SANAA (Reuters) - Yemen's president named the country's U.N. envoy as prime minister on Monday in a move welcomed by the Shi'ite Muslim Houthi group which controls the capital, signaling an easing in the country's prolonged political crisis.
An aide to President Abd-Rabbu Mansour Hadi said Khaled Bahah's name had been among three proposed last week by the Houthi group after they rejected appointment of Ahmed Awad bin Mubarak as prime minister last week.
"We believe he (Bahah) is the right person," said Abdelmalek al-Ejri, a member of the Houthi political bureau. "His appointment will help the country overcome the difficulties it is going through."
Bahah, who was born in 1965 and who holds a masters degree in administration, business and finance from India's University of Pune, served previously as oil minister before being appointed Yemen's envoy to the United Nations.
Analysts say he is a technocrat who is expected to focus on trying to improve public services in a country that has been going through political turmoil since mass protests in 2011 forced long-serving President Ali Abdullah Saleh to step down.
His appointment comes under a power-sharing deal signed last month by the Houthis and other major political parties at Hadi's presidential palace. The deal aims to bring the Houthis and the wing of a separatist group into a more inclusive government.
The Houthis, whose main stronghold is in Yemen's northern highlands, seized Sanaa after defeating forces loyal to an army general with links to a Sunni Islamist party. The move alarmed top oil exporter Saudi Arabia which fears the Houthis will build an alliance with its rival Iran.
Yemeni analyst Ali Saif said Bahah, who is from Hadramout in Yemen's east and enjoys the backing of all the country's main political parties, was unlikely to face big hurdles in forming a new government, which he said could come within two weeks.
"This is a major breakthrough," Saif told Reuters. "He is more of a technocrat than a politician, and that should help him," he said.
The Houthis, who now control all aspects of life in Sanaa, have refused to leave the city until a new government is formed.
Analysts said that the Houthi presence in Sanaa was likely to disappear, with many of the fighters who had entered Sanaa virtually unopposed on Sept. 21 poised to be incorporated into the country's military and security forces.
One main task for the new government is to review a plan drawn up by the previous administration to divide the country into six administrative regions with devolved powers. The Houthis want more regional autonomy but say the regional borders envisaged by the plan divide Yemen's wealth unfairly.
The U.N. Security Council and U.N. special envoy to Yemen Jamal Benomar both welcomed the appointment of Bahah on Monday, but Benomar warned "the transition is at risk of collapsing."
"This is one step forward, now swift action is needed to ensure the formation of the government and implement the other provisions of the (peace and national partnership) agreement," Benomar told reporters after briefing the Security Council.
The Security Council urged the Yemeni authorities to "expedite the process of reforms, including army and security sector reform," said Argentinian U.N. Ambassador Maria Perceval, president of the 15-member council for October.
She said the council was prepared to consider imposing sanctions on individuals disrupting the peace and political process in Yemen.
Yemen, which has struggled to reassert government control over the country since 2011, also faces an al Qaeda insurgency and a separatist movement eager to resurrect the socialist state that merged with the northern half in 1990.
The United States and other Western and Gulf countries are worried that continued instability in Yemen could strengthen al Qaeda. They have supported a U.N.-backed political transition since 2012 led by Hadi that is meant to shepherd Yemen to stability after decades of autocracy.
On Thursday, suicide bombers linked to al Qaeda killed at least 67 people in two separate attacks targeting the Houthis and an army camp in eastern Yemen.
Reporting by Mohammed Ghobari, additional reporting by Michelle Nichols at the United Nations, Writing by Sami Aboudi; Editing by Gareth Jones, Dominic Evans and Bernard Orr