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The UN Security Council has said that it is ready to take "further steps", which could mean new sanctions, if Yemen's Shia Houthi group does not immediately return to UN-led negotiations on a democratic transition.

The council expressed "grave concern" in a statement on Friday afternoon at the announcement that the Houthis were taking over the impoverished Arabian Peninsula country and dissolving parliament.

In a televised statement from the Republican Palace in the capital Sanaa, the Houthi group said that it would set up a five-member "presidential council" and a transitional national council of 551 members to replace the dissolved legislature.

The "constitutional declaration", attended by tribal and military representatives as well as by the outgoing interior and defence ministers, came after a Wednesday deadline set by the group for political parties to resolve the crisis passed with no agreement.

The Security Council "called in the strongest terms for all parties, in particular the Houthis" to abide by regional and national dialogue initiatives for a democratic transition.

The US, for its part, said it was "deeply concerned" by the developments in the country, saying that the move by the Houthis did not meet the standards set by the UN envoy to Yemen.

The Houthis swept into Sanaa from their northern stronghold last September.

Sectarian divide

Last month, the Houthis seized the presidential palace and key government buildings in what authorities called a coup attempt.

Al Jazeera's Hashem Ahelbarra, who has reported extensively from Yemen, said "the spectacular rise of the Houthis" could further fuel sectarian tensions in the country.

Who are the Houthis?

"This is going to be seen by the Sunnis in the country as a Shia takeover of Yemen ... [which will] definitely exacerbate the sectarian divide in the country," he said.

The Houthis are holding deposed President Abd Rabbu Mansour Hadi, who tendered his resignation following the group's takeover of the presidential palace in January, and his cabinet under house arrest.

The Security Council called for their immediate release.

Friday's announcement came after days of failed talks sponsored by the UN envoy to Yemen, Jamal Benomar.

Benomar reportedly left Yemen for Saudi Arabia on Friday.

According to senior politicians who attended the talks, the Houthis insisted on the formation of a presidential council with representatives from northern and southern Yemen.

Yemeni political parties demanded assurances that the formation of the council will go hand in hand with a withdrawal of Houthi forces from key institutions and the release of Hadi and cabinet members.

Other parties in the talks wanted the parliament to convene and possibly announce early elections, which the Houthis opposed, claiming the parliament had no legitimacy and that its mandate had expired.

Source: Al Jazeera and agencies