* Yemen deal breaks down despite U.S. pressure
* Protesters threaten more rallies, block key port
SANAA (Reuters) - Last-minute diplomatic wrangling has derailed a deal on a transition of power in Yemen despite growing U.S. pressure on President Ali Abdullah Saleh to agree to the Gulf-brokered plan and relinquish power.
Inspired by uprisings in the Arab world, protesters have rallied across Yemen for months, resisting fierce attempts by state forces to quash their revolt against Saleh's 33-year rule.
Concerned that continued chaos in Yemen could strengthen al Qaeda's local wing, Western and Gulf powers have mapped out a deal paving the way for Saleh's resignation within a month.
The deal had been expected to be signed on Wednesday. It would have granted Saleh immunity from prosecution and allowed him a dignified exit from power in the strategic Arabian Peninsula state.
But the agreement broke down after a dispute over who would sign for the opposition, and the leader of a bloc of Yemen's wealthy oil-exporting Gulf neighbors left Sanaa without securing a deal on Wednesday.
A Yemeni government official told Reuters that a deal was still possible, but it was unclear when talks could resume. "There is still a glimmer of hope," the official said.
"Brennan noted that this transfer of power represents the best path forward for Yemen to become a more secure, unified, and prosperous nation and for the Yemeni people to realize their aspirations for peace and political reform," the statement said.
As diplomatic wrangling unfolded in the capital, protesters blocked the entrance of Yemen's second-largest port of Hudaida on the Red Sea and threatened to carry out more demonstrations.
Sources close to the talks have told Reuters that Saleh wanted the rotating head of the coalition, Yassin Noman, a leftist, to sign the deal. The opposition preferred Mohammed Basindwa, tipped as a possible interim prime minister.
The opposition agreed to have Noman as the first opposition signatory, but also wanted Basindwa to be on a list of signatories. Saleh refused and the deal fell through, the sources said.
MINOR CHANGES TO DEAL
Protesters, frustrated that their daily rallies have failed to dislodge Saleh, want the 69-year-old leader out immediately.
They have threatened to step up their campaign by marching on government buildings, a move that brought new bloodshed last week as security forces fired to stop them.
Many activists were skeptical that the Gulf plan would bring genuine change. "This agreement will annihilate the revolution because Saleh will not implement it," Sanaa activist Meshaal Mujahid said of the new deal, before it fell apart.
Along with the port on the Red Sea, the cities of Ibb, Taiz and Hadramout were also brought to a standstill as most workers complied with a strike aimed at pressuring Saleh to leave.
Saleh, who has outlasted previous attempts to challenge his power, indicated in April he would sign the deal, but refused to put his name to it in the final hours.
He said at the time he would only sign in his capacity as ruling party leader, not as president.
The opposition, including Islamists and leftists, say the deal tentatively agreed on Wednesday contained only minor changes to the April deal, on who would sign and in what capacity.
Political analysts doubt whether the deal will actually be carried out after two previous near-deals also fell through at the last minute.
"I won't believe it until I see it, that's what we learned in Yemen ... Everyone thought that the deal was done a few weeks ago but Saleh found a way to back out in the final hours and days," said Shadi Hamid, analyst at the Brookings Doha Center.
"Saleh is notoriously stubborn. If he signs, maybe we'll actually see a conclusion to the crisis in Yemen and that's what people have been waiting for."