(Reuters) - Israeli troops and Palestinians fought a gun battle around Yasser Arafat's headquarters on Friday after Israel dismissed a cease-fire offer and sent its tanks into Ramallah, Palestinian officials said.
A top aide to the Palestinian president, who was inside, said the army smashed a hole in the wall of Arafat's office building and tore down a fence using armored bulldozers. Another Palestinian official said the building was on fire.
The top aide to Arafat told Reuters by telephone from inside that he feared the Israelis might be about to storm into the building, where Arafat was present with close advisers.
An Israeli military source confirmed the drive deep into the West Bank city was Israel's response after one of the worst suicide bombings of the 18-month-old Palestinian uprising against Israeli occupation.
Prime Minister Ariel Sharon , under pressure from right-wing members of his government to topple Arafat, met through the night with the rest of his cabinet.
Israel radio said the government had decided to declare Arafat an enemy and to mobilize army reservists. An announcement was expected after the cabinet meeting ended. "There are gun battles between Israeli troops and President Arafat's bodyguards inside the compound. We hold the Israeli government fully responsible and warn it that it is playing with fire," said Nabil Abu Rdainah, Arafat's top aide.
Several people had been wounded, he said.
Information Minister Yasser Abed Rabbo said tanks had fired shells at Arafat's office building and that it had caught fire.
"Israeli tanks fired shells at President Arafat's offices and the building is on fire, and we are inside," he said.
PALESTINIAN POLICEMEN WOUNDED Dozens of Israelis tanks had rumbled into fog-bound Ramallah overnight. At least five Palestinian policemen were wounded in initial clashes, Palestinian security sources said.
"It is clear that this operation targets the president personally and the Palestinian leadership as a whole," Abed Rabbo told Reuters by telephone from inside the compound where Arafat had been confined by Israel since December.
Hours earlier, the Palestinian president had offered an immediate cease-fire but it was swiftly dismissed by Israel.
Following Wednesday's suicide bombing, tension had soared, despite the offer of an Arab plan for Middle East peace that was unanimously endorsed at an Arab summit in Beirut and cautiously welcomed by Israeli Foreign Minister Shimon Peres .
The Israeli military source confirmed "military activity going on in Ramallah" and said it responded to Palestinian "terror attacks" since Wednesday -- the bombing in a hotel and an attack on a Jewish settlement that killed 24 Israelis in all.
"Right now it is in Ramallah only. If there is a need, it will be broadened," the source added.
Palestinians have been waging an uprising against occupation in the West Bank and Gaza Strip since September 2000. At least 1,107 Palestinians and 381 Israelis have been killed in tit-for-tat violence since the revolt began.
Israeli forces thrust into Ramallah, 15 km (nine miles) north of Jerusalem, hours after Arafat said he was ready for an immediate truce and Palestinian security sources said arrests of militants linked to bombings had begun, as demanded by Israel. Ramallah is the Palestinians' main political and commercial hub in the West Bank.
CABINET MEETING
The incursion unfolded as the Israeli cabinet met into the early hours to flesh out plans for what Palestinians feared would be a major reprisal. They stocked up on food and other essential supplies beforehand to prepare for siege conditions. Sharon signaled he was in no mood for compromise when he convened the cabinet, saying Israel faced a "new situation, a different situation" after a Palestinian suicide bombing which killed 20 Israelis in the coastal city of Netanya.
Israeli military sources said more combat reserve units had already been called up as a result of recent Palestinian attacks.
Earlier this month, the army reoccupied Ramallah in Sharon's fiercest offensive against cities handed to Palestinian rule under the 1993 Oslo interim peace accords.
Israeli officials swiftly dismissed Arafat's truce offer, saying it would judge him by actions and not words, although Palestinian Authority officials said their security forces had begun arresting militants across the West Bank.
Such arrests would respond to U.S. and Israeli calls for Arafat to do more to curb militants behind attacks on Israelis.
As the cease-fire offer was made, a Palestinian infiltrated a Jewish settlement in the West Bank and shot dead four people.
The gunman was shot dead by soldiers after a stand-off of several hours in a family house, an army spokeswoman said.
In Washington, a senior U.S. official cast doubt on Arafat's truce offer, saying he had not accepted specific cease-fire measures proposed by Zinni and still at issue in negotiations.
"We still don't have agreement to implement the specific steps," added the official, who asked not to be named.
Arafat's cease-fire gambit appeared timed to forestall any Israeli military onslaught.
Copyright © 2002 Reuters Limited.