Hostage toll to rise after Algeria ends desert siege

ALGIERS/IN AMENAS, Algeria (Reuters) - Algeria warned on Sunday that the hostage death toll from a siege at a desert gas plant would rise, after its troops staged a final assault which killed all the remaining Islamist gunmen.

Britain said at least three of its citizens had been killed in the crisis, ended when Algerian special forces stormed the In Amenas plant on Saturday. France acknowledged the death toll would be high but cautioned against criticizing Algeria's military response, saying it had faced an intolerable situation.

Algeria's Interior Ministry had reported on Saturday that 23 hostages and 32 militants were killed during assaults launched by Algerian special forces to end the crisis, with 107 foreign hostages and 685 Algerian hostages freed.

However, Minister of Communication Mohamed Said said this would rise when final numbers were issued in the next few hours. "I am afraid unfortunately to say that the death toll will go up," Said was quoted as saying by the official APS news agency.

Details are only slowly emerging on what happened during the siege, which marked a serious escalation of unrest in northwestern Africa, where French forces are battling Islamist militants across the Sahara desert in Mali.

In London, Prime Minister David Cameron said that British citizens were among the dead. "Tragically we now know that three British nationals have been killed and a further three are believed to be dead and also a further British resident is also believed to be dead," Cameron said in a televised statement.

One Briton had already was confirmed killed when the gunmen seized the hostages before dawn on Wednesday at the plant, run by Norway's Statoil along with Britain's BP and Algeria's state oil company.

The Islamists' attack has tested Algeria's relations with the outside world, exposed the vulnerability of multinational oil operations in the Sahara and pushed Islamist radicalism in northern Africa to centre stage.

French Foreign Minister Laurent Fabius defended Algeria's handling of the crisis, after some governments expressed frustration that they had been kept in the dark.

"What everyone needs to know is that these terrorists who attacked this gas plant are killers who pillage, rape, plunder and kill. The situation was unbearable," Fabius said.

"It's easy to say that this or that should have been done. The Algerian authorities took a decision and the toll is very high but I am a bit bothered ... when the impression is given that the Algerians are open to question. They had to deal with terrorists," he told Europe 1 radio in an interview.

MULTINATIONAL HOSTAGE-TAKERS

The Islamist militants seized the remote compound near the Libyan border, taking a large number of hostages. Said reported that the militants had six different nationalities and the operation to clear the plant of mines laid by the hostage-takers was still under way.

Believed to be among the 32 dead militants was their leader, Abdul Rahman al-Nigeri, a Nigerien close to al Qaeda-linked commander Mokhtar Belmokhtar, presumed mastermind of the raid.

One American has also been confirmed dead. Statoil said five of its workers, all Norwegian nationals, were still missing. Japanese and American workers are also unaccounted for.

Some Western governments expressed frustration at not being informed of the Algerian authorities' plans to storm the complex. Algeria, scarred by a civil war with Islamist insurgents in the 1990s which claimed 200,000 lives, had insisted there would be no negotiation in the face of terrorism.

President Barack Obama said on Saturday the United States was seeking from Algerian authorities a fuller understanding of what took place, but said "the blame for this tragedy rests with the terrorists who carried it out".

British Foreign Secretary William Hague declined to confirm newspaper reports that some hostages had been executed in cold blood. "We don't know that definitively. That sort of thing is quite likely to have happened," he said, noting "the nature of the terrorists involved".

BP's chief executive Bob Dudley said on Saturday four of its 18 workers at the site were missing. The remaining 14 were safe.

PLANNED BEFORE FRENCH LANDED IN MALI

The militant attack was one of the most audacious in recent years and almost certainly planned before French troops launched the operation in Mali this month to stem an advance by Islamist fighters.

Hundreds of hostages escaped on Thursday when the army launched a rescue operation, but many hostages were killed.

Before the Interior Ministry released its provisional death toll, an Algerian security source said eight Algerians and at least seven foreigners were among the victims, including two Japanese, two Britons and a French national.

The U.S. State Department said on Friday one American, Frederick Buttaccio, had died but gave no further details.

Mauritanian news agencies identified the field commander of the group that attacked the plant as Nigeri, a fighter from one of the Arab tribes in Niger who had joined the Algerian Salafist Group for Preaching and Combat (GSPC) in early-2005.

That group eventually joined up with al Qaeda to become Al Qaeda in the Islamic Maghreb (AQIM). It and allied groups are the targets of the French military operation in Mali.

The news agencies described him as "one of the closest people" to Belmokhtar, who fought in Afghanistan and then in Algeria's civil war of the 1990s. Nigeri was known as a man for "difficult missions", having carried out attacks in Mauritania, Mali and Niger.

The apparent ease with which the fighters swooped in from the dunes to take control of an important energy facility, which produces some 10 percent of the natural gas on which Algeria depends for its export income, has raised questions over the country's outwardly tough security measures.

Algerian officials said the attackers may have had inside help from among the hundreds of Algerians employed at the site.

Security in the half-dozen countries around the Sahara desert has long been a preoccupation of the West. Smugglers and militants have earned millions in ransom from kidnappings.

The most powerful Islamist groups operating in the Sahara were severely weakened by Algeria's secularist military in the civil war in the 1990s. But in the past two years the regional wing of al Qaeda gained fighters and arms as a result of the civil war in Libya, when arsenals were looted from Muammar Gaddafi's army.

(Additional reporting by Balazs Koranyi in Oslo, Estelle Shirbon and David Alexander in London, Brian Love in Paris; Writing by Giles Elgood, Myra MacDonald and David Stamp; Editing by Alison Williams)

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Foreigners still trapped in Sahara hostage crisis

ALGIERS/IN AMENAS, Algeria (Reuters) - More than 20 foreigners were captive or missing inside a desert gas plant on Saturday, nearly two days after the Algerian army launched an assault to free them that saw many hostages killed.

The standoff between the army and al Qaeda-linked gunmen - one of the biggest international hostage crises in decades - entered its fourth day, having thrust Saharan militancy to the top of the global agenda.

The number and fate of victims has yet to be confirmed, with the Algerian government keeping officials from Western countries far from the site where their countrymen were in peril.

Reports put the number of hostages killed at between 12 to 30, with possibly dozens of foreigners still unaccounted for - among them Norwegians, Japanese, Britons, Americans and others.

The U.S. State Department said on Friday one American, Frederick Buttaccio, had died but gave no further details.

On Saturday, the Algerian military was holding the vast residential barracks at the In Amenas gas processing plant, while gunmen were holed up in the industrial plant itself with an undisclosed number of hostages, making it difficult for Algerian special forces to intervene.

The army is surrounding the plant, and helicopters are monitoring the area, Algerian state radio said, quoting a reporter in the city of In Amenas.

Scores of Westerners and hundreds of Algerian workers were inside the heavily fortified compound when it was seized before dawn on Wednesday by Islamist fighters who said they wanted a halt to a French military operation in neighboring Mali.

Hundreds escaped on Thursday when the army launched an operation, but many hostages were killed in the assault. Algerian forces destroyed four trucks holding hostages, according to the family of a Northern Irish engineer who escaped from a fifth truck and survived.

Leaders of Britain, Japan and other countries have expressed frustration that the assault was ordered without consultation and officials have grumbled at the lack of information. Many countries also withheld details about their missing citizens to avoid releasing information that might aid the captors.

An Algerian security source said 30 hostages, including at least seven Westerners, had been killed during Thursday's assault, along with at least 18 of their captors. Eight of the dead hostages were Algerian, with the nationalities of the rest of the dead still unclear, he said.

Algeria's state news agency APS put the total number of dead hostages at 12, including both foreigners and locals.

The base was home to foreign workers from Britain's BP, Norway's Statoil and Japanese engineering firm JGC Corp and others.

Norway says eight Norwegians are still missing. JGC said it was missing 10 staff. Britain and the United States have said they have citizens unaccounted for but have not said how many.

The Algerian security source said 100 foreigners had been freed but 32 were still unaccounted for.

"We must be prepared for bad news this weekend but we still have hope," Norwegian Prime Minister Jens Stoltenberg said.

A U.S. official said on Friday a U.S. flight carrying wounded people from many countries had left Algeria, without giving further details.

The attack has plunged international capitals into crisis mode and is a serious escalation of unrest in northwestern Africa, where French forces have been in Mali since last week fighting an Islamist takeover of Timbuktu and other towns.

"We are still dealing with a fluid and dangerous situation where a part of the terrorist threat has been eliminated in one part of the site, but there still remains a threat in another part," British Prime Minister David Cameron told his parliament.

Two Japanese, two Britons and a French national were among the seven foreigners confirmed dead in the army's storming, the Algerian security source told Reuters. One British citizen was killed when the gunmen seized the hostages on Wednesday.

"(The army) is still trying to achieve a ‘peaceful outcome' before neutralizing the terrorist group that is holed up in the (facility) and freeing a group of hostages that is still being held," Algeria's state news agency said on Friday, quoting a security source.

MULTINATIONAL INSURGENCY

Algerian commanders said they moved in on Thursday about 30 hours after the siege began, because the gunmen had demanded to be allowed to take their captives abroad.

A French hostage employed by a French catering company said he had hidden in his room for 40 hours under the bed before he was rescued by Algerian troops, relying on Algerian employees to smuggle him food with a password.

"I put boards up pretty much all round," Alexandre Berceaux told Europe 1 radio. "I didn't know how long I was going to stay there ... I was afraid. I could see myself already ending up in a pine box."

The captors said their attack was a response to the French military offensive in neighboring Mali. However, some U.S. and European officials say the elaborate raid probably required too much planning to have been organized from scratch in the single week since France first launched its strikes.

Paris says the incident proves its decision to fight Islamists in neighboring Mali was necessary.

Security in the half-dozen countries around the Sahara desert has long been a preoccupation of the West. Smugglers and militants have earned millions in ransom from kidnappings.

The most powerful Islamist groups operating in the Sahara were severely weakened by Algeria's secularist military in a civil war in the 1990s. But in the past two years the regional wing of Al Qaeda gained fighters and arms as a result of the civil war in Libya, when arsenals were looted from Muammar Gaddafi's army.

Al Qaeda-linked fighters, many with roots in Algeria and Libya, took control of northern Mali last year, prompting the French intervention in that poor African former colony.

The apparent ease with which the fighters swooped in from the dunes to take control of an important energy facility, which produces some 10 percent of the natural gas on which Algeria depends for its export income, has raised questions over the value of outwardly tough Algerian security measures.

Algerian officials said the attackers may have had inside help from among the hundreds of Algerians employed at the site.

U.S. Defense Secretary Leon Panetta said those responsible would be hunted down: "Terrorists should be on notice that they will find no sanctuary, no refuge, not in Algeria, not in North Africa, not anywhere. ... Those who would wantonly attack our country and our people will have no place to hide."

(Additional reporting by Ali Abdelatti in Cairo, Eamonn Mallie in Belfast, Gwladys Fouche in Oslo, Mohammed Abbas in London, Padraic Halpin and Conor Humphries in Dublin, Andrew Quinn and David Alexander in Washington; Editing by Giles Elgood)

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Sahara hostage holders make new threat

ALGIERS (Reuters) - At least 22 foreign hostages were unaccounted for on Friday and their al-Qaeda-linked captors threatened to attack other energy installations after Algerian forces stormed a desert gas complex to free hundreds of captives, resulting in dozens of deaths.

With Western leaders clamoring for details of the assault they said Algeria had launched on Thursday without consulting them, a local source said the gas base was still surrounded by Algerian special forces and some hostages remained inside.

Thirty hostages, including several Westerners, were killed during the storming, the source said, along with at least 11 of their captors, who said they had taken the site as retaliation for French intervention against Islamists in neighboring Mali.

The crisis represents a serious escalation of unrest in North Africa, where French forces have been in Mali since last week to fight an Islamist takeover of the north, and strikes a heavy blow to Algeria's vital oil industry, just recovering from years of civil war.

Fourteen Japanese were among those still unaccounted for by the early hours of Friday, their Japanese employer said, while Norwegian energy company Statoil, which runs the Tigantourine gas field with Britain's BP and Algeria's national oil company, said eight Norwegian employees were still missing.

A French hostage employed by a French catering company said Algerian military forces were combing the sprawling In Amenas site for hostages when he was escorted away by the military.

"They are still counting them up," Alexandre Berceaux told Europe 1 radio.

The crisis posed a serious dilemma for former colonial power Paris and its allies as French troops attacked the hostage-takers' al Qaeda allies in Mali, another former colony.

The kidnappers warned Algerians to stay away from foreign companies' installations in the OPEC-member oil and gas producing state, threatening more attacks, Mauritania's news agency ANI said, citing a spokesman for the group.

Algerian workers form the backbone of an oil and gas industry that has attracted international firms in recent years partly because of military-style security. The kidnapping, storming and further threat cast a deep shadow over its future.

An Irish engineer who survived said he saw four jeeps full of hostages blown up by Algerian troops whose commanders said they moved in about 30 hours after the siege began because the gunmen had demanded to be allowed to take their captives abroad.

Two Japanese, two Britons and a French national were among at least seven foreigners killed, the source told Reuters. Eight dead hostages were Algerian. The nationalities of the rest, and the perhaps dozens more who escaped, were unclear. Some 600 local Algerian workers, less well guarded, survived.

Norwegian Foreign Minister Espen Barth Eide said his country still did not know the fate of eight of 13 Norwegian hostages taken. "As we understand it, the operation is still ongoing," he told Britain's BBC broadcaster.

Japanese Prime Minister Shinzo Abe has cancelled part of his trip in Southeast Asia, his first overseas trip since taking office, and will fly home due to the hostage crisis, Japan's senior government spokesman said on Friday.

"The action of Algerian forces was regrettable," said Japan's Chief Cabinet Secretary Yoshihide Suga, adding Tokyo had not been informed of the operation in advance.

Their governments say Americans, Romanians and an Austrian have also been captured by the militants, who have demanded France end its week-old offensive in Mali.

A U.S. plane landed near the plant to evacuate hostages, the local source said on Friday.

Underlining the view of African and Western leaders that they face a multinational Islamist insurgency across the Sahara - a conflict that prompted France to send hundreds of troops to Mali last week - the official source said only two of the 11 dead militants were Algerian, including the squad's leader.

The bodies of three Egyptians, two Tunisians, two Libyans, a Malian and a Frenchman - all assumed to have been hostage-takers - were found, the security source said.

The group had claimed to have dozens of guerrillas on site, and it was unclear whether any militants had managed to escape.

The overall commander, Algerian officials said, was Mokhtar Belmokhtar, a veteran of Afghanistan in the 1980s and Algeria's bloody civil war of the 1990s. He appears not to have been present and has now risen in stature among a host of Saharan Islamists, flush with arms and fighters from chaotic Libya, whom Western powers fear could spread violence far beyond the desert.

Algerian security specialist Anis Rahmani, author of several books on terrorism and editor of Ennahar daily, told Reuters about 70 militants were involved from two groups, Belmokhtar's group, who travelled from Libya, and the lesser known "Movement of the Islamic Youth in the South".

"They were carrying heavy weapons including rifles used by the Libyan army during (Muammar) Gadaffi's rule. They also had rocket-propelled grenades and machine guns."

"NO TO BLACKMAIL"

Algeria's government made clear it is implacably at odds with Islamist guerrillas who remain at large in the south, years after the civil war in which some 200,000 people died. Communication Minister Mohamed Said repeated their refusal ever to negotiate with hostage-takers.

"We say that in the face of terrorism, yesterday as today as tomorrow, there will be no negotiation, no blackmail, no respite in the struggle against terrorism," he told APS news agency.

British Prime Minister David Cameron, who warned people to prepare for bad news and who cancelled a major policy speech on Friday to deal with the situation, said through a spokesman that he would have liked Algeria to have consulted before the raid.

A Briton and an Algerian were also killed on Wednesday.

French hostage Berceaux said he had hidden for nearly 40 hours in a room separately from other foreign hostages, surviving on supplies brought to him by Algerian colleagues.

"When the military came to get me, I did not know whether it was over," said Alexandre Berceaux. "They arrived with (my Algerian) colleagues, otherwise I would never have opened the door."

U.S. officials had no clear information on the fate of Americans, though a U.S. military drone had flown over the area. Washington, like its European allies, has endorsed France's move to protect the Malian capital by mounting air strikes last week and now sending 1,400 ground troops to attack Islamist rebels.

A U.S. official said on Thursday it would provide transport aircraft to help France with a mission whose vital importance, President Francois Hollande said, was demonstrated by the attack in Algeria. Some fear, however, that going on the offensive in the remote region could provoke more bloodshed closer to home.

The apparent ease with which the fighters swooped in from the dunes to take control of an important energy facility, which produces some 10 percent of the natural gas on which Algeria depends for its export income, has raised questions over the value of outwardly tough security measures.

(Additional reporting by Ali Abdelatti in Cairo, Eamonn Mallie in Belfast, Gwladys Fouche in Oslo, Mohammed Abbas in London and Padraic Halpin and Conor Humprhies in Dublin; writing by Alastair Macdonald and Philippa Fletcher; editing by Peter Millership, Michael Perry and Will Waterman)

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Some hostages reported to escape Sahara siege

ALGIERS/BAMAKO (Reuters) - Some hostages were reported to have escaped from a remote Algerian gas plant on Thursday, where dozens of foreigners and scores of Algerians were seized by Islamist gunmen demanding a halt to a French military campaign in neighboring Mali.

Governments around the world were holding emergency meetings to respond to one of the biggest international hostage crises in decades, which sharply raises the stakes over the week-old French campaign against al Qaeda-linked rebels in the Sahara.

Algeria's Ennahar television said 15 foreigners, including two French citizens, had escaped the besieged plant deep in the Sahara desert. About 40 Algerians had also been freed, mainly women working as translators, it said.

A security source told Reuters the captors, encircled by Algerian troops, were demanding safe passage out with their prisoners. Algeria has refused to negotiate.

A group calling itself the "Battalion of Blood" says it seized 41 foreigners, including Americans, Japanese and Europeans, after storming a natural gas pumping station and employee barracks before dawn on Wednesday.

The attackers have demanded an end to the French military campaign in Mali, where hundreds of French paratroops and marines are launching a ground offensive against rebels a week after Paris began firing on militants from the air.

Algerian Interior Minister Daho Ould Kablia said the raid was led by Mokhtar Belmokhtar, a veteran Islamist guerrilla fighter who fought Soviet forces in Afghanistan in the 1980s and had recently set up his own group in the Sahara after falling out with other local al Qaeda leaders.

A holy warrior-cum-smuggler dubbed "The Uncatchable" by French intelligence and "Mister Marlboro" by some locals for his illicit cigarette-running business, Belmokhtar's links to those who seized towns across northern Mali last year are unclear.

The hostage takers appear to have allowed some prisoners to speak to the media to put pressure on Algerian forces not to storm the compound. An unidentified hostage who spoke to France 24 television said prisoners were being forced to wear explosive belts. Their captors were heavily armed and had threatened to blow up the plant if the Algerian army tried to storm it.

"They attacked the two sites at the same time. They went inside, and once it was daylight they gathered everyone together," the man, who sounded calm, said in the only part of the phone call the French broadcaster aired.

Another hostage, identified as British, spoke to Al Jazeera television and called on the Algerian army to withdraw from the area to avoid casualties.

"We are receiving care and good treatment from the kidnappers. The (Algerian) army did not withdraw and they are firing at the camp," the man said. "There are around 150 Algerian hostages. We say to everybody that negotiations is a sign of strength and will spare many any loss of life."

Another hostage, identified as Irish, told the Qatar-based channel the hostages included French, American, Japanese, British, Irish and Norwegian citizens.

"The situation is deteriorating. We have contacted the embassies and we call on the Algerian army to withdraw ... We are worried because of the continuation of the firing."

After what it said was a phone interview with one of the hostage takers, the Mauritanian news agency ANI said Algerian security forces had tried to approach the facility at dawn.

"We will kill all the hostages if the Algerian army try to storm the area," it quoted the hostage taker as saying. Algeria has not commented on reports its troops tried to approach.

NUMBERS UNCONFIRMED

The precise number and nationalities of foreign hostages could not be confirmed, with some countries reluctant to release information that could be useful to the captors.

British Foreign Secretary William Hague confirmed one British citizen had been killed and "a number" of others were among those held. Algerian media said an Algerian was killed in the assault. Another local report said a Frenchman had died.

The militants said seven Americans were among their hostages, a figure U.S. officials said they could not confirm.

Norwegian oil company Statoil said nine of its Norwegian staff and three Algerian employees were captive. Britain's BP, which operates the plant with Statoil and Algerian state oil company Sonatrach, said some of its staff were held but would not say how many or their nationalities.

Japanese media said five workers from Japanese engineering firm JGC Corp. were held. France has not confirmed whether any French citizens were captive. Vienna has said one hostage is an Austrian working for BP.

"This is a dangerous and rapidly developing situation," Britain's Hague told reporters in Sydney.

U.S. Defense Secretary Leon Panetta said Washington "will take all necessary and proper steps that are required to deal with this situation". Japan's Prime Minister Shinzo Abe said "Japan will never tolerate such an act".

France's ambassador to Mali, Christian Rouyer, said the attack in Algeria demonstrated that the French were right on the need to intervene in Mali.

"We have the flagrant proof that this problem goes beyond just the north of Mali," Rouyer told France Inter radio. "Northern Mali is at heart of the problem, of course, but the dimension is really national and international, which gives even more justification to the French intervention."

Hollande has received backing from Western and African allies who fear that al Qaeda, flush with men and arms from the defeated forces of Libya's Muammar Gaddafi, is building a desert haven in Mali, a poor country that was helpless to combat fighters who seized its northern cities last year.

The Algerian government has ruled out negotiating with the hostage takers, and the United States and other Western governments condemned the attack on a facility that produces 10 percent of Algeria's gas, much of which is pumped to Europe.

The militants, communicating through established contacts with media in neighboring Mauritania, said they had dozens of men armed with mortars and anti-aircraft missiles in the compound and had rigged it with explosives.

They said they had repelled a raid by Algerian forces after dark on Wednesday. There was no government comment on that. Algerian officials said earlier about 20 gunmen were involved.

GOVERNMENTS HELD RESPONSIBLE

"We hold the Algerian government and the French government and the countries of the hostages fully responsible if our demands are not met, and it is up to them to stop the brutal aggression against our people in Mali," read one statement carried by Mauritanian media.

They condemned Algeria's secularist government for letting French warplanes fly over its territory to Mali. They also accused Algeria of shutting its border to Malian refugees.

Regis Arnoux, head of CIS, a French catering firm operating at the site, told BFM television he had been in touch with a manager of some 150 Algerian workers there. Local staff were being prevented from leaving but were otherwise free to move around inside and keep on working.

"The Westerners are kept in a separate wing of the base," Arnoux said. "They are tied up and are being filmed. Electricity is cut off, and mobile phones have no charge.

"Direct action seems very difficult ... Algerian officials have told the French authorities as well as BP that they have the situation under control and do not need their assistance."

Japan's JGC Corp. said in a statement it was cooperating with the government and would not comment on the number of its employees kidnapped.

In Mali, France said on Wednesday its forces were about to launch a ground assault on the rebels they began targeting from the air last week. Residents said a column of about 30 French Sagaie armored vehicles set off toward rebel positions from the town of Niono, 300 km (190 miles) from the capital, Bamako.

The French action has widespread international support. Neighboring African countries are expected to provide ground troops soon. Germany, Britain and the Netherlands have offered transport aircraft. Washington has said it is considering what kind of support it can offer France.

Many inhabitants of northern Mali have welcomed the French attacks, though some also fear being caught in the cross-fire. The Mali rebels who seized Timbuktu and other oasis towns in northern Mali last year imposed Islamic law, including public amputations and beheadings that angered many locals.

"There is a great hope," one man said from Timbuktu, where he said Islamist fighters were trying to blend into civilian neighborhoods. "We hope that the city will be freed soon."

The rebels include fighters from al Qaeda's mainly Algerian-based North African wing AQIM as well as home-grown Malian groups Ansar Dine and MUJWA. Islamists have warned Hollande that he has "opened the gates of hell" for all French citizens.

A day after launching the campaign in Mali, Hollande also ordered a raid in Somalia on Saturday to free a French hostage held there by al Qaeda-linked al Shabaab militants since 2009. That rescue was a failure, with two French commandos killed.

Al Shabaab said on Thursday it had executed its hostage, Denis Allex. France says it believes Allex died in the rescue attempt.

(Additional reporting by Pascal Fletcher, Andrew Callus and Dmitry Zhdannikov in London, Balazs Koranyi in Oslo, Laurent Prieur in Nouakchott, Daniel Flynn in Dakar, John Irish, Catherine Bremer, Marine Pennetier, and Nick Vinocur in Paris, David Alexander in Rome, Andrew Quinn in Washington, Jane Wardell in Sydney, Omar Fahmy in Cairo, Mirna Sleiman in Dubai and Kaori Kaneko in Tokyo; Writing by Peter Graff; Editing by Will Waterman)

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Syrian army on offensive in Aleppo after university blast

BEIRUT (Reuters) - Syrian armed forces launched a renewed offensive in the northern city of Aleppo on Wednesday, state media said, a day after 87 people were killed in explosions at the city's university.

The state news agency SANA said the military had killed dozens of "terrorists" - a term Damascus uses for rebels trying to overthrow President Bashar al-Assad - in the new fighting.

Reuters cannot independently verify reports due to media restrictions in Syria.

"The Armed Forces carried out several special operations against the mercenary terrorists in Aleppo and its countryside, inflicting heavy losses upon them in several areas," SANA said.

Aleppo is split roughly in half between government and rebel forces. SANA said dozens of "terrorists" were killed in the rebel strongholds of Sukari, Bab al-Hadeed and Bustan al-Qasr.

Government forces also killed militants in al-Laramon, a area of Aleppo from which Damascus says two rockets were fired into the University of Aleppo on Tuesday, it added.

If confirmed, the government's report of a rocket attack would suggest rebels in the area had been able to obtain and deploy more powerful weapons than previously used.

The Syrian Observatory for Human Rights, a Britain-based monitoring group, said 87 people were killed and dozens wounded in the explosions, but it could not identify the source of the blasts. It said the toll could rise to more than 100 as there were still body parts that were unaccounted for.

State television showed a body lying on the street and burning cars. An entire facade of a multi-story university building had crumbled and cars were overturned. An interior shot of a corridor showed that the ceiling had caved in.

Amateur video footage showed students carrying books out of the university after one of the explosions, walking quickly away from rising smoke. The camera then shakes to the sound of another explosion and people begin to run.

Syria has been plunged into bloodshed since a violent government crackdown in early 2011 on peaceful demonstrations for democratic reform which turned the unrest into an armed insurgency bent on overthrowing Assad.

Each side in the 22-month-old conflict blamed the other for Tuesday's blasts at the university, located in a government-held area of Syria's most populous city.

Some activists in Aleppo said a government air strike caused the explosions, while state television accused terrorists of firing two rockets at the university. A rebel fighter said the blasts appeared to have been caused by surface-to-surface missiles.

The nearest rebel-controlled area, Bustan al-Qasr, is more than a mile away from the university.

The Observatory said rebel sources on the ground reported they were fighting with government forces in the early hours of Wednesday around Bustan al-Qasr, implying a renewed push by government forces to expel the insurgents.

(Reporting by Oliver Holmes; Editing by Jon Boyle)

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France keeps up Mali air strikes, African troop plan advances

BAMAKO (Reuters) - France kept up its air strikes against Islamist rebels in Mali as plans to deploy African troops gathered pace on Tuesday amid concerns that delays could endanger a wider mission to dislodge al Qaeda and its allies.

France has already poured hundreds of troops into Mali and carried out days of air strikes since Friday in a vast desert area seized last year by an Islamist alliance that combines al Qaeda's north African wing AQIM with Mali's home-grown MUJWA and Ansar Dine rebel groups.

Western and regional powers are concerned the insurgents will use Mali's north as a launchpad for international attacks.

West African defense chiefs were to meet in Bamako on Tuesday to approve plans to speed up the deployment of 3,300 regional troops foreseen in a U.N.-backed intervention plan to be led by Africans.

Speaking from a French military base in Abu Dhabi at the start of a day-long visit to the United Arab Emirates, President Francois Hollande said French forces in Mali had carried out further strikes overnight "which hit their targets."

"We will continue the deployment of forces on the ground and in the air," Hollande said. "We have 750 troops deployed at the moment and that will keep increasing so that as quickly as possible we can hand over to the Africans."

He saw the African troop deployment taking "a good week".

France plans to field a total 2,500 soldiers in its former colony to bolster the Malian army and work with the intervention force provided by the ECOWAS grouping of West African states.

Foreign Minister Laurent Fabius - accompanying Hollande on a visit aimed at firming up trade relations and making progress on a possible sale of 60 French Rafale fighter jets - said he was confident Gulf Arab states would also help the Mali campaign.

Fabius said there would be a meeting of donors for the Mali operation most likely in Addis Ababa at the end of January.

He predicted the current level of the French involvement in Mali would go on for "a matter of weeks".

ECOWAS mission head in Bamako Aboudou Toure Cheaka said the West African troops would be on the ground in a week. Their immediate mission would be to help stop the rebel advance while preparations for a full intervention plan continued.

The original timetable for the 3,300-strong U.N.-sanctioned African force - backed by western logistics, money and intelligence services - did not initially foresee full deployment before September due to logistical constraints.

Senegal, Burkina Faso, Niger, Nigeria and Guinea have all offered troops. But regional powerhouse Nigeria, which is due to lead the mission, has cautioned that even if some troops arrive in Mali soon, training will take more time.

The plan is being fast-tracked after a plea for help by Mali's government after mobile columns of Islamist fighters last week threatened the central garrison towns of Mopti and Sevare, with its key airport.

"SAFEGUARD MALI"

French Prime Minister Jean-Marc Ayrault said France's goals were to stop the Islamist rebels, to "safeguard the existence of Mali" and pave the way for the African-led military operation.

U.S. officials said Washington was sharing information with French forces in Mali and considering providing logistics, surveillance and airlift capability.

"We have made a commitment that al Qaeda is not going to find anyplace to hide," U.S. Defense Secretary Leon Panetta told reporters as he began a visit to Europe.

As French aircraft bombarded mobile columns of Islamist fighters, other insurgents launched a counter-attack further to the south, dislodging government forces from the town of Diabaly, 350 km (220 miles) from Bamako.

French intervention has raised the risk for eight French hostages held by al Qaeda allies in the Sahara and for 30,000 French expatriates living in neighboring, mostly Muslim states. Concerned about reprisals at home, France has tightened security at public buildings and on public transport.

The U.N. said an estimated 30,000 people had fled the latest fighting in Mali, joining more than 200,000 already displaced.

U.N. Secretary-General Ban Ki-moon on Monday welcomed the French-led military intervention in Mali and voiced the hope that it would halt the Islamist assault.

Amnesty International said at least six civilians were killed in recent fighting in the town of Konna, where French aircraft had earlier bombarded rebel positions, and called on both sides to spare non-combatants.

France, which has repeatedly said it has abandoned its role as the policeman of its former African colonies, is among the toughest proponents of a speedier deployment of the African troops, and convened a U.N. Security Council meeting Monday to discuss the crisis.

French U.N. Ambassador Gerard Araud told reporters after the meeting that the U.S., Canada, Belgium, Denmark and Germany had also offered logistical support for France's Mali operation.

"I felt that all the members of the Security Council were expressing their support (for) and understanding of the French decision," Araud told reporters.

No Europeans or other African Union members will be allowed in the defense chiefs meeting in Bamako on Tuesday, a western diplomat told Reuters, requesting not to be named.

"They don't want any French pressure at the meeting," the diplomat said.

(Additional reporting by Elizabeth Pineau and Raissa Kasolowsky in Abu Dhabi; Michelle Nichols and Louis Charbonneau at the United Nations; Richard Valdmanis in Dakar, Brian Love in Paris and David Alexander in Lisbon; Editing by Pascal Fletcher and Anna Willard)

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Decision on immunity for U.S. troops in Afghanistan by year-end: Karzai

KABUL (Reuters) - A decision on immunity for U.S. troops staying in Afghanistan after the 2014 planned withdrawal will be made by the end of the year, Afghan President Hamid Karzai said on Monday.

"The issue of immunity is under discussion (and) it is going to take eight to nine months before we reach agreement," Karzai told a news conference in the capital, Kabul, after returning from meetings with U.S. President Barack Obama in Washington.

The Afghan government rejected an initial U.S. proposal regarding the question of immunity and a second round of negotiations will take place this year in Kabul, he said.

Those negotiations could involve Afghanistan's Loya Jirga, a "grand assembly" of political and community leaders convened for issues of national importance, he added.

When asked if security would deteriorate in Afghanistan after the withdrawal of the NATO-led force, Karzai replied: "By no means... Afghanistan will be more secure and a better place."

The Obama administration has been considering a residual force of between 3,000 and 9,000 troops in Afghanistan to conduct counterterrorism operations while providing training and assistance for Afghan forces. But the administration said last week it did not rule out a complete withdrawal after 2014.

The United States is insisting on immunity from prosecution for any U.S. troops that remain.

(Reporting By Hamid Shalizi, writing by Amie Ferris-Rotman and Dylan Welch; Editng by Robert Birsel)

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France bombs Mali rebels, African states ready troops

BAMAKO/PARIS (Reuters) - French aircraft pounded Islamist rebels in Mali for a second day on Saturday and neighboring West African states sped up their plans to deploy troops in an international campaign to prevent groups linked to al Qaeda expanding their power base.

France, warning that the control of northern Mali by the militants posed a security threat to Europe, intervened dramatically on Friday as heavily armed Islamist fighters swept southwards towards Mali's capital Bamako.

Under cover from French fighter planes and attack helicopters, Malian troops routed a rebel convoy and drove the Islamists out of the strategic central town of Konna, which they had seized on Thursday. A senior army officer in the capital Bamako said more than 100 rebel fighters had been killed.

A French pilot died on Friday when rebels shot down his helicopter near the town of Mopti. Hours after opening one front against al Qaeda-linked Islamists, France mounted a commando raid to try to rescue a French hostage held by al Shabaab militants in Somalia, also allied to al Qaeda, but failed to prevent the hostage being killed.

French President Francois Hollande made clear that France's aim in Mali was to support the West African troop deployment, which is also endorsed by the United Nations, the European Union and the United States.

Western countries in particular fear that Islamists could use Mali as a base for attacks on the West and expand the influence of al Qaeda-linked militants based in Yemen, Somalia and North Africa.

"We've already held back the progress of our adversaries and inflicted heavy losses on them," Hollande said. "Our mission is not over yet."

A resident in the northern city of Gao, one of the Islamists' strongholds, reported scores of rebel fighters were retreating northward in pickup trucks on Saturday.

"The hospital here is overwhelmed with injured and dead," he said, asking not to be identified for fear of reprisals.

In Konna, a shopkeeper reported seeing scores of dead Islamist fighters piled in the streets, as well as the bodies of dozens of uniformed soldiers.

A senior official with Mali's presidency announced on state television that 11 Malian soldiers had been killed in the battle for Konna, with around 60 others injured.

Human Rights Watch said around 10 civilians had died in the violence, including three children who drowned trying to cross a river to safety. It said other children recruited to fight for the Islamists had been injured.

With Paris urging West African nations to send in their troops quickly, Ivory Coast President Alassane Ouattara, chairman of the regional bloc ECOWAS, kick-started a U.N.-mandated operation to deploy some 3,300 African soldiers.

TROOPS BY MONDAY

The mission had not been expected to start until September.

"By Monday at the latest, the troops will be there or will have started to arrive," said Ali Coulibaly, Ivory Coast's African Integration Minister. "Things are accelerating ... The reconquest of the north has already begun."

The multinational force is expected to be led by Nigerian Major-General Shehu Abdulkadir and draw heavily on troops from West Africa's most populous state. Burkina Faso, Niger and Senegal each announced they would send 500 soldiers.

French army chief Edouard Guillaud said France had no plan to chase the Islamists into the north with land troops, and was waiting for ECOWAS forces. France has deployed some special forces units to the central town of Mopti and sent hundreds of soldiers to Bamako in "Operation Serval" - named after an African wildcat.

Concerned about reprisals on French soil, Hollande announced he had instructed Prime Minister Jean-Marc Ayrault to tighten security in public buildings and on public transport in France.

Hollande's intervention in Mali could endanger eight French nationals being held by Islamists in the Sahara. A spokesman for one of Mali's rebel groups, Ansar Dine, said there would be repercussions.

"There are consequences, not only for French hostages, but also for all French citizens, wherever they find themselves in the Muslim world," Sanda Ould Boumama told Reuters. "The hostages are facing death."

The French Defense Ministry said its failed bid on Friday night to rescue a French intelligence officer held hostage in Somalia since 2009 was unrelated to events in Mali.

The ministry said it believed the officer had been killed by his captors along with at least one French commando. But the Harakat Al-Shabaab Al-Mujahideen insurgent group that was holding Denis Allex said he was alive and being held at a location far from the raid.

RED ALERT

The French Foreign Ministry stepped up its security alert on Mali and parts of neighboring Mauritania and Niger on Friday, extending its red alert - the highest level - to include Bamako.

France advised its 6,000 citizens in Mali to leave. Thousands more French live across West Africa, particularly in Senegal and Ivory Coast.

European Union foreign policy chief Catherine Ashton on Friday urged an "accelerated international engagement" and said the bloc would speed up plans to deploy 200 troops to train Malian forces.

A U.S. official said the Pentagon was weighing options such as intelligence-sharing with France and logistics support. French officials suggest U.S. surveillance capacity, including unmanned drones, would prove valuable in vast northern Mali.

In Britain, a spokesman said Prime Minister David Cameron had spoken to Hollande to express support for France's intervention and to offer two C-17 transport planes to assist the mission.

He said both men discussed "the need to work with the Malian government, regional neighbors and international partners to prevent a new terrorist haven developing on Europe's doorstep and to reinvigorate the U.N.-led political process once the rebel advance has been halted".

Military analysts voiced doubt, however, about whether Friday's action was the start of a swift operation to retake northern Mali - a harsh, sparsely populated terrain the size of France - as neither equipment nor ground troops were ready.

"We're not yet at the big intervention," said Mark Schroeder, of the risk and security consultancy Stratfor.

More than two decades of peaceful elections had earned Mali a reputation as a bulwark of democracy - but that image unraveled in a matter of weeks after a military coup last March that paved the way for the Islamist rebellion.

Interim President Dioncounda Traore, under pressure for bolder action from Mali's military, declared a state of emergency on Friday. Traore cancelled a long-planned official trip to Paris on Wednesday because of the violence.

"Every Malian must henceforth consider themselves a soldier," he said on state TV.

On the streets of Bamako, some cars were driving around with French flags draped from the windows to celebrate Paris's intervention.

"It's thanks to France that Mali will emerge from this crisis," said student Mohamed Camera. "This war must end now."

(Additional reporting Adama Diarra, Tiemoko Diallo and Rainer Schwenzfeier in Bamako, Mathieu Bonkoungou in Ouagadougou, Joe Bavier in Abidjan and Elizabeth Pineau in Paris; Editing by Daniel Flynn and Kevin Liffey)

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Obama, Karzai accelerate end of U.S. combat role in Afghanistan

WASHINGTON (Reuters) - President Barack Obama and Afghan President Hamid Karzai agreed on Friday to speed up the handover of combat operations in Afghanistan to Afghan forces, raising the prospect of an accelerated U.S. withdrawal from the country and underscoring Obama's determination to wind down a long, unpopular war.

Signaling a narrowing of differences, Karzai appeared to give ground in talks at the White House on U.S. demands for immunity from prosecution for any American troops who stay in Afghanistan beyond 2014, a concession that could allow Obama to keep at least a small residual force there.

Both leaders also threw their support behind tentative Afghan reconciliation efforts with Taliban insurgents, endorsing the establishment of a Taliban political office in Qatar in hopes of bringing insurgents to inter-Afghan talks.

Outwardly, at least, the meeting appeared to be something of a success for both men, who need to show their vastly different publics they are making progress in their goals for Afghanistan. There were no signs of the friction that has frequently marked Obama's relations with Karzai.

Karzai's visit came amid stepped-up deliberations in Washington over the size and scope of the U.S. military role in Afghanistan once the NATO-led combat mission concludes at the end of 2014.

"By the end of next year, 2014, the transition will be complete," Obama said at a news conference with Karzai standing at his side. "Afghans will have full responsibility for their security, and this war will come to a responsible end."

The Obama administration has been considering a residual force of between 3,000 and 9,000 troops - far fewer than some U.S. commanders propose - to conduct counterterrorism operations and to train and assist Afghan forces.

A top Obama aide said this week that the administration does not rule out a complete withdrawal after 2014, a move that some experts say would be disastrous for the weak Afghan central government and its fledgling security apparatus.

Obama on Friday left open the possibility of that so-called "zero option" when he several times used the word "if" to suggest that a post-2014 U.S. presence was far from guaranteed.

Insisting that Afghan forces were "stepping up" faster than expected, Obama said Afghan troops would take over the lead in combat missions across the country this spring, rather than waiting until the summer as originally planned. NATO troops will then assume a "support role," he said.

"It will be a historic moment and another step toward full Afghan sovereignty," Obama said.

Obama said final decisions on this year's troop cuts and the post-2014 U.S. military role were still months away, but his comments suggested he favors a stepped-up withdrawal timetable.

There are some 66,000 U.S. troops currently in Afghanistan. Washington's NATO allies have been steadily reducing their troop numbers as well despite doubts about the ability of Afghan forces to shoulder full responsibility for security.

'WAR OF NECESSITY'

Karzai voiced satisfaction over Obama's agreement to turn over control of detention centers to Afghan authorities, a source of dispute between their countries, although the White House released no details of the accord on that subject.

Obama once called Afghanistan a "war of necessity." But he is heading into a second term looking for an orderly way out of the conflict, which was sparked by the September 11, 2001, attacks on the United States by an al Qaeda network harbored by Afghanistan's Taliban rulers.

He faces the challenge of pressing ahead with his re-election pledge to continue winding down the war while preparing the Afghan government to prevent a slide into chaos and a Taliban resurgence once most NATO forces are gone.

Former Senator Chuck Hagel, Obama's nominee to become defense secretary, is likely to favor a sizable troop reduction.

Karzai, meanwhile, is eager to show he is working to ensure Afghans regain full control of their territory after a foreign military presence of more than 11 years.

Asked whether the cost of the war in lives and money was worth it, Obama said: "We achieved our central goal ... or have come very close to achieving our central goal, which is to de-capacitate al Qaeda, to dismantle them, to make sure that they can't attack us again."

He added: "Have we achieved everything that some might have imagined us achieving in the best of scenarios? Probably not. This is a human enterprise, and you fall short of the ideal."

Obama made clear that unless the Afghan government agrees to legal immunity for U.S. troops, he would withdraw them all after 2014 - as happened in Iraq at the end of 2011.

Karzai, who criticized NATO over civilian deaths, said that with Obama's agreement to transfer detention centers and the planned withdrawal of U.S. forces from Afghan villages, "I can go to the Afghan people and argue for immunity" in a bilateral security pact being negotiated.

Addressing students at Georgetown University later in the day, the Afghan leader predicted with certainty that the United States would keep a limited number of troops in Afghanistan after 2014, in part to battle al Qaeda and its affiliates.

"One of the reasons the United States will continue a limited presence in Afghanistan after 2014 in certain facilities in Afghanistan is because we have decided together to continue to fight against al Qaeda," Karzai said. "So there will be no respite in that."

Many of Obama's Republican opponents have criticized him for setting a withdrawal timetable and accuse him of undercutting the U.S. mission by reducing troop numbers too quickly.

Karzai and his U.S. partners have not always seen eye to eye, even though the American military has been crucial to preventing insurgent attempts to oust him.

In October, Karzai accused Washington of playing a double game by fighting the war in Afghan villages instead of going after insurgents who cross the border from neighboring Pakistan.

In Friday's news conference, Karzai did not back down from his previous comments that foreigners were responsible for some of the official corruption critics say is rampant in Afghanistan. But he acknowledged: "There is corruption in the Afghan government that we are fighting against."

Adding to tensions has been a rash of deadly "insider" attacks by Afghan soldiers and police against NATO-led troops training or working with them. U.S. forces have also been involved in a series of incidents that enraged Afghans, including burning Korans, which touched off days of rioting.

(Additional reporting by Roberta Rampton, Mark Felsenthal, Jeff Mason, Phil Stewart, Tabassum Zakaria, David Alexander; Editing by Warren Strobel and Will Dunham)

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Rights group warns of worsening Pakistani sectarian violence

QUETTA, Pakistan (Reuters) - Violence against Pakistani Shi'ite Muslims is rising and some communities are living in a state of siege, a human rights group said on Friday, warning that sectarian violence will only get worse a day after 114 people were killed in bombings.

Most of the deaths were caused by twin attacks aimed at members of the Muslim Shi'ite sect in the southwestern city of Quetta, near the Afghan border.

"Last year was the bloodiest year for Shias in living memory," said Ali Dayan Hasan of Human Rights Watch. "More than 400 were killed and if yesterday's attack is any indication, it's just going to get worse."

A suicide bomber first targeted a snooker club in Quetta. A car bomb blew up nearby 10 minutes later after police and rescuers had arrived.

In all, 82 people were killed and 121 wounded. Nine police and 20 rescue workers were among the dead.

"It was like doomsday. Bodies were lying everywhere," said police officer Mir Zubair Mehmood.

The banned Sunni group Lashkar-e-Jangvi (LeJ) claimed responsibility for the attack in a predominantly Shi'ite neighborhood where the residents are ethnic Hazaras, Shi'ites who first migrated from Afghanistan in the nineteenth century.

The bombings underscored the myriad threats security forces face from homegrown Sunni extremist groups, the Pakistani Taliban insurgency in the northwest and from nationalist groups in resource-rich Baluchistan province, of which Quetta is capital.

Shi'ite leaders said they wanted the military to take control of Quetta to protect them and they would not allow the 82 victims of the twin bomb attacks to be buried until their demands were met.

The burials had been scheduled to take place after Friday prayers but the bodies would remain in the mosque until the Shi'ites had received promises of protection.

"We won't let them be buried unless the army comes into Quetta," said Maulana Amin Shaheedi, who heads the Shi'ite Majlis-e-Wahdatul Muslameen, an umbrella organization formed in 2008 to unite Shiite organizations and clerics.

The paramilitary Frontier Corps is largely responsible for security in Baluchistan province but Shi'ites say it is unable or unwilling to protect them from the LeJ.

"STATE OF SIEGE"

The LeJ wants to impose a Sunni theocracy in U.S.-allied Pakistan by stoking Sunni-Shi'ite violence. It bombs religious processions and shoots civilians in the type of attacks that pushed countries like Iraq close to civil war.

LeJ leader Malik Ishaq was released last year after spending 14 years in jail in connection with dozens of murder and terrorism cases.

The roughly 500,000-strong Hazara people in Quetta, who speak a Persian dialect, have distinct features and are an easy target, said Dayan of Human Rights Watch.

"They live in a state of siege. Stepping out of the ghetto means risking death," said Dayan. "Everyone has failed them - the security services, the government, the judiciary."

Earlier on Thursday, a separate bomb killed 11 people in Quetta's main market.

The United Baloch Army claimed responsibility for that blast. The group is one of several fighting for independence for Baluchistan, an arid, impoverished region with substantial gas, copper and gold reserves.

Baluchistan constitutes just less than half of Pakistan's territory and is home to about 8 million of the country's population of 180 million.

In a separate attack on Thursday, in Mingora, the largest city in the Swat valley in the northwest, at least 21 people were killed when an explosion targeted a public gathering of residents who had come to listen to a religious leader.

No one claimed responsibility for that bombing. Swat has been under army rule since a military offensive expelled Pakistani Taliban militants in 2009.

Sectarian attacks in Pakistan have risen even as overall deaths from militant violence have fallen over the past two years. But Pakistan's security forces and its overburdened justice system are struggling to cope.

Human rights groups say the government must investigate whether some of the groups have links to elements within Pakistan's security services.

The LeJ has had historically close ties to elements in the security forces, who see the group as an ally in any potential war with neighboring India.

The security forces deny any such links.

(Reporting by Katharine Houreld; Editing by Robert Birsel)

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Swiss trains collide, 17 injured

NEUHAUSEN, Switzerland (Reuters) - Two Swiss trains collided on Thursday, injuring 17 people, none of them seriously, and closing the line near the German border, police said.

The two local trains, one travelling from Winterthur and the other from Schaffhausen, crashed just outside the Neuhausen station in northern Switzerland, not far from the German border.

Swiss railways said the line was closed and buses were carrying local passengers, while those travelling from Zurich to Stuttgart in Germany would be diverted via Basel.

Police spokeswoman Anja Schudel said 17 people had been injured and nine of them taken to hospital, but nobody was badly hurt. Everybody had been evacuated from the trains, which were carrying a total of 280 passengers, she said.

Swiss trains have a reputation for punctuality and safety, and fatal train accidents are rare.

The last major accident was in 2010. One passenger was killed and 42 were injured when one of the country's best-known tourist trains, the Glacier Express, derailed at the height of the summer holiday season.

(Reporting by Arnd Wiegmann and Emma Thomasson; Editing by Louise Ireland)

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Exhausted Egyptians count cost of political turmoil

ZAGAZIG, Egypt (Reuters) - These days, craftsmen, shopkeepers and other inhabitants of the Egyptian Delta town of Zagazig are often too busy making ends meet to ponder why life seems to be getting harder every day.

But when, exhausted, they finally come home and sit down to their evening meal, conversations inevitably turn to growing hardship and the frightening prospect of cuts in food subsidies as the economy slides further into crisis.

With their patience already stretched after years of upheaval, Egyptians - from the capital Cairo to smaller towns like Zagazig - appear to be nearing the point where discontent could explode into a new wave of unrest.

"There is no security. There is nothing," said Soheir Abdel Moneim, a retired school teacher, as she hurried through an open-air market in Zagazig in search of vegetables she could afford.

"The pound is falling. Everything is more expensive. Is there anything that has not become more expensive?" she asked with a shrug, as traders on bicycles loaded with their wares dodged through the chaos of the market.

Nearby, a torn poster of President Mohamed Mursi beams from the wall of a crumbling brick house, with the words "Liars! Liars!" scrawled over his face.

The mood of growing nervousness is bad news for Mursi, who faces a parliamentary election in coming months, and a new round of political feuding that could pitch Egypt back into civil strife.

Egypt's economy, once strong and popular among investors, has been in tatters since the revolt of 2011 that ousted Hosni Mubarak and shook the country to its foundations.

Disagreements over a new national constitution late last year triggered violent protests, dealing another blow to the economy and eroding trust in Mursi's government.

A country where cuts in food subsidies have caused riots in the past now faces the risk of further upheaval as Mursi prepares to impose austerity measures in order to obtain a desperately needed $4.8 billion loan from the International Monetary Fund.

In Zagazig, people worry about the future.

Farouk Sarhan, the 74-year-old manager of a shop selling women's clothes, said sales were already down by almost 50 percent from just a few weeks ago.

"No one is selling or buying. I had more activity last year," he said, stubbing out a cigarette with a deep sigh in his tiny store lined with mannequins of veiled women.

"Customers are not buying as much as before because of the economic situation."

The price of fresh food often goes up in winter but shoppers in the Zagazig market said recent increases had been steep, with tomatoes and cauliflower about 50 percent dearer than at the start of the year.

WHAT NEXT?

Egypt has been on the ropes since investors and tourists fled after the revolt, when people rose up to demand their freedom and also an end to economic policies they said simply lined the pockets of the rich.

On the economic front, the picture remains grim, although Qatar's decision to lend Egypt another $2 billion has offered some respite.

Foreign reserves are dwindling and the pound has been hitting new lows daily. Food and raw materials from abroad have become more expensive, hurting businesses and families in a desert nation which relies on imports to feed itself.

As in other parts of Egypt, people in Zagazig see complex economic trends in terms of the daily hardships they must endure, and it is Mursi's government and his Muslim Brotherhood allies who get the blame.

"Mursi doesn't feel our grievances," said Emad, a man in his late 30s who sells traditional Egyptian clothes by the side of a dusty street. He said he had been forced to raise prices to cover rising costs, upsetting his customers.

Pointing to one of the black embroidered gowns, Emad said: "We used to sell this for 35 pounds ($5.40). Now it's 45 pounds. We didn't raise the prices. Traders did.

"Very few people are buying. I used to sell 50 pieces a day, and now I sell 15 or 20. Today I still haven't sold anything."

Reliable opinion polls are unavailable in Egypt and it is hard to gauge how widespread people's views are. But in Zagazig, most of those interviewed by Reuters echoed Emad's feelings.

Economists worry that continued turmoil could prompt people and businesses to convert their savings into dollars en masse - a risky process known as dollarisation which has caused trouble in many emerging market crises before.

But in Zagazig, people laughed at the idea, saying only the rich could afford to buy foreign currency. "Dollars?" asked Nabil, a local trader, as others burst into laughter. "Give me some dollars! Of course we don't have any!"

SUPPORT FOR MURSI

But some were prepared to give Mursi a chance.

In the nearby village of al-Adwa, where the future president grew up in the family of a local farmer, brick walls and fences were plastered with posters of Mursi.

A crowd of farmers standing by the side of a dirt track cutting through the village shook their fists and shouted "Mursi! Mursi!" when asked about their political views.

But even in Adwa, where Mursi appeared to enjoy rock-solid support, locals said sudden increase in taxes or abrupt cuts to fuel or food subsidies would cost him dearly.

"If that happens that would be the worst thing. What am I going to do as a farmer?" said Said Youssef, his hands black from working the land. "Where are we going to get the money?"

Another man, Aly Saber, 65, said fertilizer prices had gone up by 50 Egyptian pounds in the past year alone, making his business less profitable.

"Things are tough here in the rural areas," he said as others nodded in agreement. "Everything is becoming more expensive."

Mohamed Gamal, the 42-year-old owner of a tiny shop selling kitchen appliances, said business was so bad that he would sometimes go for days without a single customer.

"I import goods all the time. Prices have gone up by 10-40 percent since the revolution. It's gone up even more in recent weeks," said Gamal, who, Like Mursi, grew up in Adwa.

He said his neighbors were suspicious about why he had to keep raising his prices.

"People just don't believe me," he said, hunched over his desk, cigarette smoke swirling above stacks of unsold trays, cups and ironing boards. "They are not convinced why things are getting more expensive. I buy them, and they stack up."

($1 = 6.4809 Egyptian pounds)

(Writing by Maria Golovnina; Editing by Giles Elgood)

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Afghan peace efforts show flickers of life

WASHINGTON/ISLAMABAD (Reuters) - President Barack Obama and Afghan President Hamid Karzai will discuss matters of war, including future U.S. troop levels and Afghanistan's army, when they meet on Friday, but matters of peace may be the most delicate item on their long agenda.

After nearly 10 months in limbo, tentative reconciliation efforts involving Taliban insurgents, the Karzai government and other major Afghan factions have shown new signs of life, resurrecting tantalizing hopes for a negotiated end to decades of war.

Pakistan, which U.S. and Afghan officials have long accused of backing the insurgents and meddling in Afghanistan, has recently signaled an apparent policy shift toward promoting its neighbor's stability as most U.S. combat troops prepare to depart, top Pakistani and Afghan officials said.

In another potentially significant development, Taliban representatives met outside Paris last month with members of the Afghan High Peace Council - although not directly with members of the Karzai government, which they have long shunned.

U.S. officials, speaking on condition of anonymity, said the developments are promising - but that major challenges remain to opening negotiations, let alone reaching an agreement on the war-ravaged country's political future.

Hopes for Afghan peace talks have been raised before, only to be dashed. Last March, the Taliban suspended months of quiet discussions with Washington aimed at getting the insurgents and the Karzai government to the peace table.

Obama is expected to press the Afghan president to bless the formal opening of a Taliban political office in the Gulf state of Qatar as a way to jump-start inter-Afghan talks.

Karzai has been lukewarm to the idea, apparently fearing his government would be sidelined in any negotiations.

TRIP AT A TURNING POINT

Karzai's meeting with Obama, at the end of a three-day visit to Washington, is shaping up to be one of the most critical encounters between the two leaders, as the White House weighs how rapidly to remove most of the roughly 66,000 U.S. troops in Afghanistan and how large a residual force to leave after 2014.

Obama, about to begin his second term in office, appears determined to wrap up U.S. military engagement in Afghanistan. On Monday, he announced as his nominee for Pentagon chief former Nebraska Senator Chuck Hagel, who appears likely to favor a sizeable U.S. troop drawdown.

Other issues on the agenda have plenty of potential for causing friction: the future size and focus of the Afghan military; a festering dispute over control of the country's largest detention center; and the future of international aid after 2014.

Karzai's trip "is one of the most important ones because the discussions we are going to have with our counterparts will define the relations between (the) United States and Afghanistan," Afghan Foreign Minister Zalmay Rassoul told the lower house of parliament this month.

No final announcement on post-2014 U.S. troop levels is expected during Karzai's visit, and the issue is further complicated by Washington's insistence on legal immunity for American troops that remain.

General John Allen, the top U.S. and NATO commander in Afghanistan, recommended keeping between roughly 6,000 and 15,000 U.S. troops in Afghanistan after 2014, but the White House is considering possibly leaving as few as 3,000 troops.

A U.S. official, speaking on condition of anonymity, said the White House had asked for options to be developed for keeping between 3,000 and 9,000 troops in the country.

PAST PEACE HOPES DASHED

Last year, the Obama administration hoped to kick-start peace talks with a deal that would have seen Washington transfer five Taliban prisoners from Guantanamo Bay prison. In return, the Taliban would renounce international terrorism and state a willingness to enter talks with Karzai's representatives.

That deal never came off, and the question now is whether it, or an alternative peace process, can get under way as the U.S. military presence rapidly winds down.

Looking at developments in the last few months, "you could see that there are things happening," said one U.S. official, who was not authorized to speak for the record.

At the end of 2012, Pakistan released four Afghan Taliban prisoners who were close to the movement's reclusive leader, Mullah Mohammed Omar. It appeared to be a step toward meeting Afghanistan's long-standing insistence that Islamabad free those who could help promote reconciliation. A senior Afghan official welcomed the release.

A member of Pakistan's parliament closely involved in Afghan policy-making said there are signs of a shift in the thinking of Pakistan's powerful military. Some in the military, which has long regarded Afghanistan as a battleground in its existential conflict with rival India, are now saying that the graver threat comes from Pakistan's own militants.

"Yes, there is skepticism. The hawks are there. But the fact is that previously there were absolutely no voices in the army with this kind of positive thinking," the parliamentarian said.

"Pakistan has also realized that there won't be a complete withdrawal of the U.S. from Afghanistan," the lawmaker said. "The security establishment realizes it has to compromise somewhere. Hence the Taliban releases. ... Hence the statements from even the most skeptical Afghan officials that there is a change in Pakistani thinking."

Ghairat Baheer, who represented the Hezb-e-Islami faction at last month's peace talks in the Paris suburb of Chantilly, rejected a continued U.S. military presence in Afghanistan, but praised the Pakistan prisoner release as a sign of its good intentions.

WAITING FOR THE TALIBAN

After more than a year of frustration, Obama administration officials are skeptical about luring the Taliban to peace talks, citing what appears to be a deep fissure within the movement between moderates who favor entering the political process and hard-liners committed to ousting both NATO troops and Karzai.

The Taliban's lead negotiator, Tayeb Agha, whom the Obama administration regards as a reliable interlocutor, offered to resign last month in apparent frustration, the Daily Beast website reported.

Taliban envoys have yet to meet officially with Karzai's government, and the insurgents demand a rewriting of the Afghan constitution.

"I don't think anyone knows where (reconciliation) stands. And I mean that because there are a lot of reconciliation talks and a lot of games that are being played in a lot of places," said Fred Kagan, a military analyst at the conservative American Enterprise Institute.

"The likelihood of getting an acceptable deal that actually secures our interests is vanishingly small," he said. "But the probability that you could get the deal and have it implemented in time to make this drawdown timeline make sense is nonsense."

(Additional reporting by Phil Stewart and David Alexander in Washington, and Hamid Shalizi in Kabul. Editing by Christopher Wilson)

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Turmoil in Indian court as five accused of rape appear

NEW DELHI (Reuters) - Five men accused of the gang rape and murder of an Indian student appeared in court on Monday to hear charges against them, after two of them offered evidence possibly in return for a lighter sentence in a case that has provoked widespread anger.

The five men, along with a teenager, are accused of raping the 23-year-old physiotherapy student when she boarded their bus after going to the cinema in New Delhi on December 16. She died two weeks later in a Singapore hospital.

The attack on the student has ignited protests against the government and anger towards the police for their perceived failure to protect women. It has also provoked a rare national debate about rising violence against women.

Reuters images showed the men stepping out of a blue police van that brought them from Tihar jail, and walking through a metal detector into the South Delhi court, across the street from the cinema where the victim watched a film before boarding the bus with a male friend on December 16.

Following rowdy scenes in the packed court, the magistrate, Namrita Aggarwal, closed the hearing to the media and the public. The court was cleared and police were posted at its doors before the accused were brought in.

"Keeping in view the sensitivity of this case that has risen, the proceedings including the inquiry and trial are to be held in camera," Aggarwal said, before ordering people not connected with the case out of the courtroom.

A police guard said the five men had their faces covered when they entered the court, where the magistrate was due to read charges against them. The five have already been charged with murder, rape and abduction along with other offences.

Aggarwal said the next hearing would be on January 10. She did not say when the case would go to trial in a separate, fast-track court, set up after the attack on the woman.

Earlier, an argument broke out in court when a lawyer offered to defend the men. He was shouted down by colleagues who said the accused did not deserve representation, given the brutality of the crime.

Two of the accused, Vinay Sharma and Pawan Gupta, moved an application on Saturday requesting they be made "approvers", or informers, against the other accused, Mukesh Kumar, Ram Singh and Akshay Thakura, public prosecutor Rajiv Mohan told Reuters.

Mohan told Reuters he was seeking the death sentence given the "heinous" crime.

"The five accused persons deserve not less than the death penalty," he said, echoing public sentiment and calls from the victim's family.

Members of the bar association in Saket district, where the case is being heard, have vowed not to represent the accused.

GROUNDS FOR APPEAL?

But on Monday, Supreme Court lawyer Manohar Lal Sharma stood up to offer representation to the men. He was booed by other lawyers in the court, where media and advocates had gathered before the men were due to appear.

"We are living in a modern society. We all are educated. Every accused, including those in brutal offences like this, has the legal right to represent his or her case to defend themselves," Lal Sharma said.

"I'm afraid they won't get justice, that's why I have decided to appear for them in the court," Sharma said, but added it was up for the court to decide.

Police have conducted extensive interrogations and say they have recorded confessions, even though the five have no lawyers.

Legal experts say their lack of representation could give grounds for appeal should they be found guilty. Similar cases have resulted in acquittals years after convictions.

Last week, chief justice Altamas Kabir inaugurated six fast-track courts to help reduce a backlog of sex crime cases in Delhi.

But some legal experts have warned that previous attempts to fast-track justice in India in some cases led to imperfect convictions that were later challenged.

The men, most of them from a slum neighborhood, will be offered legal aid by the court before the trial can begin.

The sixth member of the gang that lured the student and a male friend into the private bus is under 18 and will be tried in a separate juvenile court.

The government is aiming to lower the age teenagers can be tried as an adult, given widespread public anger that the boy will face a maximum three year sentence.

The victim, who died on December 29 in hospital in Singapore, where she had been taken for treatment, was identified by a British newspaper on the weekend but Reuters has opted not to name her.

Indian law generally prohibits the identification of victims of sex crimes. The law is intended to protect victims' privacy and keep them from the media glare in a country where the social stigma associated with rape can be devastating.

(Writing by Frank Jack Daniel; Editing by Robert Birsel)

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Defiant Assad summons Syrians for "war to defend nation"

BEIRUT (Reuters) - A defiant President Bashar al-Assad called on Sunday for national mobilization in a "war to defend the nation", describing rebels fighting him as terrorists and agents of foreign powers with whom it was impossible to negotiate.

Appearing in an opera house in central Damascus packed with cheering supporters, the Syrian leader delivered his first speech to an audience since June last year, and his first public comments since a television interview in November.

He unveiled what he described as a peace initiative to end the 21-month-old uprising. But the proposal, including a reconciliation conference that would exclude "those who have betrayed Syria", was certain to be rejected by enemies who have already said they will not negotiate unless he leaves power.

He spoke confidently for about an hour before a crowd of cheering loyalists, who occasionally interrupted him to shout and applaud, at one point raising their fists and chanting: "With blood and soul we sacrifice for you, O Bashar!"

At the end of the speech, supporters rushed to the stage, mobbing him and shouting: "God, Syria and Bashar is enough!" as a smiling Assad waved and was escorted from the hall.

"We are now in a state of war in every sense of the word," Assad said in the speech. "This war targets Syria using a handful of Syrians and many foreigners. Thus, this is a war to defend the nation."

"We meet today and suffering is overwhelming Syrian land. There is no place for joy while security and stability are absent on the streets of our country," Assad said. "The nation is for all and we all must protect it."

The United Nations says 60,000 people have been killed in the civil war in Syria, which has brought fighting to the edge of the capital.

(Reporting by Erika Solomon; writing by Peter Graff; editing by Philippa Fletcher)

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Chavez swearing-in can be delayed: Venezuelan VP

CARACAS (Reuters) - President Hugo Chavez's formal swearing-in for a new six-year term scheduled for January 10 can be postponed if he is unable to attend due to his battle to recover from cancer surgery, Venezuela's vice president said on Friday.

Nicolas Maduro's comments were the clearest indication yet that the Venezuelan government is preparing to delay the swearing-in while avoiding naming a replacement for Chavez or calling a new election in the South American OPEC nation.

In power since 1999, the 58-year-old socialist leader has not been seen in public for more than three weeks. Allies say he is in delicate condition after a fourth operation in two years for an undisclosed form of cancer in his pelvic area.

The political opposition argues that Chavez's presence on January 10 in Cuba - where there are rumors he may be dying - is tantamount to the president's stepping down.

But Maduro, waving a copy of the constitution during an interview with state TV, said there was no problem if Chavez was sworn in at a later date by the nation's top court.

"The interpretation being given is that the 2013-2019 constitutional period starts on January 10. In the case of President Chavez, he is a re-elected president and continues in his functions," he said.

"The formality of his swearing-in can be resolved in the Supreme Court at the time the court deems appropriate in coordination with the head of state."

In the increasing "Kremlinology"-style analysis of Venezuela's extraordinary political situation, that could be interpreted in different ways: that Maduro and other allies trust Chavez will recover eventually, or that they are buying time to cement succession plans before going into an election.

Despite his serious medical condition, there was no reason to declare Chavez's "complete absence" from office, Maduro said. Such a declaration would trigger a new vote within 30 days, according to Venezuela's charter.

RECOVERY POSSIBLE?

Chavez was conscious and fighting to recover, said Maduro, who traveled to Havana to see his boss this week.

"We will have the Commander well again," he said.

Maduro, 50, whom Chavez named as his preferred successor should he be forced to leave office, said Venezuela's opposition had no right to go against the will of the people as expressed in the October 7 vote to re-elect the president.

"The president right now is president ... Don't mess with the people. Respect democracy."

Despite insisting Chavez remains president and there is hope for recovery, the government has acknowledged the gravity of his condition, saying he is having trouble breathing due to a "severe" respiratory infection.

Social networks are abuzz with rumors he is on life support or facing uncontrollable metastasis of his cancer.

Chavez's abrupt exit from the political scene would be a huge shock for Venezuela. His oil-financed socialism has made him a hero to the poor, while critics call him a dictator seeking to impose Cuban-style communism on Venezuelans.

Should Chavez leave office, a new election is likely to pitch former bus driver and union activist Maduro against opposition leader Henrique Capriles, the 40-year-old governor of Miranda state.

Capriles lost to Chavez in the October presidential election, but won an impressive 44 percent of the vote. Though past polls have shown him to be more popular than all of Chavez's allies, the equation is now different given Maduro has received the president's personal blessing - a factor likely to fire up Chavez's fanatical supporters.

His condition is being watched closely by Latin American allies that have benefited from his help, as well as investors attracted by Venezuela's lucrative and widely traded debt.

"The odds are growing that the country will soon undergo a possibly tumultuous transition," the U.S.-based think tank Stratfor said this week.

(Additional reporting by Marianna Parraga; editing by Christopher Wilson)

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Eleven dead in Damascus gas station blast

AZAZ, Syria (Reuters) - At least 11 people were killed and 40 wounded when a car bomb exploded at a crowded petrol station in the Syrian capital Damascus on Thursday, opposition activists said.

The station was packed with people queuing for fuel that has become increasingly scarce during the country's 21-month-long insurgency aimed at overthrowing President Bashar al-Assad.

The semi-official al-Ikhbariya television station showed footage of 10 burnt bodies and Red Crescent workers searching for victims at the site.

The opposition Revolution Leadership Council in Damascus said the explosion was caused by a booby-trapped car.

There was no immediate indication of who was responsible for the bombing in the Barzeh al-Balad district, whose residents include members of the Sunni Muslim majority and other religious and ethnic minorities.

"The station is usually packed even when it has no fuel," said an opposition activist who did not want to be named. "There are lots of people who sleep there overnight, waiting for early morning fuel consignments."

It was the second time that a petrol station has been hit in Damascus this week. Dozens of people were incinerated in an air strike as they waited for fuel on Wednesday, according to opposition sources.

In northern Syria, rebels were battling to seize an air base in their campaign against the air power that Assad has used to bomb rebel-held towns.

More than 60,000 people have been killed in the uprising and civil war, the United Nations said this week, a much higher death toll than previously thought.

DRAMATIC ADVANCES

After dramatic advances over the second half of 2012, the rebels now hold wide swathes of territory in the north and east, but they cannot protect towns and villages from Assad's helicopters and jets.

Hundreds of rebel fighters were attempting to storm the Taftanaz air base, near the highway that links Syria's two main cities, Aleppo and Damascus.

A rebel fighter speaking from near the Taftanaz base overnight said much of the base was still in loyalist hands but insurgents had managed to destroy a helicopter and a fighter jet on the ground.

The northern rebel Idlib Coordination Committee said the rebels had detonated a car bomb inside the base.

The government's SANA news agency said the base had not fallen and that the military had "strongly confronted an attempt by the terrorists to attack the airport from several axes, inflicting heavy losses among them and destroying their weapons and munitions".

Rami Abdulrahman, head of the opposition-aligned Syrian Observatory for Human Rights which monitors the conflict from Britain, said as many as 800 fighters were involved in the assault, including Islamists from Jabhat al-Nusra, a powerful group that Washington considers terrorists.

Taftanaz is mainly a helicopter base, used for missions to resupply army positions cut off by the rebels, as well as for dropping crude "barrel bombs" on rebel-controlled areas.

Near Minakh, another northern air base that rebels have surrounded, government forces have retaliated by shelling and bombing nearby towns.

NIGHTLY BOMBARDMENTS

In the town of Azaz, where the bombardment has become a near nightly occurrence, shells hit a family house overnight. Zeinab Hammadi said her two wounded daughters, aged 10 and 12, had been rushed across the border to Turkey, one with her brain exposed.

"We were sleeping and it just landed on us in the blink of an eye," she said, weeping as she surveyed the damage.

Family members tried to salvage possessions from the wreckage, men lifting out furniture and children carrying out their belongings in tubs.

"He (Assad) wants revenge against the people," said Abu Hassan, 33, working at a garage near the destroyed house. "What is the fault of the children? Are they the ones fighting?"

Opposition activists said warplanes struck a residential building in another rebel-held northern town, Hayyan, killing at least eight civilians.

Video footage showed men carrying dismembered bodies of children and dozens of people searching for victims in the rubble. The provenance of the video could not be independently confirmed.

In addition to their tenuous grip on the north, the rebels also hold a crescent of suburbs on the edge of Damascus, which have come under bombardment by government forces that control the center of the capital.

On Wednesday, according to opposition activists, dozens of people died in an inferno caused by an air strike on a petrol station in a Damascus suburb where residents were lining up for fuel.

The civil war in Syria has become the longest and bloodiest of the conflicts that rose out of uprisings across the Arab world in the past two years.

Assad's family has ruled for 42 years since his father seized power in a coup. The war pits rebels, mainly from the Sunni Muslim majority, against a government supported by members of Assad's Shi'ite-derived Alawite minority sect and some members of other minorities who fear revenge if he falls.

The West, most Sunni-ruled Arab states and Turkey have called for Assad to step down. He is supported by Russia and Shi'ite Iran.

(Additional reporting by Khaled Yacoub Oweis in Amman and Dominic Evans in Beirut; Writing by Peter Graff; Editing by Ruth Pitchford and Giles Elgood)

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