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DUBAI, Sept 9 (Reuters) - Yemeni President Ali Abdullah Saleh said on Wednesday Shi'ite rebels in the north were receiving funding from groups in Iran as well as from Iraqi Shi'ite cleric Moqtada al-Sadr.

"We can't accuse any official parties in Iran, but there are Iranians communicating with us and saying they are prepared to mediate ... which means they are communicating with them (the rebels)," Saleh told Arabic broadcaster Al Jazeera.

"The same goes for Moqtada al-Sadr in Najaf in Iraq, he wants to become a mediator, which means they have links ...this we can say with absolute transparency," he said, referring to the populist Iraqi Shi'ite figure who is close to Iran.

Saleh also said two "cells" in Yemen's security apparatus had received money from Iran, around $100,000, and would face prosecution, without giving details. Last month fresh fighting erupted between Zaydi Shi'ite Muslims in the Saada region and government forces. The conflict first broke out in 2004.

The rebels accuse Saudi Arabia, whose Wahhabi brand of Islam regards Shi'ites as heretics, of backing the government, while the government sees an Iranian hand behind the rebels.

An official statement quoted a military source as saying late on Tuesday that Yemeni security forces "inflicted great human losses" on rebels in Saada province in a two-day operation that included air strikes.

The rebels, often referred to as "Hou... >>>