Clashes broke out late morning between the Somali army, commanded by the federal government, and forces loyal to Jubbaland state leader Ahmed Madobe, residents in Jubbaland's Balad Hawo district told Reuters.

Jubbaland borders Kenya and is one of five semi-autonomous states in Somalia.

"I see two houses burning," shopkeeper Farah Abdullahi told Reuters from Balad Hawo, just over the border from the Kenya.

Fighters were using anti-aircraft guns and mortars, he said. "Some residents have fled ... the whole town is dead. No business (is) open."

Madobe is a trusted ally of Kenya, which helped build his forces and cement his rule, but is detested by neighboring Ethiopia, which has backed the central government.

Both Kenya and Ethiopia have troops in Somalia as part of an African Union-led peacekeeping force.

The AU peacekeepers, Somali federal government and local states are all supposed to be fighting the al Shabaab insurgency. Instead, some are fighting each other.

The United States warned last week the rivalries were distracting from the war on al Shabaab, which is linked to al Qaeda and has been battling central government since 2008.

Rashid Abdi, a senior analyst on Horn of Africa politics, warned the conflict also risked entangling Somalia's neighbors Ethiopia and Kenya. "The Jubbaland situation can escalate very rapidly," he told Reuters. "It is very likely that it can draw in external actors."

Jubbaland information minister Abdi Hussein Sheikh Mohamed blamed national troops accompanied by Ethiopian troops for attacking Jubbaland forces.

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"If the Somali government continues fighting the Somali states, then al Shabaab will get the chance to capture Somalia," Mohamed said.

Somalia's minister of information did not respond to calls seeking comment. The Ethiopian foreign ministry referred Reuters to the defense ministry, which did not return calls.

Some of Somalia's states accuse the government of meddling in local elections to entrench allies ahead of national polls scheduled for this year.

Jubbaland is particularly important - it borders both Kenya and Ethiopia and is the breadbasket of Somalia while its capital Kismayo is a strategically important port. Kenya helped Madobe oust al Shabaab from Kismayo in 2012.

Monday's fighting was the second clash between Somali federal and state forces in four days. Eleven people were killed on Thursday and Friday in fighting between Somali national forces and the Ahlu Sunnah Wal Jama'a (ASWJ) militia, a group of moderate Sufi Muslims which pushed al Shabaab out of its territory.

(Additional reporting by Abdi Sheikh in Mogadishu and Katharine Houreld in Nairobi; Writing by Elias Biryabarema; Editing by Katharine Houreld and Andrew Cawthorne)