* Crowds are largest since protests began two weeks ago
* Tens of thousands protest; scuffles in south Aden
* Most protests end calmly, disperse for chewing of qat (Updates with Obama call to Saleh, paragraphs 7, 22)
By Mohammed Ghobari and Khaled Abdullah
SANAA, Feb 3 (Reuters) - Tens of thousands of Yemenis squared off in peaceful protests for and against the government on Thursday during an opposition-led “Day of Rage,” a day after President Ali Abdullah Saleh offered to step down in 2013.
The peaceful protests faded out by midday as planned, suggesting Yemenis outside the traditional opposition activist core had not been motivated to transform the rally into a self-sustaining, Egyptian-style mass upheaval.
Still, the opposition drew more than 20,000 people in Sanaa, the biggest crowd since a wave of demonstrations hit the Arabian Peninsula state two weeks ago, inspired by protests that toppled Tunisia’s ruler and threaten Egypt’s president.
“The people want regime change,” anti-government protesters shouted as they gathered near Sanaa University, a main rallying point. “No to corruption, no to dictatorship!”
Saleh, in power for 30 years but eyeing the unrest spreading in the Arab world, indicated on Wednesday he would leave office when his term ends in 2013. He pledged, among a host of other political concessions, that his son would not take over the reins of government.
It was Saleh’s boldest gambit yet to stave off turmoil in Yemen, an important U.S. ally against al Qaeda, as he sought to avert a showdown with protesters in the impoverished state.
U.S. President Barack Obama, in a telephone call to Saleh on Wednesday, urged the Yemeni leader to follow up on his reform measures with “concrete actions,” the White House said.
Across Yemen, tens of thousands of anti-government protesters took to the streets including in Taiz, where Saleh once served as military governor, and in southern towns where a separatist movement has grown increasingly active.
Yet analysts say only a large showing from traditionally non-aligned Yemenis and disgruntled youths, facing soaring unemployment and meagre incomes, would create a watershed moment for farther-reaching unrest in Yemen.
Scuffles broke out in the southern port city of Aden when security forces broke up a protest with tear gas, and two people were wounded. Hundreds of security men had deployed across the city, arresting 20, an opposition spokesman said.
Yemen’s biggest opposition party, the Islamist Islah, welcomed Saleh’s initiative but snubbed a presidential appeal to call off protests. But anti-government protesters appeared to lack consensus, with some calling for Saleh to get out while others wanted him to prove he would act on his promises.
“What the president offered yesterday was just theatre. I don’t trust him,” a protester, Mahmoud Abdullah, said in Sanaa.
In most of the country, protests ended promptly at noon, with demonstrators dispersing quietly ahead of a customary break to chew qat, a narcotic leaf widely consumed in Yemen.
Should protests widen, the stakes would be high for Saleh. His country is on the brink of becoming a failed state, as it tries to fight a resurgent al Qaeda wing, quell separatism in the south and cement peace with Shi’ite rebels in the north.
“The danger for the government is that all these different strands of opposition ... coalesce not necessarily out of any sort of allegiance, but because they have the same political enemy. That becomes very dangerous for Saleh,” said Gregory Johnsen, a Yemen analyst at Princeton University.
Abubakr al-Qirbi, Yemen’s foreign minister, told BBC Radio that “serious dialogue” was needed now between the ruling and opposition parties. “We have never closed the door for their participation,” Qirbi said.
Asked whether the unrest could be exploited by radical Islamists, he replied: “Any instability, not only in Yemen, whether it is in Egypt or Tunisia or in any other country, will play into the hands of extremists and terrorists. This is really why it is important to work with governments and opposition parties to make them realise that the objective of change is to create stability and not to create anarchy.”
Saleh, a shrewd political survivor, has backed out of previous promises to step aside. Analysts say Wednesday’s pledge could be a genuine way to exit gracefully but he may also hope to wait out regional unrest and reassert dominance another day.
Yemen’s opposition coalition said it wanted assurances that reforms would be implemented, and demanded better living conditions for Yemenis, about 40 percent of whom live on less than $2 a day, while a third suffer from chronic hunger.
“Yemenis are angry about the situation, but haven’t reached the level they have in Egypt,” said Barak Barfi, Research Fellow for New America Foundation.
The United States relies heavily on Saleh to help combat al Qaeda’s Yemen-based arm, which also targets neighbouring Saudi Arabia, the world’s top oil exporter.
Instability in Yemen would present serious political and security risks for Gulf states. Obama told Saleh during their Wednesday call it was “imperative that Yemen take forceful action” against al Qaeda, the White House said.
Additional reporting by Erika Solomon in Dubai and Keith Weir in London; writing by Erika Solomon and Cynthia Johnston; editing by Mark Heinrich