Militants clashed with the Yemeni army in a southern town on Sunday, heightening fears that the Arabian Peninsula state could collapse under protests against President Ali Abdullah Saleh and an Islamist threat.
The army tried to dislodge a coalition of Islamists from Jaar in Abyan province after they seized buildings on Saturday and security forces appeared to have deserted the town of several hundred thousand. One soldier was killed on Sunday.
Abyan is seen as a stronghold of Al Qaeda in the Arabian Peninsula (AQAP), the Yemeni wing of the network which Western countries and neighbour Saudi Arabia fear could take advantage of any power vacuum if protesters succeed in ousting Saleh.
Five soldiers were killed on Saturday in an ambush in Lowdar, also in Abyan, which the government attributed to al Qaeda militants. Militants fired rockets at government buildings in Zinjibar on Sunday.
Saleh, under pressure from tens of thousands of Yemenis protesting in the streets to demand his departure after 32 years in power, convened a meeting of his ruling party on Sunday.
A party source said the party's central committee, which contains thousands of members, had asked Saleh to stay in power until 2013, when his presidential term expires. One of Saleh's first concessions when protests began in February was to say he would not seek another period in office beyond that date.
In an interview shown on Al Arabiya on Sunday, Saleh said he was prepared for a dignified departure at any stage but that opposition parties were hijacking the protests to demand he quit without organising a democratic handover.
"I could leave power ... even in a few hours, on condition of maintaining respect and prestige," Saleh said. "I have to take the country to safe shores ... I'm holding on to power in order to hand it over peaceably."
But he seemed to suggest he would stay at least for the short term, littering the interview with warnings that Yemen would slide into civil war and would fragment along regional and tribal lines if he left power immediately.
"Yemen is a time bomb and if we and our friendly countries don't have a return to dialogue, there will be a destructive civil war," he said, warning protesters against mounting a coup against him.
Washington and leading oil producer Saudi Arabia have backed Saleh as their man to keep al Qaeda from expanding its foothold in a country many political analysts say is close to collapse.
AQAP claimed responsibility for the foiled attempt in late 2009 to blow up a jetliner bound for Detroit and for U.S.-bound cargo bombs sent in October 2010.
With central government control weak, Saleh's government has relied on tribal allies to maintain order, but has faced in recent years rebellions from Zaidi Shi'ites in the north and a separatist movement hoping to recreate the South Yemeni state that united with the north under Saleh's rule in 1990.
More than 80 people have been killed since protests started in January, inspired by popular revolts in Tunisia and Egypt, to demand the departure of Saleh, who has outlasted civil war as well as separatist, rebel and militant campaigns since 1978.
Opposition parties have been talking to Saleh about a transition but have so far rebuffed any of his concessions. Last week he offered to step down within a year after organising a new constitution, parliamentary then presidential elections.
"We still have a very big gap," said Yassin Noman, the rotating head of Yemen's opposition coalition. "I think he is manoeuvring."
The tide appeared to turn against Saleh after March 18 when plainclothes snipers loyal to the president fired into an anti-government crowd, killing 52 people.
The violence led to defections including military commanders such as General Ali Mohsen, ambassadors, lawmakers, provincial governors and tribal leaders, some from his own tribe.
Saleh said the defections were mainly by Islamists and that some had returned to him. He said Mohsen had been acting emotionally because of Friday's bloodshed but that security forces were not behind the deaths.
A source close to Mohsen, who has supported the protesters, said he and Saleh had weighed a deal in which both would leave the country, taking their sons and relatives with them to pave the way for a civilian transitional government.
"I'm not looking for a home in Jeddah or Paris," Saleh said on Saturday, vowing to stay in Yemen.
The country of 23 million, with an acute water shortage and dwindling oil reserves, is widely viewed as the next country in the region to see a change in leadership.
A revolt in Bahrain has been quieted by an army show of force on the streets after a state of emergency was declared.
Syria has erupted with protests in recent days.