SANAA (Reuters) - Yemen's president has announced a new cabinet including members of the Shi'ite Muslim Houthi group that captured the capital Sanaa in September, state media said on Friday, in a move that could help end a crippling standoff in the Arab nation.
Under a power-sharing agreement signed last month, the Houthis are meant to withdraw their forces from the city once a new administration is formed. Tensions rose last week when they set an ultimatum for President Abd-Rabbu Mansour Hadi to form a government within 10 days or face "other options".
Stability in the country of 25 million people is important to the United States because it borders oil-producing Saudi Arabia and is home to one of the most active branches of al Qaeda.
The new government will be headed by Prime Minister-designate Khaled Bahah, a former oil minister and ambassador to the United Nations. The 34 ministers named on state television and news agency Saba include half a dozen Houthi loyalists, whose portfolios will include the civil service and social affairs.
Once a religious movement seeking greater autonomy in the north, the Houthis have in recent months become Yemen's power-brokers and sent their militiamen into the west and center of the country, far beyond their traditional redoubts.
They captured Sanaa on Sept. 21, following weeks of anti-government unrest.
"The announcement of the government is a step that can help in easing the political crisis. I think President Hadi did not announce this government formation without consultations with the Houthis," said Yemeni political analyst Ali Saif Hassan.
The cabinet also includes politicians from a wing of a southern separatist group, al-Herak.
Abdullah al-Saydi, a former envoy to the United Nations was appointed foreign minister; Mahmoud al-Sobehy, a senior army commander in the southern city of Aden, became defense minister; Mohammed bin Nabhan, a member of Herak, takes over the oil ministry; and Galal el-Rouwaishan, former head of intelligence, is the new interior minister.
No changes were made to the finance ministry, which is headed by Mohammed Zemam.
writing by Sami Aboudi and Rania El Gamal; Editing by Mark Trevelyan