Chechens invade Russia and take 160 hostages

Chechen rebels were threatening the lives of 160 hostages last night after a bloody and audacious raid on a border town which spread the savagery of the Chechnya war into Russia for the first time.

About 100 gunmen, armed with grenade-launchers and sub-machine guns, brought terror to Budennovsk, an industrial town of about 100,000 people in Mikhail Gorbachev's home region of Stavropol, 50 miles north of Chechnya. The rebels raised the green and white Chechen flag over the town hall and sprayed the streets with gunfire.

At least 40 people were reported to have been killed, including 20 policeman. The attackers last night threatened to execute their hostages - 60 hospital patients and 100 local officials - if the Russian military did not halt its six-month war against the secessionist rebels in Chechnya, Itar-Tass news agency reported.

Russia put all its forces in the northern Caucasus on full battle alert, and closed airports in the region. The Russian Interior Ministry, which maintains its own troops, last night rushed soldiers to the town.

The assault on Budennovsk, which followed the fall of Shatoi, the last major rebel stronghold inside Chechnya, could mark the start of what the Chechen leader, Dzhokhar Dudayev, has repeatedly warned would be a Russia- wide campaign of retaliatory terror.

A gun battle between security forces and the hostage-takers left government buildings in flames and scattered bodies through the streets.

The assault began shortly after midday when the heavily armed men stormed the headquarters of the local police, the offices of the Federal Security Bureau, the successor agency to the KGB, and other official buildings. The attackers were reported last night to be still in control of a local hospital. Other reports said they had fled towards Chechnya in stolen buses with at least some of the hostages. Tass said the gunmen had also shot down a Russian

helicopter.

"All hostages ... will be shot dead if Russian troops do not immediately stop combat activities in Chechnya," the Stavropol police quoted the hostage- takers as saying. The exact identity of the gunmen was unclear last night.

The gunmen were said to have driven into Stavropol from Chechnya in two lorries laden with weaponry, avoiding searches at military checkpoints by saying the lorries carried corpses of Russia's war dead. The Interior Minister, Viktor Yerin, rushed to Budennovsk yesterday to oversee security operations and President Boris Yeltsin ordered "all necessary measures" to capture the hostage-takers.

The attack came only hours after the commander of Russia's North Caucasian Military Region, Col Gen Anatoly Kvashnin, said: "The last phase of the mountain war in Chechnya is over," he said. But Mr Dudayev told Itar-Tass last night that "the struggle is not over - it is just taking new forms."