Arafat defiant amid the ruins

The army systematically destroyed surrounding edifices

Palestinian leader Yasser Arafat has said he will not capitulate as Israeli tanks and troops closed in to just a few metres from his besieged office in Ramallah.

The army reoccupied Mr Arafat's compound on Thursday and has been systematically destroying buildings there after back-to-back suicide bombings in Um al-Fahm and Tel Aviv earlier in the week.

I am not inside the compound... I learned about this while listening to the radio

Palestinian intelligence chief

"I reiterate my call to all our parties to halt violent attacks inside Israel because (Prime Minister Ariel) Sharon exploits them as a cover to destroy the peace of the brave," Mr Arafat said in a statement issued by the official Palestinian news agency Wafa.

"We are ready for peace but not for capitulation, and we will not give up Jerusalem or a grain of our soil which are guaranteed to us by international law," he said.

The compound is under total Israeli control

Israel is demanding the surrender of about 20 people inside whom it blames for the violence, including senior Palestinian security officials.

Israel says Mr Arafat is not a target, but Mr Sharon's cabinet has decided to "isolate" him following this week's attacks.

Overnight, at least one tank shell hit Mr Arafat's refuge, showering the Palestinian leader in dust but not causing any injuries, according to a reporter inside the building.

France condemned the siege as "unacceptable" and called for it to be halted immediately.

The US administration earlier urged Israel not to jeopardise future reforms of Mr Arafat's Palestinian Authority by its actions.

White House spokesman Ari Fleischer said: "Israel has the right to defend itself and to deal with security, but Israel also has to bear in mind the consequences of action and Israel's stake in development of reforms in the Palestinian institutions."

Demolition

Israeli sappers on Saturday demolished an interior ministry block in Mr Arafat's compound with three explosions, leaving only one wall standing.

	Arafat's Ramallah compound Known as the Muqataa Built by the British in the 1920s Palestinians took control in 1994 year after Oslo peace accords Largely destroyed by Israeli forces Click here for more on Yasser Arafat's compound

After the explosions, an armoured digger pulled up menacingly alongside the office building and struck it several times high up on the walls with its blade before withdrawing.

Earlier army bulldozers destroyed an overhead walkway connecting Mr Arafat's office with an adjacent reception areas.

A Palestinian former minister inside the building told AFP news agency that the situation was "very serious" with food and water in short supply and about 250 people sheltering on an upper story.

The men Israel wants to arrest include the head of West Bank intelligence, Tawfiq Tirawi, accused by Israel of involvement in terrorist activities, and Mahmud Damra, the leader of Mr Arafat's Force-17 bodyguard.

Several people surrendered to the Israelis overnight. Palestinian officials said they had not been on Israel's list, but were civilian employees and perhaps some of Mr Arafat's guards.

On Friday, Mr Tirawi told Radio Monte Carlo by telephone that he was not at the besieged compound, and he had only learnt he was wanted by the Israelis from news reports.

There is no way of confirming Mr Tirawi's remarks.

The Ramallah siege coincided with two Israeli army incursions into the Gaza Strip, with one group of soldiers advancing to the edge of Gaza City and another penetrating an area near the towns of Beit Lahiya and Beit Hanun.

At least three Palestinians - a man, a woman and a teenage boy - were killed by the Israeli fire.

Mr Arafat has been confined in Ramallah for much of the past year, and most of his compound had already destroyed in Israeli air strikes and two earlier occupations.