* African Union, world leaders believe Ouattara won election
* Gbagbo defies criticism at home and from abroad
* Top cocoa producer faces period of uncertainty, isolation
By Tim Cocks and Loucoumane Coulibaly
ABIDJAN (Reuters) - Laurent Gbagbo was sworn in as Ivory Coast president on Saturday after his proclaimed election victory was rejected by world leaders and his rival, but accepted by the army, raising the risk of a long power struggle.
Meanwhile, Alassane Ouattara, named winner of the vote by the election commission before the result was reversed on Friday by the top Ivorian legal body, submitted a written oath and took the first steps towards setting up a parallel government.
Gbagbo has presided over the world’s top cocoa-producing nation for a decade, but now faces international isolation and possible sanctions after its Constitutional Council, headed by an ally of Gbagbo, cancelled hundreds of thousands of votes in Ouattara strongholds, alleging intimidation by northern rebels.
The U.N. envoy, Y.J. Choi, who received copies of the count from almost every polling station, said that even if all the allegations of fraud were true, they still could not have changed the result announced by the election commission.
The vote was meant to heal the wounds of a 2002-03 civil war that split the once-vibrant nation in two. But the process has instead reopened them, leaving at least 15 dead in vote-related violence in the last 10 days and rebel forces on alert.
Ouattara’s party has warned that denying him victory would risk throwing the country back into north-south conflict. A spokesman for the New Forces rebels said on Saturday that they would “not rest long without doing anything” to stop Gbagbo.
Gbagbo’s swearing-in was broadcast live on state television, a day after the head of the armed forces declared his continued allegiance to the incumbent. His win was rejected by France, the United States, United Nations, African Union and West African bloc ECOWAS. Most diplomats boycotted the ceremony.
“I will continue to work with all the countries of the world, but I will never give up our sovereignty,” Gbagbo said to cheers and the sound of vuvuzelas after the ceremony.
The International Monetary Fund said it could not recognise Gbagbo’s presidency unless the United Nations did — a factor that could dash hopes for relief of some $3 billion in debt under the Heavily Indebted Poor Countries programme.
The African Union said earlier it would also take steps against those who tried to undermine the vote result as announced by the electoral commission in favour of Ouattara.
In rejecting the outcome, rival Ouattara has been backed by rebels still running the north of the country after a 2002-03 civil war, and by Prime Minister Guillaume Soro, a former rebel himself, who handed in his resignation to Ouattara.
After Gbagbo was sworn in, Ouattara also said he was president, having submitted a written oath to the Constitutional Council, and called on Soro to name a new government.
U.S. President Barack Obama and French President Nicolas Sarkozy led calls for Gbagbo to hand over power. In an unusually strong endorsement U.N. Secretary General Ban Ki-moon said the world body supported results showing a Ouattara win.
The United Nations is required to sign off on an election victor in Ivory Coast, according to a 2007 peace deal.
Gbagbo, a master at whipping up sentiment against former colonial power France, was openly scornful of the rejections and his camp threatened to expel the U.N. envoy in Ivory Coast.
“I’ve noted some serious cases of interference,” Gbagbo said. “We didn’t ask anyone to come and run our country. Our sovereignty is something I am going to defend.”
Small-scale protests and tyre-burning broke out on Saturday in several towns, including Abidjan and in Bouake in the north.
“We want (Ouattara) as president. We don’t want Gbagbo any more. We are tired of him,” said Bouake resident Samba Diakite.
The AU said it would send former South African president Thabo Mbeki to try to seek a solution to the crisis.
The crisis in Ivory Coast, once West Africa’s brightest economic star, pushed futures prices up 2.41 percent on Friday, and forced up the risk premium on Ivory Coast’s $2.3 billion Eurobond. It yielded 11.67 percent, from below 10 percent after the first election round.
The regional body ECOWAS, led by economic powerhouse Nigeria, also supported Ouattara’s victory.
But diplomats in New York said Russia, whose Lukoil has an exploration block in Ivory Coast, had blocked the U.N. Security Council from also doing so.
The lack of Security Council consensus on the U.N. position could encourage Gbagbo to ignore outside pressure.