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* Vice-president to lead peace effort, sources say

* Kachin impasse prompts restructuring

* China, Western nations urge end to Kachin fighting

(Adds KIA attack, details)

By Aung Hla Tun

YANGON, April 29 (Reuters) – Myanmar will overhaul its peace

negotiating teams in a bid to settle armed rebellions with

ethnic rebel militias following a failure to end a stubborn

conflict in the strategic Kachin State, sources close to the

process said on Sunday.

President Thein Sein has ordered a shakeup after a lack of a

breakthrough after six rounds of talks with Kachin political

leaders. Fighting between troops and militias has displaced more

than 50,000 people since June.

The reformist president, who appealed to dozens of ethnic

groups in August to start talks, would bring in more senior

people to lead talks as part of his three-stage plan for

“everlasting peace” in a country plagued by decades of unrest.

Two sources close to the government’s peace effort said the

new faces would include one of Thein Sein’s two vice presidents

and top military figures.

“The new team will comprise many members including senior

army officers, parliamentary lawmakers and state chief ministers

and will be led by a vice president,” one source said,

requesting anonymity because the issue was highly sensitive.

The Kachin Independence Army (KIA) is one of the most

powerful rebel groups in Myanmar. Kachin State is crucial to

Myanmar’s economic interests, home to hydropower plants and from

next year, twin gas and oil pipelines from the being built to

feed the growing energy needs of neighbouring China.

Rail Transportation Minister Aung Min, one of the top

negotiators, told reporters in the capital Naypyitaw two

negotiating teams would be consolidated into one, but gave no

further details, a local journalist said. The comments could not

be immediately confirmed.

WESTERN PRESSURE

The need for permanent political deals with the rebels has

been pushed by Western powers as a priority for stability and

economic development. Preliminary ceasefires have been agreed

with at least 10 ethnic political groups or armies in Myanmar.

The Karen National Union (KNU), which waged one of the

world’s longest-running insurgencies until recently, this month

became the first group to begin talks towards a political

agreement. The substance of those talks is expected to be

granting some autonomy if they agree to form political parties.

It was not known exactly who would be brought in or

replaced, the sources said. The two teams are led by Aung Min

and Aung Thaung, a heavyweight in the ruling Union Solidarity

and Development Party (USDP) and former Industry Minister.

Analysts and diplomats say Aung Min’s group has managed to

win the trust of sceptical rebel leaders and enjoyed far more

success than the team led by Aung Thaung, who is considered a

hardliner from the authoritarian military regime that ruled

Myanmar until last year.

Aung Thaung’s team has been in talks with the Kachin

Independence Army and its political wing, the Kachin

Independence Organisation, but the dialogue towards a ceasefire

in the murky conflict has been fruitless.

State media said three local government officials were

killed and three were missing following a KIA attack on an

administrative office in Sadon, Kachin State, on Saturday.

Rebels also destroyed vehicles and a bridge, newspapers said.

The international community has repeatedly called for

restraint on both sides, while rights groups say the military,

which Thein Sein has instructed not to attack the KIA, has

committed a litany of rights abuses, including rape, forced

labour and extrajudicial killings.

(Writing by Martin Petty; Editing by Nick Macfie)