* Ousted Zelaya insists Sunday's election is illegal

* Zelaya says U.S. changing position on the vote

By Mica Rosenberg

TEGUCIGALPA, Nov 24 (Reuters) - Ousted Honduran President Manuel Zelaya said on Tuesday it could divide the Americas and set a dangerous precedent if the United States decides to throw its support behind a presidential election on Sunday.

Honduras has been mired in crisis since soldiers toppled Zelaya on June 28 after he irked conservatives in his party. Congress installed Roberto Micheletti as de facto leader but most of the world has condemned the coup and refused to recognize the caretaker government.

While Washington has not given an official position on whether it will recognize the vote, many U.S. analysts and diplomats say a clean election could be a way to break the deadlock and ease Honduras out of its four-month crisis. Neither Zelaya nor Micheletti is a candidate.

The U.S. State Department said this week it saw the election as an "essential part" of the solution to the crisis.

President Barack Obama's handling of the crisis is under the spotlight given lingering resentment of U.S. foreign policy in Latin America during the Cold War, when Washington sometimes backed military dictators over democracy.

Zelaya said the sense he got was that Washington was focusing on the election as a way out of the crisis. He said it would be undemocratic if the United States ended up backing the result of an election held by a post-coup government.

"The United States changed its position. Its priority was the restoration of democracy and then elections, now they put elections as the priority," Zelaya told Reuters in a phone interview from inside the Brazilian Embassy where he has taken refuge since sneaking back from exile in September.

"The U.S. position ... has divided the Americas and is creating a grave precedent," Zelaya said.

Several Latin American nations say they will not recognize the result of the election, but Micheletti told Reuters on Monday he was confident the United States would do so. [nN23198107]

The United States pushed hard for a resolution deal based around a power-sharing government, but the accord collapsed in early November over the thorny issue of whether Zelaya could be restored to serve out the last few weeks of his term.

ZELAYA ROLE COULD FADE

Addressing the Organization of American States, which is refusing to send in international observers, U.S. Assistant Secretary of State for Western Hemisphere Affairs Arturo Valenzuela noted this week the election had been scheduled well before the coup and would allow Hondurans a say in their future.

Zelaya said it was illegitimate to hold an election when he and his supporters were being repressed. "The United States has started to support the de facto regime," he said.

Early on, Washington was insistent Zelaya had to be brought back to finish his term, but attempts to force that have failed and Zelaya said recently he no longer wanted to be restored.

With Sunday's vote approaching, Washington has suggested its recognition of the result is not contingent on Zelaya's temporary return. The Honduran Congress is to vote after the election on whether he can be brought back until his term ends on Jan. 27.

Favored to win the election is Porfirio "Pepe" Lobo, a powerful landowner from the opposition National Party. Zelaya called Lobo "a close friend" but said he could not endorse a leader brought to power in an illegitimate process.

Zelaya angered business leaders in power by cozying up to socialist Venezuelan President Hugo Chavez.

Lobo and his closet competitor in the race, Elvin Santos, from Zelaya and Micheletti's Liberal party, are keeping quiet on how they plan to handle the ousted leader's fate. (Additional reporting by Tomas Sarmiento and Deborah Charles in Washington; Editing by Catherine Bremer and Peter Cooney) ((For possible scenarios, click on: [ID:nN23252618])) ((mica.rosenberg@thomsonreuters.com; +52 55 5282 7153; Reuters Messaging: mica.rosenberg.reuters.com@reuters.net))

AlertNet news is provided by