A television grab shows a soldier helping a girl away from the scene at a school in the town of Beslan in the province of North Ossetia near Chechnya, September 1, 2004. Armed attackers, who seized a school in southern Russia, are holding up to 400 hostages including 200 schoolchildren, an official spokeswoman said.

MOSCOW (Reuters) - A heavily armed gang seized at least 120 hostages at a Russian school near Chechnya on Wednesday and threatened to kill 50 children for every one of their group who was killed, a senior local official said.

The attack bore the signs of a Chechen rebel operation. The gang of up to 17 men and women stormed into the secondary school in Beslan in North Ossetia province during a ceremony to mark the first day of the new school year.

"They have said that for every fighter wiped out they will kill 50 children and for every fighter wounded -- 20," regional Interior Minister Kazbek Dzantiyev told reporters in Beslan.

The gang, some strapped with explosives and reported to have mined the school grounds, later set free 15 of the children, Itar-Tass news agency said.

There was confusion over the exact number of hostages with initial reports putting it at 400. Interfax news agency later quoted local police as saying it was between 120 and 150.

The attackers rebuffed a local Muslim leader's attempts to talk and have demanded a meeting with top regional officials to discuss demands for the release of fighters seized in neighboring Ingushetia in June during a big rebel raid there.

SPORADIC FIRE

Witnesses near the school said sporadic gunfire resounded throughout the day.

"Every gunshot I hear is like a shot into my heart," said one woman, Vera, tears pouring down her cheeks and whose child was among the hostages.

Hundreds of police, rescue officials, and interior ministry troops with AK-47 rifles surrounded the school. Armored vehicles were parked nearby.

President Vladimir Putin, who broke his holiday to return to Moscow to deal with the latest in a wave of violence linked to separatist rebels in Chechnya, dispatched his interior minister and head of the FSB security service to the scene.

The former spy-chief rose to power in 2000 on the back of his tough approach on Chechnya and has always refused to negotiate with separatists.

Previous hostage-taking involving Chechen rebels have all ended with huge loss of life.

When Chechen rebels seized 700 hostages at a Moscow theater in 2002, 129 hostages and 41 guerrillas were killed when Russian troops stormed the building using poisonous gas.

In 1995, Chechen rebels took hundreds of hostages in a hospital in the southern Russian town of Budennovsk. More than 100 died during the assault and a botched Russian commando raid.

Underlining how much government nerves have been shaken by the latest barrage of attacks, Russia deployed extra troops to guard dozens of nuclear facilities.

"After the latest terrorist attacks security services decided to send more interior ministry troops to all nuclear sites across the country," a Russian Atomic Energy Agency spokesman said. He would not give any numbers of troops.

SHOCK, DISBELIEF

At least three civilians were killed and 11 injured in the initial phase of the attack, Tass quoted the local interior ministry as saying. Nearly 50 children had managed to escape.

"I was standing next to the (school) gates when I saw three people with guns running. At first, I thought it was a joke but then they started shooting in the air. Then I ran away," teen-ager Zaurbek Tsumartov told local television.

The wave of attacks has raised questions over Putin's hard-line strategy to bring Chechen rebels to heel but in the past he has showed no signs of buckling to their pressure.

Last weekend, the man the Kremlin picked to lead its policies in Chechnya easily won the local presidential election.

But the mass hostage-taking marks a new challenge to Putin's Chechnya policies.

Tuesday, a female suicide bomber blew herself up in central Moscow in an attack that killed nine and injured 51.

On August 24 two passenger planes were blown up apparently by suicide bombers in attacks that killed 90 people.

North Ossetia lies to the west of the seething Chechnya region where Russian forces have been fighting a war with separatist rebels for a decade.

There was no immediate charge that Chechen rebels were behind the attack, but the well-organized assault and the proximity to Chechnya suggested they were involved.