French security officials, but would not say how much.

"This incident is purely for monetary purposes. They have demanded a ransom ... Figures are just under discussion. You would understand that it is an issue that I cannot comment on."

Omaar did not give any more details about the negotiations or the ransom, but said that he did not expect talks to be more thorny due to the captives' separation.

"I do believe there is a common position between Hizbul Islam and al Shabaab, and they have a common purpose and line of thinking. I do not think it will present two separate and complicated issues."

Rebel officials were not immediately available to comment.

Senior police officer Abdiqadir Odweyne said the higher ranking Frenchmen was handed over to al Shabaab. Prime Minister Omar Abdirashid Ali Sharmarke said that Hizbul Islam would be held responsible for that man.

Western security services view al Shabaab as a proxy for Osama bin Laden's al Qaeda network in the failed Horn of Africa state, which has been mired in conflict since 1991.

BARGAINING CHIPS

A Somali government official and some media had said the two Frenchmen were posing as journalists. Paris has denied that, saying they were on official government business.

A Brussels-based journalist safety body expressed dismay over those reports, joining other media rights groups saying that such ruses put reporters at risk [ID:nLG237309].

Mogadishu is one of the world's most dangerous cities and has a history of kidnappings of foreigners, mainly aid workers and journalists. Hostages have normally been released after days or weeks in captivity for substantial ransom payments.

A Somali analyst said the French government may secure the release of its men if it adopts a soft approach and is willing to part with a ransom big enough to keep financing the war.

"The Shabaab are not thinking about killing, they may have other options," independent analyst Hassan Hundubey said.

"They may demand the release of one of their leaders in Guantanamo or demand a ransom, since they want to run this war indefinitely. His life is more important than a beheading."

Hundubey said a Somali linked to the Islamists was being held at the U.S. military prison in Guantanamo for working with al Qaeda. "They killed the Somalis because they were sending a message to other Somalis who might want to cooperate with western security agencies or the government," Hundubey said. (Additional reporting by Ibrahim Mohamed in Hargeisa; Writing by Helen Nyambura-Mwaura; Editing by Jack Kimball and Matthew Jones)

AlertNet news is provided by