UPDATE 5-Goma rebels say will "liberate" all Congo

* Rebels progress, target takeover of Congo

* Goma quiet after army, U.N. give up fight over lakeside

city

* Rebels now in control of strategic town of Sake

* Congo leader says to look into rebel demands

SAKE/GOMA, Democratic Republic of Congo, Nov 21 (Reuters) -

R ebel forces in eastern Congo vowed on Wednesday to "liberate"

all of the vast central African country as they began seizing

towns near the Rwandan border and spoke of a 1,000-mile march to

the capital Kinshasa.

The M23 rebels, widely believed to be backed by Rwanda,

captured the eastern city of Goma on Tuesday, a provincial

capital home to a million people; United Nations peacekeepers

simply looked on, after Congolese troops had quit the town.

Regional leaders called on the rebels to halt their advance

and Congo's President Joseph Kabila appeared to soften his stand

on Wednesday, saying he would look in to rebel grievances as the

insurgents extended their reach.

"The journey to liberate Congo has started now," Vianney

Kazarama, spokesman for the rebel group, told a crowd of more

than 1,000 at a stadium in Goma. "We're going to move on to

Bukavu, and then to Kinshasa. Are you ready to join us?

Hours later, a rebel unit took control of Sake, a strategic

town near Goma on the road running the length of Lake Kivu to

Bukavu, 100 km (60 miles) away. In the 1990s, the current

president's father burst out of the same area at the head of a

rebel force to overthrow Mobutu Sese Seko.

A Reuters correspondent in Sake saw heavily armed rebels in

control of the town and no sign of fighting. The bodies of four

uniformed men and one in civilian clothing lay by the road.

Locals inspected shelled buildings, burned out cars and a tank

abandoned by the Kinshasa government's FARDC army.

The government in Kinshasa issued a statement on Wednesday

admitting it had lost the battle but pledging to win the war:

"Victory will be ours. That is what the Congolese want."

RWANDAN ROLE

The rebels accuse Kabila of failing to grant them posts in

the army in line with a peace deal that ended a previous revolt

in 2009. The current rebellion also reflects local ethnic

tensions, intertwined with Rwanda's desire for influence over a

neighbouring region rich in minerals.

Rwanda previously backed the insurgency that swept Kabila's

father, Laurent, to power in 1996 after a march across Congo to

oust Mobutu, veteran dictator of a country then known as Zaire.

The new fighting has aggravated tensions between Congo and

Rwanda, which the Congolese government says is orchestrating the

insurgency as a means of grabbing resources, which include

diamonds, gold and coltan, an ore of rare metals used in

electronics and high-tech materials.

U.N. experts have backed Congo's accusations - implicating

Rwanda's defence minister. The government in Kigali denies the

charges and says Kinshasa and world powers have failed to

address the root causes of years of conflict in the region.

Kabila and Rwandan President Paul Kagame met on Wednesday in

the Ugandan capital Kampala after holding three-way talks with

Ugandan President Yoweri Museveni late on Tuesday.

African foreign ministers urged the African Union to deploy

troops to halt the rebels and Kabila, Kagame and Museveni

ordered the rebels to halt their advance.

After refusing any form of dialogue with the rebels, Kabila

said he would evaluate the causes of the conflict but gave no

further details on possible talks.

But there are signs of trouble for Kabila already spreading

in the country the size of western Europe.

A Reuters reporter saw hundreds of young men with sticks

sack the headquarters of Kabila's PPRD party in Bukavu, in

protest at the Congolese government's failure to defend Goma.

Goma itself was quiet on Wednesday but at the rebel rally in

the stadium, dozens of members of the security forces who had

not fled the city appeared to have joined the insurgents.

"Its a problem of governance; there's no food, there's no

money," Rashidi Benshulungu, a captain in military intelligence

who had changed sides, told Reuters. "I'm not a politician,

that's a problem for Kabila. But we're following the ARC," he

added, using an acronym used by the M23's combat force.

AGGRAVATED TENSIONS

While regional mediator Uganda brokered talks between Congo

and Rwanda, whose armies have repeatedly clashed during nearly

two decades of on-off conflict around the Great Lakes, the U.N.

Security Council ordered the rebels to withdraw and disband.

A statement expressed "deep concern at reports indicating

that external support continues to be provided to the M23,

including through troop reinforcement, tactical advice and the

supply of equipment, causing a significant increase of the

military abilities of the M23". It "demands that any and all

outside support to the M23 cease immediately".

The French government also expressed frustration with the

U.N. peacekeepers, from India, South Africa and Uruguay, who

gave up defending the city after Congo's army retreated. Paris

called it "absurd" that the U.N. force did not protect Goma.

But the U.N. mission defended its failed effort to protect

the town, saying its forces had fired hundreds of rockets at the

rebels but were overwhelmed when the number of rebels attacking

the town jumped from 500 to 3,000 in the space of 48 hours.

The mission stopped short of blaming outside support but is

likely to add to accusations levelled at Rwanda.

While conflict has simmered almost constantly in Congo's

east in recent years, this is the first time Goma has fallen to

rebels since foreign occupying armies officially pulled out

under peace deals at the end of the most recent 1998-2003 war.

Aid agencies have estimated that 5 million people have died

from fighting and conflict-related disease since that war began.

Tens of thousands of people have already fled days of fighting

between the rebels and the U.N.-backed Congolese soldiers.

"We're starving, we fled the fighting, and when we came back

all of our things had been pillaged, but we don't know by who,"

said a Goma resident who gave his name only as Zachary.

New York-based Human Rights Watch said at least 11 civilians

had been killed in the latest fighting for Goma.

SAKE FALLS

In Sake, 25 km (15 miles) west of Goma, local people said

Congolese troops had briefly regrouped there before pulling out

again before the rebels drove in on Wednesday.

Rwanda's foreign minister said the fall of Goma had shown

there was no military solution to the crisis, so Kinshasa had to

seek the path of dialogue.

As a result, Kabila faces the tricky choice between dialogue

with the rebels, which will be politically unpopular, and trying

to rally his scattered forces in North Kivu province.

He had been praised for securing peace deals that ended the

last war but his re-election late last year provoked

demonstrations by many frustrated with the slow pace of change.

Expectations in Goma are low: "You know, we don't have a

choice. We've come here to welcome them," said Blaise Ciza, a

Goma resident who attended the rebel rally at the stadium.

"But one thing that's impressed us is they didn't kill lots

of people when they took the town. Last night we were scared but

it remained calm. We congratulate them for that."

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