SANAA- The leader of Yemeni Shi'ite rebels, Abdul-Malik al-Houthi, is alive but seriously wounded and has entrusted a relative with leading the northern rebellion in his stead, a Yemeni official said on Tuesday.

There was no immediate confirmation of the report from the rebels, who said on their website that fighting was continuing in a strategic area of Yemen bordering Saudi Arabia, the world's top oil exporter.

According to the information available to us, Houthi sustained wounds to his leg and hand, and his leg was amputated after that, a local government official from the northern province of Saada, the rebel stronghold, told Reuters.

Shi'ite rebels from the Zaidi sect have been fighting government troops in mountainous north Yemen since 2004, complaining of marginalisation.

Yemen is also fighting al Qaeda in several provinces while trying to contain separatist sentiment in the south. The instability has prompted fears that al Qaeda may exploit the chaos to strengthen its foothold in the poorest Arab country.

The official said Houthi was wounded about a month ago, but gave no details as to where. A government website reported last month that Houthi may have died after being severely wounded by government forces. That was never confirmed by the rebels.

He has been unable to appear again after this and has handed the leadership of the rebellion to his brother-in-law, Youssef al-Madani, the official said, adding that Houthi had returned to his home village for treatment.

Western powers and neighbouring Saudi Arabia fear Yemen could turn into a failed state. Yemen last week said it was in an open war on al Qaeda after the militant group's Yemen wing said it was behind an attempt on December 25 to bomb a U.S.-bound passenger plane.

On their website, the rebels said air strikes by Saudi forces and ground battles were still in progress on Tuesday, but made no mention of any changes to their leadership. The conflict has killed hundreds and displaced more than 200,000 people.
The government source in Saada did not say when Houthi had entrusted the rebellion to his relative.

The rebels said government troops had begun advancing on the strategic Jabal Dukhan area which straddles the Saudi border, and added that dozens had been killed in fighting there in the last few days.

State media also reported that Yemen had sentenced an army officer to 10 years in jail for providing the Houthis with weapons intelligence, including information on radioactive elements.

Officer Muhammad Abdullah al-Bahri, a 35-year-old chemistry and physics teacher, confessed to taking orders directly from the rebels, according to state news agency Saba.

He was convicted of taking photographs to identify positions from where insurgents could fight government troops, and designing rebel websites.

(Writing by Raissa Kasolowsky and Cynthia Johnston, editing by Myra MacDonald)