* AU troops to move south, Kenyans press north
* Militants have formidable arsenal
By Yara Bayoumy
ADDIS ABABA, Jan 30 (Reuters) - African Union and Kenyan troops aim to squeeze Somali rebels linked to al Qaeda by pursuing a coordinated war on two fronts, the U.N. chief's special envoy in Somalia said on Monday.
Under the plan, AU forces will push towards a Somali rebel stronghold outside the capital and Kenyan forces will focus on the Islamists' bastions in the south.
Augustine Mahiga, who relocated to Mogadishu from Nairobi to become the most senior U.N. official in Somalia for 17 years, cautioned it was hard to predict if the complex strategy would defeat the rebels given their sophisticated weaponry and ability to melt into the population.
African Union and U.N. officials at an AU summit in Addis Ababa are optimistic the twin track of a coordinated military campaign as well as a political roadmap, which envisions elections by August, means "the prospect for peace in Somalia has never been so real".
"AMISOM (the AU force) is (conducting) operations on the outskirts of Mogadishu and they'll be heading towards the Afgoye corridor. That is where al Shabaab has retreated to and has the highest concentration of its troops," Mahiga told Reuters on the summit's sidelines.
"They (Kenyan troops) take Kismayu and from there ... they'll progress northwards to Marka and the AMISOM troops from Mogadishu will also be going further south. It is a strategy that has been divided into sectors," he said.
It may not be that simple. The Ugandan and Burundian troops who make up the AMISOM force encountered fierce resistance in the battle for Mogadishu.
Equally, the advance of Kenyan soldiers towards the port city of Kismayu has been slower than anticipated since they crossed into Somalia in October.
Ethiopia, which has also deployed troops on Somali soil and seized some territory close to their shared border, said its force would stay put until AU troops replace them, to avoid a power vacuum.
Somalia has been in conflict for two decades with no single entity ever fully in control. Warlords and Islamist militants vie for control while drought has compounded hardship for many Somalis.
KISMAYU HEAVILY DEFENDED
Kismayu, the centre of al Shabaab's operations, will be a tough battle but a necessary one to crush the militants, diplomats say.
Mahiga said the port served as an entry point for the foreign fighters in al Shabaab's ranks and accounted for about 90 percent of the rebels' revenues.
"(It's) the place where imports and exports have been taking place including arms and export of charcoal ... so this is heavily, heavily defended and it's going to be quite a battle," said Mahiga.
What's more, seizing control of Kismayu is the relatively easy part, counter-insurgency experts say. Holding on to the city will be tougher.
Kenya wants to integrate its troops inside Somalia into the AMISOM force as soon as the U.N. Security Council approves an increase in the force's current size from 12,000.
The AU wants to increase AMISOM's numbers to close to 18,000. Mahiga said he had met EU officials who said they would "consider seriously" funding the extra troops. Under the current structure, the European Union, particularly Italy, is in charge of paying wages.
Al Shabaab's growing recourse to al Qaeda-inspired suicide attacks makes quashing the five-year insurgency more difficult.
"They have always proven to be quite agile and they have over the years built a formidable arsenal of weapons," Mahiga said. "They have been training all these years (and) can retreat and regroup." (Editing by Richard Lough and Giles Elgood)