ADDIS ABABA, Sept 22 (Reuters) - An Ethiopian rebel group denied on Tuesday it is helping Islamist militants in neighbouring Somalia who are waging a violent rebellion against the country's U.N.-backed government.

Al Shaabab, the main rebel group that Washington says is al Qaeda's proxy in Somalia, on Sunday seized control of Yeed town on the border with Ethiopia from Somali government forces in fighting that killed at least 14 people.

A local governor said militiamen from the Ethiopian Ogaden National Liberation Front (ONLF) helped al Shaabab drive out government forces in the attack.

But the ONLF denied the reports of cooperation.

"The Ogaden National Liberation Front has no relationship whatsoever with al Shaabab, which on several occasions has assassinated ONLF members," it said in a statement.

"ONLF does not interfere in the internal affairs of Somalia and in fact has so far supported the new transitional government, although aware of the deep involvement of Ethiopia with some warlords working with the current government."

Ethiopia entered Somalia in late 2006 to topple an Islamist movement in the capital Mogadishu. The intervention sparked an insurgency that is still raging despite the fact Ethiopian troops pulled out in January. ONLF said the report linking it with al Shaabab was a plot by Addis Ababa to discredit it.

Regional analysts say the ONLF and al Shaabab gunmen have clashed on the border several times in recent years.

Ethiopia denounces the ONLF -- which demands independence for the ethnic Somali eastern Ogaden region -- as a terrorist group supported by long-time archrival Eritrea.

Ethiopia and Somalia have a long history of hostilities over Ogaden and fought a war over the region in the 1907s.

Foreign oil and gas companies have long eyed the Ogaden which they believe may be rich in mineral deposits.

The rebels warned companies last week against exploring the region. In 2007, the ONLF attacked an oil exploration field owned by a subsidiary of Sinopec, China's biggest petrochemicals producer.

The separatist cause has been fuelled by the region's low level of development. Until Chinese engineers arrived in the remote region in 2007, the entire area had only 30 km (20 miles) of tarmac road.

Source: Reuters