By Nazih Siddiq
NAHR AL-BARED, Lebanon, June 1 (Reuters) - Battles raged around a Palestinian refugee camp in north Lebanon on Friday as Lebanese troops tried to tighten the noose around al Qaeda-inspired militants holed up there.
Security sources said elite forces were trying to dislodge the group called Fatah al-Islam from some front positions on the edge of Nahr al-Bared camp while artillery batteries pounded the area. A Fatah al-Islam source said the militants had repulsed all attacks on its positions in seven hours of fierce fighting.
The army has been battling militants in the camp -- many of them foreign fighters, Lebanese authorities say -- since May 20 in Lebanon's worst internal violence since the 1975-1990 civil war. At least 84 people -- 35 soldiers, 29 militants and 20 civilians -- have been killed.
Artillery and machinegun fire shook the camp from early morning. At times shells exploded at a rate of 10 a minute and smoke billowed from buildings inside as fires raged.
"It is clear that this is the start of an army assault," said a Palestinian source with contacts in the camp. He said early reports indicated there were civilian casualties.
The camp, set up in 1948 as a temporary tent camp to house Palestinian refugees fleeing their homes after the creation of Israel, is now a small town with small concrete buildings and narrow alleyways.
A military source said the army was trying to destroy structures overlooking its positions on the camp's edge. "Snipers have been using these outposts to fire at our soldiers," he said.
An army said shelling was in response to attacks by the militants on army positions but did not confirm any major ground fighting. There was no immediate word on casualties but two Lebanese civilians were wounded by a shell while driving nearby.
ARMY MASSING TANKS
There was no army confirmation that a large-scale offensive was imminent, though a Reuters witness said a score of tanks had assembled about 1 km (half a mile) from an entrance to the camp.
A statement posted on a website frequently used by al Qaeda urged militants in Lebanon to rise up and defend Fatah al-Islam.
"Islamists, rise up and aid your brothers in Nahr al-Bared. This is your religious duty," said the statement signed by known Qaeda-linked militant Mohamed Hakaima.
More than 25,000 of Nahr al-Bared's 40,000 Palestinians have fled to the smaller Beddawi camp nearby.
The government is demanding that the militants surrender. The authorities have charged 20 captured members of the group with terrorism. The charges carry the death penalty.
A 1969 Arab agreement prevents the army from entering Lebanon's 12 Palestinian camps, home to 400,000 refugees.
The Lebanese government has given Palestinian leaders in Lebanon a chance to find a way out of the stand-off because it fears the fighting could spark violence in other refugee camps.
But the Palestinian source said the authorities appeared to have become impatient with the lack of progress by mediators and had decided to step up military pressure on the militants.
Abbas Zaki, Palestine Liberation Organisation representative in Lebanon, urged the Fatah al-Islam militants to surrender.
Members of Lebanon's anti-Syrian cabinet have described Fatah al-Islam as a tool of Syrian intelligence, but Damascus denies any links to the group and says its leader, Shaker al-Abssi, is on Syria's wanted list.
Abssi has said he follows al Qaeda's ideology, but has no direct links to Osama bin Laden's network. Many of his estimated 300 gunmen have fought in Iraq, Palestinian sources say.
Lebanese authorities say Fatah al-Islam includes Arabs from Saudi Arabia, Algeria, Tunisia, Syria and Lebanon.
(Additional reporting by Nadim Ladki and Yara Bayoumy in Beirut and Firouz Sedarat in Dubai)