The BBC's Monica Whitlock: ''Makhmud is very ambitious''

Makhmud Khudoiberdiev, who staged a failed coup last year, said his forces had already mined the dam on the Kairakkhum channel as a "deterrence measure."

At least 89 people have been killed in two days of fierce fighting around the regional capital of Khojand which rebels stormed on Wednesday.

President Rokhmanov is treating the attack very seriously

The rebels oppose last year's peace agreement ending the country's long civil war and want fresh elections.

A spokesman for President Emomali Rakhmonov said government troops had retaken most of the city and hemmed in rebel soldiers.

A statement from Mr Rakhmonov read on national television said: "The government of Tajikistan is able now to deliver a finishing blow to this group."

But the Russian news agency Interfax reported that rebels were still in control of the northern town of Aini, where they had appointed a new police chief and confiscated large amounts of industrial explosives.

Mr Khudoiberdiev said he would not negotiate with the government until it broadcast his demands on television and radio.

The dam he threatened to destroy holds a reservoir so large it is referred to locally as a "sea".

Mr Khudoiberdiev said: "It will flood vast territories of Central Asia.

"Hot heads in Tajikistan and outside it should make a choice: Either peace in Tajikistan, or millions of victims for the sake of preserving Rakhmonov's ambitions."

But Tajik Vice Premier Abdurakhmon Azimov said: "There will be no negotiations or consideration of the rebels' demands.

''The matter in question is to block and liquidate them."

Rebels call for 40% representation

In a statement to the BBC, the rebels said they want fresh elections and a provisional council of representatives from across Tajikistan to rule in the interim.

They are demanding a 40% share in the coalition government set up under last year's peace deal.

But our Central Asia correspondent Louise Hidalgo says President Rakhmanov and the mainly Islamic opposition are certain to reject the demands.

The government has already accused the rebels of trying to derail the peace process and vowed to stop them by whatever means.

Armed history

It is the first time in Tajikistan's five-year civil war that fighting has broken out in the northern Leninabad region, the country's industrial heartland.

The area is home to a large population of ethnic Uzbeks, many of whom were dissatisfied with the peace agreement.

Mr Khudoiberdiev, an ethnic Uzbek and once high-ranking army commander, was accused by the Tajik Government of being behind a mutiny in August 1997 to protest against the deal.