* Hadi in luxury hotel guarded by Gulf troops

* Separatist gunmen in the streets

* Hadi may be judged quickly on restart of services

* Long queues form for petrol

* Al Qaeda waiting in the wings

By Angus McDowall

ADEN, Sept 27 (Reuters) - Aden's al-Qasr Hotel is the temporary home of Yemen's President Abd-Rabbu Mansour Hadi after his return from exile in Saudi Arabia last week, but the flag raised above its entrance is not that of his own government but that of a separatist movement.

Hadi and his Gulf backers hope that further victories in a war against the northern Houthis and army units loyal to former president Ali Abdullah Saleh will let him leave Yemen's second city and return to the presidential palace in the capital Sanaa.

Beyond the barbed wire serving as a gate, rolled backed by a fighter in sarong and sandals, and inside the hotel's sandbagged outer walls, the uniformed troops and armoured vehicles guarding Yemen's president are all from Gulf countries.

That reliance on both foreign forces and a ragtag collection of local militias whose loyalty to Hadi appears limited and conditional underscores the difficulties facing his government as it regains notional control over parts of Yemen.

As Gulf-backed forces assemble in Marib province east of Sanaa ahead of a widely expected thrust towards the Houthi-held capital, the fate of Aden and its hinterland may offer a glimpse at whether some form of central government can be resurrected.

"Now all people are waiting to see what the president can do for the people," said Mohammed Saadi, a cardiologist, southern separatist politician and resistance leader. "If he cannot do anything, it will be war, like Syria, like Libya."

For his Gulf backers, returning Hadi to Yemen represented a moment of vindication for their campaign, part of a wider struggle by Sunni Gulf states against what they see as meddling by Iran's Shi'ite theocracy, a charge Tehran denies.

But a brief tour of the chaotic city shows how fragile the campaign's military success has been and how fleeting its moment of partial triumph may prove. More than 4,500 people have been killed in Yemen since March, according to U.N. figures.

Just outside the hotel, lolling in the shade of acacia trees, are the groups of young armed men who did the fighting in the civil war, and whose civilian clothes and casual air belie the fact that it is now they who control the streets.



TRIBAL LEADERS

Beyond the al-Qasr's faux Arabian facade, faintly resembling the adobe towers common in parts of Yemen, government ministers, tribal sheikhs and resistance leaders gossip over milky tea while Emirati troops lounge behind the reception desk.

At the end of a long corridor, past a couple of men in suits standing at a doorway, Hadi is holding a meeting with tribal leaders in an anteroom, sitting at the head of a long table under a portrait of himself and next to a Yemeni flag.

It was the only Yemeni national flag that Reuters saw in a day in the city on a trip arranged by the Saudi army. Elsewhere, the flags in the city were those of the former South Yemen, which united with the north in 1990 and which many southerners wish to resurrect as an independent state.

Some Yemenis say opposition to the Houthis seems the only thing Hadi had in common with the southern separatists who fought on his side in Aden, where separatist pressure has grown more insistent since the outbreak of war.

Hadi's airlocked surroundings are not all that different to those of Riyadh's guest palace, his previous seat of government.

But out of the windows here at least, he can see the volcanic crags rising over Tawahi district on Aden's peninsula.

It was in Tawahi that some men assembled to wave al Qaeda flags soon after the fighting stopped in Aden in July, a reminder that the militant group is waiting in the shadows to pounce if Hadi is unable to restore stability.

"The al Qaeda movement is under the table, but is there in Tawahi, and Crater and Mansoura," the separatist Saadi said, referring to districts in Aden. "I know some of its people, some of its leaders. They sit down with you, but you know that they have something behind their minds."

Hadi has been holding constant meetings with resistance leaders and tribal sheikhs. All who come offer soldiers. Such fighters will be paid by the Yemeni government and its Gulf backers, a way in which Hadi is trying to ensure some loyalty from young fighters.



PANDEMONIUM

On a nearby road, the queue for the petrol station ran two cars deep about 150 metres in both directions.

Up close it was a study in pandemonium. Cars tried to push inside from all directions and those that had already filled up struggled to leave amid furious horn honking and insult hurling.

A little way back, a few young men had set up their own ad hoc fuel market in the shade of a tree, and stood, lengths of hosepipe in their hands and plastic jerrycans of petrol at their feet, haggling with drivers.

Petrol started to be distributed in large quantities only last week, according to both the men at the fuel station and a government official in the Qasr hotel.

Now in a city without police, every car in Aden is attempting to fill up.

"The problem is the ministry of petroleum. They don't distribute to all the stations, just to a few," said Salem Abdullah, an elder armed man with hennaed beard inside the petrol station, to whom other fighters deferred and who described himself simply as an official without further explanation.

Others there started debating whether the ministry was indeed to blame for the fuel shortage. But whether correct or not, the assumption showed that Hadi may be judged quickly on the performance of a government that still barely exists.

Behind Abdullah, deeper into the petrol station, an argument was escalating with voices being raised to shouts among a group of young men who all carried assault rifles.

It was a reminder that while vital supplies are starting to return to the city, the situation remains highly volatile. Real security depends not on the Gulf coalition but on thousands of civilians with guns.

Meanwhile, the cost of bullets is rising, said Saadi, speculating that militias were starting to hoard ammunition because they saw another war coming on the horizon.

(Editing by William Maclean and Peter Graff) ((william.maclean@thomsonreuters.com ; +97143664253; Reuters Messaging: william.maclean.thomsonreuters.com@reuters.net: Twitter: @WMacleanR))