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NAROK, Kenya (Reuters) - Maasai goatherd Joseph Nkolia points dismissively at two shallow pools, the only water in a parched stream west of the Kenyan town of Narok.
"It rained yesterday and look at it," he says.
"Two years ago it used to flow strongly through here. Now I often have to get a lorry to bring water from Narok for us and our animals, and it costs a lot." His flock wanders past without bothering to drink the scant brown water.
The stream is a tributary of the Ewaso Ngiro, one of 12 rivers fed from the Mau Complex, Kenya's biggest forest and a vital water catchment in the west of the country.
Destruction of the woodland by rampant illegal settlement, logging and charcoal burning threatens severe damage to Kenya's economy with an impact on energy, tourism, agriculture and water supply to cities and industry.
A familiar Kenyan saga of corruption, illegal landgrabs and the use of state resources to buy votes has destroyed a quarter of the 400,000 hectare forest in the last decade, with an impact that may be felt as far away as Egypt.
The Mau was broken into 22 blocks by human settlement over the last century but the real destruction began in 1997, when large plots were given away by the government of former President Daniel arap Moi to win votes in an election.
"My life will be completely ruined if I cannot get water for us and our livestock, our land will turn into a desert. We will all die," said another Maasai, Moses Mundati, standing on sunbaked ground where the Ewaso Ngiro no longer extends.
As he spoke, people brought yellow containers to gather water from the narrowed river beside him.
But if the saga is familiar, the recent reaction is not.
Kenya's new coalition government set up a task force in July to reverse the destruction of the forest, which the United Nations Environment Program (UNEP) says could cost the tourism, tea and energy sectors alone at least $300 million.
"Such an extensive and ongoing destruction of a key natural asset for the country is nothing less than a national emergency," said Prime Minister Raila Odinga.
So dramatic is the problem, the inauguration of the 60-megawatt Sondu Miriu hydro-electric project in western Kenya has been delayed because of inadequate water flow. The $260 million Japanese-funded scheme was designed to depend on water from the Mau and has only a small storage reservoir.
As high oil prices force Kenya to look for alternative energy, experts say water from the Mau, if it is preserved, could generate nearly 60 percent of current national capacity.
Lakes Nakuru, centre of a popular game park, and Natron in Tanzania, breeding ground for the Rift Valley's famous flamingos, are both receding.
"If we don't take action, in 10 years Lake Nakuru will be gone," said local development authority chief Francis Nkako.
The rivers fed by the forest's giant moisture reservoir and generation of rain also supply Lake Victoria, source of the Nile, and two other Kenyan lakes.
"This is ecological rape... taking the national capital to make money," Nkako said. "These contested resources are the epicenter of conflict in this country."
Revenue from tea, Kenya's third biggest export earner, has declined while the second biggest, tourism, is also under threat, after already suffering a 23 percent fall because of a bloody post-election crisis in January and February.
The Mara river, lifeblood of the famous Maasai Mara game park which draws thousands of tourists every year, is falling.
Tanzanian officials, whose own Serengeti park is under threat, are among those pressing for urgent action.
"This is destabilizing the environment to such an extent that it has a huge impact on economic development at a national level... it is basically a suicide process," Christian Lambrechts, a UNEP forestry expert, told Reuters.
The government stance changed dramatically earlier this year when first Environment Minister John Michuki and then Odinga were flown over the forest. Officials say they were shocked by the huge scars in once densely wooded areas.
"The prime minister could not believe what he saw," said Northern Narok District Commissioner Andrew Rukaria.
Officials say Odinga and President Mwai Kibaki -- bitter rivals until their power-sharing deal ended the political crisis -- are united on the issue.
But saving the forest is likely to be painful and may be violent: Lambrechts estimates there are 25,000 squatters in the forest.
"We don't count out the possibility of some physical resistance," said Professor Fredrick Owino, chairman of the task force, which was ordered by Odinga to report by February after auditing forest boundaries and legal claims.
Owino told Reuters 250 armed forest guards, park rangers and police had already been drafted in to seal the forest and prevent further logging.
The task force will recommend who should be relocated and who compensated. This sparked a brief rush into the forest in recent weeks by hundreds of people hoping to cash in.
A task force member of the small Ogiek ethnic group, the original hunter-gatherers of the forest, was recently assaulted in his home after being accused of betraying their interests.
Experts say only a few Ogiek still pursue traditional activities like honey-gathering while the rest clear land and farm like other Kenyans. "The rights of the indigenous people should be respected, but if you find they are armed with chain saws you have to treat them differently," Owino said.
In an indication of how charged the issue is, members from the Maasai and Kipsigis ethnic groups were sacked from the task force after repeatedly arguing.
"We are not going to go anywhere. When God descends he will find us here," said Nicodemus Yegon, one of thousands of people living in the southern Maasai Mau block who say they have title deeds to land in what officials say is protected forest.
U.N. and Kenyan officials say Maasai group ranch owners in the area sold land illegally to settlers after corrupt authorities issued false deeds, sometimes covering 10 times the original ranch areas.
This adds a potentially flammable tribal dimension to the issue, like the tensions that flared after Kenya's election.
"We want first of all the sellers of this land brought to book," said Yegon, who lives with his kinfolk in a strip of plastic-sheet roofed wooden huts along a mist-shrouded, muddy road on a ridge into the forest.
In the distance dark clouds hang over dense forests in parts of the Complex that have already been cleared of squatters. In the village, tree stumps show where forest has been cleared and charcoal burns under piles of mud.
Kamungei village is nicknamed "Sierra Leone" because the land was first bought by Kalenjin soldiers who had served in Kenya's peacekeeping force in that country a decade ago.
Lambrechts said about 700 fake title deeds to land in protected forest were issued five weeks before the 1997 election. The process was extended and formalized in 2001.
Encroachment has continued ever since, including in last year's election. Locals say Kibaki told people previously burned out of their houses by authorities to return to the land.
"This has been a campaign tool. That is why people are suffering here," said Daniel Koskei, another "Sierra Leone" inhabitant.
But despite resistance, most of those living in the forest seem sure to be removed.
"We must bite the bullet as a nation," Nkako said. "People must understand that this is not their property. We must secure the national good, the international good."
Editing by Sara Ledwith