By Cynthia Johnston and Mohamed Sudam
SANAA (Reuters) - President Ali Abdullah Saleh said on Friday he was ready to cede power to stop more bloodshed in Yemen, but only to what he called "safe hands" as tens of thousands rallied against him in "Day of Departure" protests.
Talks were underway on two tracks to work out the details of a deal on a peaceful transition of power in the Arabian Peninsula state that is home to a resurgent arm of al Qaeda, Yemeni political sources said.
Western countries are concerned al Qaeda militants could exploit any disorder arising from a messy transition if Saleh, a pivotal U.S. and Saudi ally fighting for his political life, finally steps down after 32 years in office.
"We don't want power, but we need to hand power over to safe hands, not to sick, resentful or corrupt hands," Saleh said in a rousing speech to tens of thousands of supporters in Sanaa.
The protesters waved pictures of Saleh and banners saying, "No to chaos, yes to security and stability". Some carried guns and traditional Yemeni daggers, others waved flags and played patriotic songs.
"We are against firing a single bullet, and when we give concessions this is to ensure there is no bloodshed. We will remain steadfast and challenge them with all power we have."
But across the capital, tens of thousands of anti-government protesters held their own "Day of Departure" rally to demand the departure of the president, a serial survivor of civil war, separatist movements and militant attacks. The protesters handed out red cards telling the president to "Get out".
Shooting broke out when soldiers loyal to a top Yemeni general who has been protecting the protesters fired in the air to prevent a crowd of Saleh loyalists approaching the area, witnesses said.
A soldier guarding the protest was later wounded when gunmen fired from a nearby building, witnesses said. But the violence was significantly less than a week ago, when plainclothes snipers fired into the anti-government crowd, killing 52 people.
That bloodshed prompted a string of defections that severely weakened Saleh's position including by military figures such as top general Ali Mohsen, as well as diplomats and tribal leaders.
"The government cannot just shoot its way out of this crisis," Philip Luther, Amnesty's Deputy Director for the Middle East and North Africa, said in a statement. "Whether in uniform or in plain clothes, security forces must be immediately stopped from using live ammunition on unarmed protesters."
State media said opposition "elements" shot dead one person and wounded four others when they opened fire in the province of Maarib, east of the capital, but gave no further details.
SALEH MEETS DISSIDENT TOP GENERAL
Yemeni political sources said talks to resolve the crisis have been ongoing, with help from Western mediators, and included a meeting between the president and General Mohsen in which they discussed the fate of both men.
Simultaneously, broader political talks were underway on a political transition in Yemen. A diplomat in Sanaa, however, said it was premature to discuss an outcome. "It can go either way," he said.
A source close to Mohsen, who has thrown his weight behind protesters, said he and Saleh had discussed a deal in which both men would leave the country, taking their sons and relatives with them.
"The deal is not signed yet. But we believe that Saleh backed out," the source told Reuters, citing recent speeches, adding that Mohsen was now reconsidering his stance although he remained open to the deal.
The Wall Street Journal had reported the sides were close to a deal in which the two men would resign, bringing in a civilian transitional government.
A Saleh spokesman denied that report but said Saleh had held a meeting over the past 48 hours with the general. "Ali Mohsen clarified why he did what he did and requested assurances that nothing would happen against him," Ahmed al-Sufi said.
Positions have hardened since last Friday's bloodshed.
Saleh was defiant in a speech on Thursday, offering only an amnesty to defecting troops at a meeting with commanders, and his spokesman said he had no more concessions to offer.
He has offered a string of concessions, all rejected by opposition parties, including this week to hold presidential elections by January 2012. He has also warned military officers who have turned against him not to plot a coup.
In the anti-government protest area, security was tight as soldiers carefully patted down demonstrators and searched bags in checks that were then repeated by protest organizers.
"I came here to get rid of this butcher because he killed our comrades," said Abdullah Jabali, 33, a student, who said he did not believe Saleh's promises to stand down within a year.
Saleh, who oversaw the 1990 unification of north and south Yemen and emerged victorious from a civil war four years later, has shown no signs publicly of being prepared to quit now.
Washington and Riyadh, Yemen's main financial backer, have long seen Saleh as a bulwark against al Qaeda in the Arabian Peninsula (AQAP), which has tried to stage attacks beyond Yemeni soil since 2009 in both Saudi Arabia and United States.
Yemen lies on key shipping routes and borders Saudi Arabia, the world's leading oil exporter. It has often seemed to be on the brink of disintegration: northern Shi'ites often taken up arms against Saleh and southerners dream of a separate state.
With no clear successor to Saleh in line and conflicts gripping north and south Yemen, the country of 23 million faces the risk of a breakup, in addition to poverty, a water shortage, dwindling oil reserves and lack of central government control.
(Additional reporting by Mohammed Ghobari; Writing by Andrew Hammond; Editing by Jon Hemming)