By Mohamed Ghobari and Ahmed Tolba
ADEN (Reuters) -Yemen's president delegated power to a presidential council and dismissed his deputy on Thursday in moves aimed at supporting U.N.-led efforts to revive negotiations to end a bitter seven-year war.
Riyadh announced $3 billion in financial aid to the Saudi-backed government after the announcement by President Abd-Rabbu Mansour Hadi. It called for talks with the Houthi group that controls the north and has been battling a Saudi-led coalition.
Yemen's warring sides, in a major breakthrough, agreed on a two-month truce that began on Saturday, the first since 2016. The deal eased a coalition blockade on areas held by the Houthis, who ousted Hadi's government from the capital, Sanaa, in late 2014.
"I irreversibly delegate to the Presidential Leadership Council my full powers in accordance with the constitution and the Gulf Initiative and its executive mechanism," Hadi, who is based in Riyadh, said on state television.
Hadi took the helm of a crumbling state a decade ago in a Gulf-backed transition plan after protests that brought down President Ali Abdullah Saleh, who was later killed.
Analysts say the new council aims to unify anti-Houthi ranks by giving more parties a seat at the table. With Hadi effectively out of the equation and his controversial deputy dismissed, the hope is the Houthis may also be more amenable.
Riyadh, which has struggled to exit the war in Yemen, urged the new council to negotiate with the Iran-aligned Houthis under U.N. auspices "for a final and comprehensive solution".
Houthi chief negotiator Mohammed Abdulsalam said in a statement that Yemen's future should be decided inside the country. He did not respond, when asked by Reuters, on whether the group would accept an invitation for talks with the council.
"Any activity outside Yemen's borders is merely a farce and recreation by aggressor nations," he said.
Saudi de facto ruler Crown Prince Mohammed bin Salman was shown in a video on state media meeting with the new eight-member council, led by Rashad Al-Alimi, who has close ties with both Riyadh and major Yemeni bloc the Islamist Islah party.
The new body includes several leaders of United Arab Emirates-backed factions, including Aidarous al-Zubaidi of the separatist Southern Transitional Council, which distrusts Islah and vied with Hadi's government for control of Aden.
"This is an attempt, perhaps a last ditch effort, to reconstitute something resembling unity within the anti-Houthi alliance. The problem is that it is unclear how these various individuals, many of whom have diametrically opposing views, can work together," Gregory Johnsen, a former member of the U.N. Panel of Experts on Yemen, said on Twitter.
Dismissed Vice President Ali Mohsen al-Ahmar, an Islamist-leaning general, is resented by the Houthis for military campaigns in their northern stronghold and by some southerners for his role in the 1994 north-south civil war.
The war has killed tens of thousands, devastated the economy and pushed Yemen to the brink of famine. The central bank split into rival authorities and the riyal's depreciation in the government-held south pushed basic goods out of reach for many.
Saudi Arabia and the UAE will each inject $1 billion into Yemen's central bank and the kingdom will grant an additional $1 billion for oil derivatives and development.
Riyadh, which last deposited funds into the Aden-based central bank in 2018, also said it would give $300 million to the U.N. aid response, which in March raised less than a third of the $4.27 billion sought.
The United Nations is pushing for measures to stabilise the economy and launch inclusive political negotiations to end the conflict.
The conflict is widely seen as a proxy war between Saudi Arabia and Iran. The Houthis say they are fighting a corrupt system and foreign aggression.
(Reporting By Mohamed Ghobari in Aden and Ahmed Tolba in Cairo; Writing Lisa Barrington and Ghaida Ghantous; Editing by Muralikumar Anantharaman, Raju Gopalakrishnan and Nick Macfie)
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