By Abdi Guled and Ibrahim Mohamed

MOGADISHU (Reuters) - Washington has sent weapons to Somalia's government to thwart Islamist insurgents, who cut hands and feet off thieves on Thursday and paraded the severed limbs in the streets of Mogadishu.

Somalia's al Shabaab insurgents are seen as a proxy for al Qaeda and Western nations fear they could destabilise the region and provide safe havens for hardline Islamists from abroad.

When a moderate Islamist was elected president in January, there was hope he could end nearly two decades of bloodshed in Somalia by reconciling with hardliners who want to impose a strict version of Islamic law across the country.

But Osama bin Laden declared President Sheikh Sharif Ahmed an enemy in an audio tape released in March. He called on the insurgents to topple the government and for Muslims around the world to join their jihad.

The Washington Post said on Thursday arms and ammunition had been sent to the government in a move signalling that President Barack Obama's administration wanted to thwart the hardliners.

"It's confirmed. They received approval from the U.N. Security Council," an international security source said.

While the United Nations has had a long-standing arms embargo on Somalia, a May Security Council resolution urged member states to train and equip government security forces -- as long as a U.N. embargo monitoring committee had no objections.

Another foreign security source said weapons had come into Somalia for the government via Uganda, which provides half the 4,300 African Union troops protecting key sites in Mogadishu.

"The prospect of the government collapsing is sending alarm bells ringing in Western capitals, but whether this latest move will succeed remains to be seen," said Rashid Abdi, analyst at International Crisis Group.

"Going further than providing arms to actually sending in more foreign forces would be a mistake," he said. "The government would then play right into the hands of the militants, who would accuse them of accepting foreign meddling."

LIMBS ON TREES

Ethiopian troops intervened in late 2006 to topple an Islamist movement in Mogadishu, but the presence of troops from the neighbouring nation acted more as a rebel rallying call.

The Ethiopian troops withdrew in January, but the Islamists now say they will keep on fighting until the African Union troops from Uganda and Burundi leave the country.

The al Shabaab group, which has foreign fighters in its ranks, stepped up attacks in early May. It now controls most of south Somalia and all but a few blocks of the capital Mogadishu.

The rebels used long knives to cut off a hand and a foot each from four young men in Mogadishu as punishment for theft, witnesses said. It was the first double amputation in Somalia.

The men screamed in pain, and some spectators vomited.

Al Shabaab later hung the severed limbs from trees and electricity polls.

"The horrific nature of such acts that were carried out in front of a crowd adds further injustice and dehumanises these teenagers," rights group Amnesty International said.

Al Shabaab has carried out executions, floggings and single-limb amputations before, mainly in the southern port of Kismayu. Movies and soccer games are banned in areas it controls while men and women cannot travel together on public transport.

Al Shabaab's strict practices have shocked many Somalis, who are traditionally moderate Muslims, although residents give the insurgents credit for restoring order to regions they control.

"We will punish like this everyone who carries out these acts," said al Shabaab official Sheikh Ali Mohamud Fidow.

STATE OF EMERGENCY

The government has launched a series of attacks this month to drive the rebels out of Mogadishu. It has failed to make headway and is relying on African Union troops to protect the presidential palace, airport and seaport.

Somalia's security minister, the Mogadishu police chief, and a legislator have all been killed this month. The insurgents are using more suicide car bombers and security sources say its roadside bombs have become more sophisticated.

The government has declared a state of emergency and called for foreign military intervention.

Somalia's neighbour Kenya ruled out any intervention on Thursday but has been beefing up security along its border.

Ethiopian Prime Minister Meles Zenawi has not ruled out sending troops back to Somalia if the situation worsens, but said there were no plans for unilateral intervention for now.

(Additional reporting by Andrew Cawthorne, David Clarke, Abdiaziz Hassan, Duncan Miriri and Frank Nyakairu in Nairobi; Tsegaye Tadesse and Barry Malone in Addis Ababa; William Maclean in London; Patrick Worsnip at the United Nations; writing by David Clarke; editing by Andrew Cawthorne)