SANAA: Fierce fighting in the mountains of northern Yemen has killed 17 Shiite rebels and eight soldiers, a military source told AFP on Monday.

"There was fierce fighting in the (northern) city of Saada on Sunday. Seventeen Huthis (rebels) and eight Yemeni soldiers were killed," the source said.

The rebels said in a statement posted on their website that clashes were still underway in Saada, where they charged the army was using bulldozers to "destroy" property.

"The army is undertaking to destroy the city," the statement said. "It is using bulldozers to destroy houses, mosques and historical buildings."

A report on the www.26sep.net website of the defence ministry's newspaper, said government forces had seized control of rebel hideouts in Saada's Old City.

"Men of the armed forces were able to gain control of a number of hideouts in which partisans of terrorism and sabotage were barricaded," the report said.

It described the fighting as part of "the final stage of the operation of clearing the remaining terrorist sleeper cells from the city."

On Sunday, President Ali Abdullah Saleh said in an interview that he was open to dialogue with the rebels as long as they gave up the armed struggle.

"We are prepared to deal with anyone who renounces violence and terrorism," Saleh said.

A rebel spokesman responded to the statement on Monday, saying: "How do you call for dialogue when you are bombing? Stop firing, then talk about dialogue."

The rebellion among the Zaidi Shiite community, a minority in the mainly Sunni Muslim country but the majority in the north, first erupted in 2004.

Last August, the government launched a major offensive in a bid to end the uprising.

Neighbouring Saudi Arabia joined the fray in November, after accusing the rebels of occupying two villages inside the kingdom's territory and of killing a Saudi border guard.

Aid organisations say more than 150,000 people have been displaced by the fighting.