CORRECTED-UPDATE 2-Mali junta defies deadline for handing over power
(Corrects date of convention to April 5 in bullet point)
* Junta leader proposes April 5 national convention
* Mali's neighbours have imposed trade, diplomatic sanctions
* Ban on fuel imports could choke economy in days
* Northern rebels exploit coup chaos to make gains
By Bate Felix and Adama Diarra
BAMAKO, April 3 (Reuters) - Mali's junta ignored a demand by neighbours for an immediate exit from power on Tuesday, instead simply repeating its offer to hold open-ended talks on a future transition to civilian rule.
Malians rushed to stock up on petrol and cash after the 15-state ECOWAS West African bloc launched trade and diplomatic sanctions aimed at forcing the leaders of last month's coup to stand down.
Long one of the most stable democracies in West Africa, Mali has plunged into turmoil since the widely condemned power grab on March 22 further emboldened Tuareg rebels to seize half the country in their quest for a northern homeland.
They have been joined by Islamists bent on imposing sharia, Islamic law, across the whole of the moderate Muslim state, now the latest security headache for a region battling al Qaeda cells and home-grown militant groups such as Nigeria's Boko Haram.
An emergency ECOWAS summit on Monday gave the coup leaders 48 hours to quit power - a Wednesday deadline the junta did not even acknowledge in a statement delivered from the ramshackle barracks outside the capital Bamako that are its headquarters.
"We are inviting the political class and all civil society representatives to be present without exception at a national convention that will start on Thursday, April 5," junta leader Captain Amadou Sanogo told a news conference.
The convention, first announced on Sunday, is due to decide on what form the transition to civilian rule will take.
"The conclusions of this convention will be accepted by everyone," said Sanogo, without giving any further details of the organisation or timetable of the convention.
Sanogo and his team of mid-ranking officers have been condemned by the U.N. Security Council and on Tuesday faced new isolation as the African Union announced travel bans and asset freezes on them, echoing existing ECOWAS measures.
Ivory Coast, from where the landlocked country sources much of its fuel, was among the first to close its borders on Tuesday as part of sanctions including the freeze of Malian funds at the central bank of the West African franc currency zone.
"Our bosses told us to let nothing go in or come out without orders from the top ... We've started patrolling to stop all movement of goods," border guard Ben Casaban said by telephone from the border point by the town of Pogo.
Guinea followed suit but others acted more slowly. Authorities in Burkina Faso said they were preparing steps needed to close the border with Mali, while border officials in Mauritania and Senegal said they were still awaiting orders.
FUEL AND CASH
At garages in central Bamako, residents armed with jerry cans queued to try to beat shortages that could choke off the economy of Africa's third-largest gold miner within days.
The National Office for Petroleum Products (ONAP) said existing national stocks would last about 10 days.
While one banking source said the financial sanctions did not yet cover commercial bank transactions with the BCEAO regional bank, many Malians began queuing to take out their savings for fear that funds would dry up soon.
"I'm here to withdraw my bursary money," Cisse Yacouba, a 25-year-old student, said. "Everyone is rushing to get some money because it is certain that there will not be enough."
While the stated aim of the coup leaders was to give the army more clout to tackle the two-month-old revolt, their power grab triggered a rebel sweep through a northern zone the size of France - in many cases hard on the heels of fleeing army forces.
The Tuareg-led rebel group MNLA says it controls the three main towns in the desert zone - Kidal, Gao and the ancient trading post of Timbuktu - and has stressed it has no intention of pushing further north.
But there is growing disquiet about the role of the local Ansar Dine Islamist group, which, rather seeking to carve out a northern homeland, wants to impose Islamic law across all of Mali. In Gao its members ransacked hotels serving alcohol and told locals that Western-style clothing was banned.
Residents in Timbuktu said on Monday better-armed Ansar Dine fighters dislodged MNLA rebels who seized the town on Sunday.
A military source said rebels on Tuesday pushed further to the town of Douentza - at the southern extremity of the Azawad territory they see as rightfully theirs.
While the source said the regular army was posted outside the regional centre of Mopti to prevent them going any further, one junior officer said on condition of anonymity that some soldiers there were already taking off their uniform.
Ousted President Amadou Toumani Toure, who had been due to step down in scheduled elections this month, is still in hiding. Neighbours are proposing that a neutral figure be named as interim president before a new attempt to stage polls.
It is unclear what appetite there is in the region for military intervention to secure the south from any further advances and, ultimately, to win back ground from the rebels.
Military chiefs of the 15-nation ECOWAS regional bloc are due to meet on Thursday to agree on paper a force of up to 3,000 troops, but the arduous process of extracting troop contingents from individual countries has yet to begin in earnest.
The African Union also announced targeted sanctions on the leaders of the factions fighting in the north.
Over 200,000 Malians have fled their homes because of the fighting, and the pillaging of food, fuel and medical supplies in Gao and other northern towns has worsened their plight.
In Paris, world culture agency UNESCO appealed to warring factions to spare local heritage sites such as Timbuktu's earthen mosques, cemeteries and other legacies of its "golden era" in the 16th century. (Additional reporting by Tiemoko Diallo in Bamako; John Irish in Paris; Aaron Maasho in Addis Ababa; Writing by Mark John; Editing by David Lewis)
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