Obama envoy sees long road ahead in war with Islamic State

BAGHDAD (Reuters) - The U.S. envoy charged by President Barack Obama with building a coalition to fight the militant group Islamic State warned on Friday that the war against the jihadists was in its early stages.

"The fight will not be easy. There will be ebb and flow on the battlefield," retired General John Allen told reporters during a visit to Baghdad. "This will take time and requires patience."

The Islamic State has seized large chunks of territory in Iraq since June, when the Iraqi military collapsed as the militants took northern Iraq's biggest city, Mosul, and then charged through the Tigris River valley.

The jihadists also control much of eastern Syria, which is embroiled in a three-year-old civil war, and have erased much of the border between the neighboring countries as it pursues its goal of creating a caliphate.

Allen cautioned that launching a campaign to take Mosul was not on the immediate horizon.

"It will kick off within a year. I can't be more specific. It's not a single battle. It's a campaign," Allen said.

Allen also described the Iraqi government's hopes to woo Sunni tribes to fight Islamic State as in its early stages.

"There is no cookie-cutter approach to the tribes. Each one has to be taken separately," he said.

"How that ultimately plays out in terms of what they can harvest from a relationship with the tribes I think is going to unfold over time."

Allen, mindful of deep suspicion among Iraq's Shi'ite majority of the United States' intent nearly three years after the U.S. withdrew its troops from the county, reiterated Obama's message that no U.S. combat troops would be sent to Iraq.

"We must build Iraqi capacity to take on the fight. This is why the United States will not send combat troops to Iraq, but instead will continue our support for Iraqi security forces through military advisers training and capacity building," he said.

Allen, a former military commander in Anbar province in 2007, is expected to visit Belgium, Jordan, Egypt and Turkey on this trip.

Accompanied by his deputy, Brett McGurk, he arrived in Iraq on Thursday to meet Iraqi officials and regional leaders "on U.S. support for and cooperation with Iraq in the fight against ISIL," the State Department said.

U.S. officials have said Allen's main purpose is to develop greater support for the coalition, which has conducted air strikes against Islamic State targets in Iraq and Syria.

(Reporting By Ned Parker; Editing by Larry King)

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Kurds call to arms as Islamic State closes in on Syrian town

By Ayla Jean Yackley and Tom Perry

SURUC Turkey/BEIRUT (Reuters) - The main Kurdish armed group in Syria called on its kinsmen across the region to help it stop a massacre in the Syrian town of Kobani as Islamic State militants armed with tanks edged closer on its outskirts and pummeled it with artillery fire.

Islamic State's battlefield gains in recent months have come as Syrian President Bashar al-Assad's forces have focused on other rebel groups. On Friday the army advanced on the city of Aleppo further west, threatening rebel supply lines in a potentially major reversal.

U.S.-led forces have been bombing Islamic State targets in Syria and Iraq but the action has done little to stop the group's advance in northern Syria towards the Turkish border, piling pressure on Ankara to intervene.

Canada said it would send fighter jets and other aircraft to take part in the U.S.-led strikes on Islamic State in Iraq for a period of up to six months.

Turkey said it would do what it could to prevent Kobani, a predominantly Kurdish town just over its southern border, from falling into Islamic State. It has stopped short of committing to any direct military intervention and Syria warned on Friday against any Turkish "aggression" on its territory.

A statement issued by the YPG, the main Kurdish armed group, vowed "never ending" resistance to Islamic State in its advance on Kobani. "Every street and house will be a grave for them."

"Our call to all the young men and women of Kurdistan ... is to come to be part of this resistance."

DESTRUCTION

Esmat al-Sheikh, head of the Kurdish forces defending Kobani, said the distance between his fighters and the insurgents was now less than one kilometer (half a mile).

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Turkish soldiers stand guard near Mursitpinar border crossing as smoke rises in the Syrian town of K …

"We are in a small, besieged area. No reinforcements reached us and the borders are closed," he told Reuters by phone. "My expectation is for general killing, massacres and destruction."

Islamic State has carved out swathes of eastern Syria and western Iraq in a drive to create a caliphate between the Euphrates and the Tigris rivers. Kobani's resistance has prevented it from consolidating territory across Syria's north.

Fighting continued after the sun set, with artillery strikes on residential areas east and southwest of Kobani's center. Kurds returned fire, and red tracer bullets targeting Islamic State strongholds east of the city flew over rooftops, a Reuters correspondent on the Turkish side of the border said.

Remzi Savas, 53, smoked a cigarette and listened to the gunfire over the border.

"My son is over there, he crossed through a minefield to get there. He is just 14. There are many children fighting for the YPG, we can't hold them back. They think they'll lose everything if Kobani falls."

The British-based Syrian Observatory for Human Rights said at least 80 shells had hit the town, known as Ayn al-Arab in Arabic, and there were heavy clashes in the east and southeast.

The fighting has driven Kurds from across northern Syria from their homes across the border into Turkey.

"It's a dramatic humanitarian tragedy as we have all witnessed," U.N. High Commissioner for Refugees Antonio Guterres said in Geneva. "It's the largest single outflow of Syrians in a few days, 160,000 people."

ALEPPO ENCIRCLED

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An elderly Syrian Kurdish refugee woman is carried by a man after crossing into Turkey from the Syri …

Further west, a Syrian army advance threatened to take the last main rebel supply route leading into Aleppo from the north and reverse two years of gains by Assad's foes.

"They are going to encircle Aleppo," said Abu Abdo Salabman, a member of the political office of the Mujahideen Army, a rebel group viewed as part of the moderate opposition to Assad.

"They are bombing us non-stop," said Salabman, who was not using his real name. "They are marching on us and the regime air force is non-stop."

The Syrian army has taken control of three villages, state television said, in a campaign by Assad's forces that could encircle insurgents in the city.

Although there are smaller, more indirect routes into Aleppo, taking the northern road would also allow the army to besiege areas of the city which fell to insurgents in 2011, a tactic it used to retake Homs city in May.

Assad's forces are fighting a mixture of rebel groups in Syria, including Islamic State but also a mix of western-backed forces in a conflict which has killed nearly 200,000 people.

This year, Washington and its allies have shifted focus in Syria from battling Assad to combating Islamic State.

The U.S. military said coalition forces carried out strikes in Iraq and Syria overnight on Thursday. In Syria they destroyed an Islamic State garrison, two of the militant group's tanks and hit two mobile oil refineries and a training camp.

In Iraq, government forces recaptured the town of Dhuluiya, about 70 km (45 miles) north of Baghdad, which had been under siege by Islamic State.

Prime Minister Haider al-Abadi called on Iraq's bickering political factions to unite. In a message to mark the Muslim holy feast of Eid, he said the battle against Islamic State would continue to the end.

TURKISH DILEMMA

Village by village, Kurdish forces in northern Iraq have regained around half the territory they gave up in August when Islamic State militants tore through their defenses in the northwest, prompting the United States to launch air strikes in September, its first since 2011.

Turkey, however, insists the air strikes alone will not contain the Islamic State threat, and wants simultaneous action to be taken against Assad's government, including the creation of a no-fly zone on the Syrian side of the border.

Prime Minister Ahmet Davutoglu said Turkey would do what it could to prevent Kobani from falling to the militants but stopped short of committing to the sort of intervention Kurds have called for.

"We wouldn't want Kobani to fall. We'll do whatever we can to prevent this from happening," Davutoglu said in a discussion with journalists broadcast on the A Haber television station.

Parliament gave the government powers on Thursday to order cross-border military incursions against Islamic State, and to allow forces of the U.S.-led foreign coalition to launch similar operations from Turkish territory.

Syria said Turkey's decision was an act of aggression which could have "catastrophic consequences".

But Davutoglu appeared to pull back from any suggestion that Turkey was planning a military incursion, saying this could drag Ankara into a wider conflict along its 900 km (560-mile) border.

Ankara fears intervention could worsen security on its border by strengthening Assad and bolstering Kurdish fighters linked to the Kurdistan Workers Party (PKK), which has waged a three-decade insurgency against the Turkish state.

(Additional reporting by Oliver Holmes in Beirut, Selin Bucak in Istanbul, Tulay Karadeniz in Ankara, Isabel Coles in Hassan Sham, Iraq, and Raheem Salman and Yara Bayoumy in Baghdad, Stephanie Nebenhay in Geneva; Writing by Nick Tattersall and Sylvia Westall; Editing by David Stamp and Giles Elgood)

• Unrest, Conflicts & War
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Islamic State video shows second British hostage beheaded

By Mark Hosenball and Sylvia Westall

WASHINGTON/BEIRUT (Reuters) - Islamic State militants beheaded British aid worker Alan Henning in a video posted on Friday, triggering swift condemnation by the British and U.S. governments.

The footage on YouTube, highlighted on pro-Islamic State Twitter feeds, showed a middle-aged man in an orange jumpsuit kneeling next to a black-clad militant in arid scrubland, similar to past Islamic State beheading videos of two American journalists and a British aid worker.

As in previous videos, Henning appears to read from a script before he is killed. "Because of our parliament's decision to attack the Islamic State, I, as a member of the British public, will now pay the price for that decision," he says.

A male voice with a British accent says, "The blood of David Haines was on your hands Cameron," in references to the slain aid worker and to Britain's prime minister. "Alan Henning will also be slaughtered, but his blood is on the hands of the British parliament."

Henning, a 47-year-old taxi driver from Salford in northern England, was part of an aid convoy taking medical supplies to a hospital in northwest Syria in December last year when it was stopped by gunmen and he was abducted.

In response to the video, Cameron said: "The brutal murder of Alan Henning by ISIL shows just how barbaric and repulsive these terrorists are. My thoughts and prayers tonight are with Alan's wife Barbara, their children and all those who loved him.

"Alan had gone to Syria to help get aid to people of all faiths in their hour of need. We will do all we can to hunt down these murderers and bring them to justice."

U.S. officials said they had no reason to doubt the authenticity of the video, titled "Another Message to America and its Allies."

"The United States strongly condemns the brutal murder of United Kingdom citizen Alan Henning," President Barack Obama said in a statement.

"Standing together with our U.K. friends and allies, we will work to bring the perpetrators of Alan's murder – as well as the murders of Jim Foley, Steven Sotloff and David Haines – to justice," Obama said, referring to other captives killed by Islamic State militants.

Near the end of the one-minute, 11-second video, the man in black introduces another hostage identified as American Peter Edward Kassig. His parents later issued a statement confirming their 26-year-old son had been taken captive while doing humanitarian work in Syria.

"We ask everyone around the world to pray for the Henning family, for our son, and for the release of all innocent people being held hostage in the Middle East and around the globe," Ed and Paula Kassig of Indianapolis, Indiana, said in the statement.

Kassig had served in the U.S. Army during the Iraq war before being medically discharged, the family said. Pentagon records show he spent a year in the army as a Ranger and was deployed to Iraq from April to July 2007.

After leaving the army, Kassig became an emergency medical technician and traveled to Lebanon in May 2012, volunteering in hospitals and treating Palestinian refugees and those fleeing Syria's nearly four-year civil war, the family added.

He was detained on Oct. 1, 2013, while traveling to the eastern Syrian city of Deir al-Zor while working for Special Emergency Response and Assistance, a non-governmental organization he founded in late 2012 and based out of southern Turkey to treat refugees flowing across the border from Syria, his family said.

While in captivity, he converted to Islam and took the name Abdul Rahman, a family spokeswoman said.

"DISGUSTING MURDER"

U.S. National Security Council spokeswoman Caitlin Hayden confirmed Kassig was being held by Islamic State. "We will continue to use every tool at our disposal - military, diplomatic, law enforcement and intelligence – to try to bring Peter home to his family," she said.

The beheading of Henning marks the fourth such killing of a Westerner by Islamic State, which has faced air strikes by U.S., British, French and Arab fighter jets since seizing swaths of Iraq and Syria in waves of sectarian violence.

Earlier on Friday, before the Henning video was posted, a British Islamic State fighter identified as Abu Saeed al-Britani appeared in a separate video, urging British Muslims to travel to Syria and Iraq to join Islamic State.

In the video on YouTube, al-Britani, wearing a camouflage shirt and what appears to be a cast on his right arm, calls British and U.S. military forces "cowards" in carrying out airstrikes instead of putting troops on the ground.

"So send all your forces. Send them all. Send all your reserves. Send all of your back-ups, for we'll send them back one by one in coffins," he said.

Britain, a close U.S. ally, recently announced it was joining a U.S.-led air assault against the Sunni militant group's targets in Iraq, after weeks of weighing its options.

Muslim groups across Britain, including some organizations that are highly critical of British foreign policy and blame Western interference for fanning the recent crisis in Iraq and Syria, had called in vain for Henning's release.

Henning's wife Barbara had called him a "a peaceful, selfless man" and appealed to Islamic State to release him.

Islamic State is believed to be holding fewer than 10 Western hostages in Syria. The remaining hostages include British journalist John Cantlie, who has appeared in three Islamic State videos.

(Additional reporting by Matt Spetalnick and Mostafa Hashem in Cairo; Writing by Jason Szep; Editing by Tom Brown and Ken Wills)

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Top North Korea officials make rare visit to South

By Ju-min Park

INCHEON South Korea (Reuters) - Three senior North Korean officials arrived in South Korea on a rare visit on Saturday to attend the Asian Games closing ceremony in what could potentially bring a breakthrough in tense ties between the rival Koreas.

Heading the delegation was Hwang Pyong So, who arrived at Incheon airport in full military uniform, and Choe Ryong Hae, two senior aides to North Korea's supreme leader Kim Jong Un. They were expected to meet South Korean government officials.

Arriving for a meeting with South Korea's Minister for Unification at a hotel, the North's officials appeared upbeat and Choe nodded when asked by reporters whether they were optimistic about the outcome of their visit.

The visit came as a surprise because Pyongyang has been issuing invectives toward the South and President Park Geun-hye on a nearly daily basis, criticizing her calls for Pyongyang to end its arms program and improve human rights conditions.

Despite its tense relations with the South, North Korea has been on a high-profile diplomatic outreach in recent weeks, with its foreign minister making visits to capitals and attending the U.N. General Assembly last month.

The North has been under U.N. sanctions for its nuclear and missile tests which deepened its international isolation but has expressed willingness to return to talks with key world powers including the United States and China on its nuclear program.

The two Koreas are technically at war because their 1950-53 conflict ended in a truce and not a peace treaty. Armed clashes in recent years have killed soldiers on both sides, and in 2010 civilians were killed when the North bombed a Southern island.

South Korea generally welcomed the North Koreans' visit and immediately raised hope that it would lead to a breakthrough in ties that have been in a deep freeze for more than four years.

"The government hopes that the high level delegation's attendance at the Asian Games closing ceremony becomes a positive occasion for improved ties between the South and the North," said Unification Ministry spokesman Lim Byeong-cheol.

Hwang is the head of the North Korean army's General Political Bureau, a powerful apparatus loyal to the secretive country's leader and a key post overseeing the 1.2-million-member military.

He took on the added title of vice chairman of the National Defense Commission, the supreme military council that Kim Jong Un himself heads as national leader, sealing his status as one of the most powerful men in Pyongyang's leadership circle.

Choe has also been in the close circle of aides around Kim and currently heads the country's agency promoting sports. Also among the delegation is Kim Yang Gon, a senior ruling Workers' Party official who has for years worked on ties with the South.

Leader Kim has been absent from public view since Sept. 3, fuelling speculation that he may be in bad health. The North's ambassador to the United Nations in Geneva denied Kim was ill, saying such reports were "fabricated rumors." [ID:nL6N0RX4VU]

The North Korean officials were scheduled to meet the South's Unification Minister, who is the main policymaker for Seoul on the North, and also President Park's top national security advisor.

They were scheduled to meet the North's athletes at the Asian Games and attend the closing ceremony late on Saturday before flying home later in the evening.

(Writing by Jack Kim; Editing by Ken Wills & Kim Coghill)

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Tensions surge in Hong Kong protests amid scuffles, signs of backlash

By John Ruwitch and Clare Jim

HONG KONG (Reuters) - Fresh scuffles broke out on Saturday between Hong Kong pro-democracy protesters and opponents of the week-long demonstrations, reigniting concerns that the Chinese-controlled city's worst unrest in decades could take a violent turn.

The protests have been largely peaceful since police last Sunday fired tear gas at crowds demanding Beijing grant Hong Kong the unfettered right to choose its own leader. But the mood turned ugly on Friday at the most volatile protest site, in the teeming suburb of Mong Kok where some criminal gangs are suspected to be based.

Police intervened to prevent a violent escalation, but a rowdy crowd of around 2,000 filled a major intersection in the small hours of Saturday and the atmosphere was highly charged as police in riot gear tried to keep them under control.

Witnesses said about a thousand protesters faced off in Mong Kok at mid-morning on Saturday, although there were no uniformed police in sight.

Pro-democracy activists vowed to hold their ground through the weekend. "We will retreat after that if the situation gets worse, such as if mobs start flashing their knives at us," said Daniel Tang, who is in his 30s.

Student activists, established protest groups and ordinary Hong Kongers have joined forces to present Beijing with one of its biggest political challenges since it violently crushed pro-democracy protests in and around Tiananmen Square in 1989.

Tens of thousands of protesters have staged sit-ins across Hong Kong over the past week, demanding the city's pro-Beijing leader Leung Chun-ying step down and China reverse a decision in August to handpick the candidates for a 2017 election.

Police said they had arrested 19 men since Friday, with local state-owned broadcaster RTHK saying eight of them were suspected members of Triads, or Chinese criminal gangs. Eighteen people were injured, including six police officers, according to the RTHK report.

One of the main student groups behind the "Occupy Central" protest movement said it would pull out of planned talks with the Hong Kong government, because it believed authorities had colluded in the attacks on demonstrators in Mong Kok.

"The government and police today connived in the attack by Triads ... on peaceful occupiers, so they have shut the way to dialogue and must bear the consequences," the Hong Kong Federation of Students said in a strongly worded statement.

The notorious Triads operate bars, nightclubs and massage parlors across Mong Kok, an area of high-rise apartment blocks across the harbor from the main protest areas.

Witnesses said anti-Triad police wearing trademark black vests were active in the area on Friday.

At times over the past week, police have left the streets, saying they wanted to ease tensions, though the reason for their apparent absence from this scene on Saturday morning was unclear.

Police have defended their handling of fighting in the area, saying they had exercised "dignity and restraint and tried our best to keep the situation under control".

But Amnesty International issued a statement criticizing them for "(failing) in their duty to protect hundreds of peaceful pro-democracy protesters from attacks by counter demonstrators."

PROTESTS "BUT A DAYDREAM"

The ruling Communist Party's official People's Daily, in a front page editorial on Saturday, praised Hong Kong police for their restraint in the face of what it said was lawless protests, including "poking" of police with umbrellas.

"A democratic society should respect the opinions of the minority, but it does not mean those minorities have the right to resort to illegal means," it wrote.

The protests will never spill over into the rest of China, the newspaper added.

"For the minority of people who want to foment a 'color revolution' on the mainland by way of Hong Kong, this is but a daydream."

Facing separatist unrest in far-flung and resource-rich Tibet and Xinjiang, Beijing is standing firm on Hong Kong, fearful that calls for democracy there could spread to the mainland, especially if successful.

STANDOFF

Demonstrations across Hong Kong have ebbed and flowed since last Sunday, when police used pepper spray, tear gas and batons to break them up in the worst unrest in Hong Kong since the former British colony was handed back to Chinese rule in 1997.

At times, tens of thousands of people gathered to block roads and buildings in central areas, bringing them to a virtual standstill.

Earlier this week, Leung rejected protesters' demands to resign, and he and his Chinese government allies made clear they would not back down.

He did, however, offer talks with leaders of the movement.

China rules Hong Kong through a "one country, two systems" formula underpinned by the Basic Law, which accords Hong Kong some autonomy and freedoms not enjoyed on the mainland and has universal suffrage as an eventual goal.

But Beijing decreed on Aug. 31 it would vet candidates who want to run for chief executive at an election in 2017, angering democracy activists, who took to the streets.

(Additional reporting by Charlie Zhu, Clare Baldwin, Joseph Campbell, Donny Kwok, James Pomfret, Bobby Yip, Irene Jay Liu, Farah Master, Diana Chan, Kinling Lo, Twinnie Sui, Venus Wu and Jason Subler in HONG KONG, and Ben Blanchard in BEIJING; Writing by Mike Collett-White & Jeremy Laurence; Editing by Sonya Hepinstall & Kim Coghill)

• Unrest, Conflicts & War
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Hong Kong leader refuses to resign but offers talks with protesters

By Clare Baldwin and Donny Kwok

HONG KONG (Reuters) - Hong Kong leader Leung Chun-ying defied pro-democracy protesters' demands to step down by Friday, with pressure also increasing from Leung's backers in Beijing over one of the most serious political challenges they have faced in decades.

Leung refused to bow to an ultimatum from protesters to resign and repeated police warnings of serious consequences should they try to block off or occupy government buildings.

He told reporters just minutes before the ultimatum expired at midnight that Chief Secretary Carrie Lam would meet students soon to discuss political reforms, but gave no timeframe.

Tens of thousands have taken to Hong Kong's streets in the past week to demand full democracy, including a free voting system when they come to choose a new leader in 2017.

The protests have ebbed and flowed in the days since police used pepper spray, tear gas and baton charges last Sunday to break up the biggest demonstrations seen since the former British colony was handed back to Chinese rule in 1997.

China rules Hong Kong through a "one country, two systems" formula underpinned by a "Basic Law", which accords Hong Kong some autonomy and freedoms not enjoyed on the mainland and with universal suffrage as an eventual goal.

Beijing, however, decreed on Aug. 31 it would vet candidates who want to run for chief executive at an election in 2017, angering democracy activists who took to the streets.

While Leung made an apparent concession by offering talks, Beijing restated its resolute opposition to the protests and a completely free vote in Hong Kong.

"For a few consecutive days, some people have been making trouble in Hong Kong, stirring up illegal assemblies in the name of seeking 'real universal suffrage'," China's official People's Daily said in a front-page commentary on Friday.

"Such acts have outrightly violated the Basic Law, Hong Kong's law, as well as the principle of the rule of law, and they are doomed to fail," the commentary warned.

Thousands of protesters had gathered outside Leung's office in central Hong Kong in anticipation of the ultimatum, but were disappointed when Leung stood firm.

Their numbers fell to hundreds as the sun rose on Friday and Hong Kongers prepared to go back to work after the two-day National Day holiday, although there were tense moments with about 100 police guarding the building.

Protesters refused to allow two trucks carrying supplies for police guarding Leung's office through their lines, although the stand-off remained peaceful.

But there were signs of tension between public employees trying to go back to work and the protesters who have barricaded the area outside Leung's office.

"I need to go to work. I'm a cleaner. Why do you have to block me from going to work?" said one woman as she quarreled with protesters. "You don't need to earn a living but I do."

Other government workers milled around outside the building, waiting for instructions before the government later declared its main office building would remain closed for the day, with workers to go to secondary sites.

Other protest sites in the Central business district, the luxury shopping area of Causeway Bay and in the densely populated residential Mong Kok district of Kowloon were quiet.

DISAPPOINTMENT, SUSPICION

Some protesters now suspect authorities are trying to buy time with their offer of talks while they wait for demonstrations to dwindle.

"The government already has an answer in its heart. They will not let us have real universal suffrage," said Isaac Chan, a 22-year-old private music tutor.

"We think this is a tactic being used to cool the crowd because (Friday) is a work day, not a holiday," he said.

The protests so far have been an amalgam of students, activists from the "Occupy" movement and ordinary Hong Kongers, under the "Umbrella Revolution" banner adopted after many protesters used umbrellas to ward off pepper spray used by police almost a week ago.

Some now fear that the lack of any clear leadership could prove to be a telling weakness for the disparate groups.

"We are not worrying about excessive violence from police, as we don't expect they will repeat it again when the whole world is watching," said Kenneth Mok, 22, a civil engineering graduate, at the Admiralty protest site near Central.

"We are worrying the movement will lose steam without a clear leader leading. We are worrying that people will go back to normal like nothing has happened," he said.

Student groups welcomed the offer of talks, but they urged followers to stay where they were to keep up the pressure on the government. The "Occupy Central with Love and Peace" movement reiterated its demand that Leung step aside.

The protests have brought parts of the Asian trading hub to a standstill. ANZ economists sent out a research note on Friday estimating that the protests may have cost retailers HK$2.2 billion ($283.5 million) so far, with retailers of luxury goods, cosmetics and consumer durables hardest hit.

Leung's widely anticipated refusal to resign underlined that both sides appear to have dug in for a protracted stand-off.

"In any place in the world, if there are any protesters that surround, attack, or occupy government buildings like police headquarters or the chief executive's office ... the consequences are serious," Leung said, echoing warnings from the police that their response to any such action would be robust.

The "Occupy Central" movement presents one of the biggest political challenges for Beijing since it violently crushed pro-democracy protests in and around Tiananmen Square in 1989.

Cracking down too hard could shake confidence in market-driven Hong Kong, which has a separate legal system from the rest of the country, but not reacting firmly enough could embolden dissidents in mainland China.

China's ambassador to Germany, Shi Mingde, told Reuters in Berlin that the protests could tarnish Hong Kong's image as one of the world's leading financial centers if the continued for a prolonged period.

Hong Kong's benchmark share index, the Hang Seng, plunged 7.3 percent in September, in part because of the uncertainty surrounding the protests. It was down 1 percent Friday morning, echoing falls in global markets. Spooked by the protests, some banks and other financial firms have begun moving staff to back-up premises on the outskirts of the city. (1 US dollar = 7.7614 Hong Kong dollar)

(Additional reporting by John Ruwitch, Charlie Zhu, Yimou Lee, James Pomfret, Irene Jay Liu, Farah Master, Diana Chan, Twinnie Siu, Kinling Lo, Diana Chan and Jason Subler in HONG KONG; Writing by Paul Tait; Editing by Alex Richardson)

• Unrest, Conflicts & War
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Swiss Red Cross worker killed by shell in Ukraine's Donetsk

By Maria Tsvetkova

DONETSK Ukraine (Reuters) - A Swiss Red Cross worker was killed by a shell that landed near the international organization's office in Ukraine's separatist-held city of Donetsk on Thursday.

Both the pro-Russian separatists and the Ukrainian government forces they have been fighting blamed each other for the attack which smashed windows, scattered shrapnel and left a crater in the pavement.

The International Committee of the Red Cross (ICRC), said Laurent DuPasquier, a 38-year-old administrator in its Donetsk office, had been in Ukraine for six weeks before he was hit.

"We understand that there were other civilian casualties in Donetsk today. Indiscriminate shelling of residential areas is unacceptable and violates international humanitarian law," ICRC Director of Operations Dominik Stillhart said in a statement.

The agency's other staff, including about 20 Ukrainian and international employees based in Donetsk, were "now in safety", the statement said. "We're deeply distressed by this loss," ICRC spokesman Ewan Watson told Reuters.

The ICRC offices in Donetsk are in a three-storey building less than one kilometer from the state security headquarters which has been occupied by separatist rebels along with other strategic points in the city since April.

The incident will bring fresh strain to bear on a fragile ceasefire called by Ukrainian President Petro Poroshenko which came into force on Sept. 5.

Poroshenko said last week the ceasefire was holding. But it has come increasingly frayed in the past few days with increased fighting going on around the main international airport of Donetsk, from where separatists are trying to dislodge government forces.

Ukrainian Foreign Minister Pavel Klimkin blamed the separatists for Thursday's attack. "I have only one question: do the terrorists have any idea of what humanity is all about when they shell the Donetsk office of the ICRC, whose only aim is to help people?" he said.

Rebel leader Andrei Purgin said the Ukrainian government forces shelled Donetsk constantly and that the attack had come from one of their areas.

"The Red Cross worker was killed by a rocket from a multiple rocket launcher," he told Reuters.

Seven Ukrainian soldiers were killed in a single strike by tank fire on their armored personnel transporter on Monday.

On Wednesday at least 10 people were killed when shelling hit a school playground in Donetsk and a public transit mini-van in a street nearby.

(Reporting by Maria Tsvetkova, Additional reporting by Stephanie Nebehay and Tom Miles in Geneva and Thomas Grove in Moscow; Writing by Richard Balmforth; Editing by Andrew Heavens)

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Rousseff widens Brazil election lead, challengers even

By Anthony Boadle

BRASILIA (Reuters) - Brazilian President Dilma Rousseff has extended her lead ahead of Sunday's election and would win re-election in a likely second-round runoff, while her main challengers are running neck-and-neck for second place, polls showed on Thursday.

Environmentalist Marina Silva has continued to slip and is now only 3 percentage points ahead of centrist candidate Aecio Neves, according to the Datafolha polling firm, a statistical tie because it is within the poll's margin of error.

If no candidate wins an outright majority in first-round voting, the presidential election will be decided in a runoff between the two leading candidates on Oct. 26.

Both Datafolha and a second poll by the Ibope research firm show Rousseff winning re-election in the runoff by 7 percentage points.

Rousseff increased her lead in the first round to 16 percentage points in both polls, with 40 percent of voter support to 24 percent for Silva.

Neves, the market favorite who has been stuck in third place since Silva's late entry into the race, increased his support by 1 percentage point to 21 percent, Datafolha said, and now has a fighting chance of making the runoff.

The polls confirmed that Silva, a popular anti-establishment figure, has continued to lose ground since peaking in late August. Silva surged after entering the race when her party's original candidate was killed in a plane crash, and initially gained a 10-point advantage over Rousseff.

She lost ground under a barrage of criticism from Rousseff's campaign that portrayed her pro-market policies as a threat to Brazil's poor and questioned her ability to govern Brazil without a solid party coalition.

Rousseff's increased chances of winning re-election have weighed down Brazil's markets where investors are hoping for a change of government. Some blame Rousseff's interventionist policies for the stagnation of Latin America's largest economy.

Silva, a renowned conservationist who has embraced market-friendly policies, is promising to jumpstart Brazil's stagnant economy, while Rousseff vows to extend social programs that have lifted millions of Brazilians out of poverty and reduced inequality in Latin America's largest nation.

The seven main candidates in the race were to face each other in a final television debate late on Thursday, the last day of campaigning.

In her last television ad, Silva assailed Rousseff for lying about the government's role in a bribery and kickback scandal rocking state-run oil company Petroleo Brasileiro SA.

The Datafolha poll surveyed 12,022 respondents nationwide between Oct. 1 and Oct. 2 and the Ibope surveyed 3,010 respondents nationwide between Sept. 27 and Oct. 2. Both polls have a margin of error of plus or minus 2 percentage points.

(Reporting by Anthony Boadle; Editing by Tom Brown)

• Elections
• Politics & Government
• Dilma Rousseff
• Marina Silva

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Turkey steels for action as Islamic State advances on Syrian border town

By Ayla Jean Yackley and Alexander Dziadosz

SURUC Turkey/BEIRUT (Reuters) - Turkey's parliament authorized the government on Thursday to order military action against Islamic State as the insurgents tightened their grip on a Syrian border town, sending thousands more Kurdish refugees into Turkey.

The vote gives the government powers to order incursions into Syria and Iraq to counter the threat of attack "from all terrorist groups", although there was little sign any such action was imminent.

The mandate also allows foreign troops to launch operations from Turkey, a NATO member that hosts a U.S. air base in its southern town of Incirlik, but which has so far resisted a frontline role in the military campaign against the insurgents.

"The rising influence of radical groups in Syria threatens Turkey's national security. ... The aim of this mandate is to minimize as much as possible the impact of the clashes on our borders," Defence Minister Ismet Yilmaz told parliament.

Islamic State fighters advanced to within a few km (miles) of the mainly Kurdish border town of Kobani on three sides on Thursday, extending their gains after taking control of hundreds of villages around the town in recent weeks.

Smoke rose behind hills to the south of Kobani as the insurgents continued their shelling into the night. Dozens of anti-tank missiles with bright-red tracers flashed through the sky as darkness enveloped the town.

Kobani's electricity supply was cut after militants bombarded a local power grid, a Kurdish fighter told Reuters.

In neighboring Iraq, which also borders Turkey, the insurgents have carried out mass executions, abducted women and girls as sex slaves, and used children as fighters in what may amount to war crimes, the United Nations said.

They took control of most of the western Iraqi town of Hit early on Thursday in Anbar province, where they already control many surrounding towns, launching the assault with three suicide car bombs at its eastern entrance.

U.S.-led forces, which have been bombing Islamic State targets in Syria and Iraq, hit a village near Kobani on Wednesday. Sources in the town, which is known as Ayn al-Arab in Arabic, reported strikes farther south overnight.

The U.S. Central Command reported that U.S. and other forces in the coalition conducted four strikes on Wednesday and Thursday in Syria and seven in Iraq. Targets included buildings, tanks and other armed vehicles.

But such strikes seemed to have done little to stop the Islamists' advance.

"We left because we realized it was only going to get worse," said Leyla, a 37-year-old Syrian arriving at the Yumurtalik border crossing with her six children after waiting 10 days in a field, hoping the clashes would subside.

"We will go back tomorrow if Islamic State leaves. I don't want to be here," she said.

Kurdish militants in Turkey warned that peace talks with Ankara, meant to end a three-decade insurgency, would collapse if the Islamist insurgents were allowed to carry out a massacre.

The British-based Syrian Observatory for Human Rights, which monitors Syria's war, said Islamic State militants were clashing with Kurdish fighters hundreds of meters from Kobani, raising fears they would enter the town "at any moment".

It said it confirmed the deaths of 16 Islamic State fighters and seven Kurdish militants but that the true toll was likely to be higher.

About 20 explosions were heard in the areas of the Tishrin dam and town of Manbij 50 km (30 miles) south of Kobani overnight, resulting from missile strikes believed to be carried out by the coalition, the observatory said earlier.

Asya Abdullah, a senior official in Syria's dominant Kurdish political party the Democratic Union Party (PYD), said there were clashes to the east, west and south of Kobani and that Islamic State had advanced to within 2-3 km on all fronts.

"If they want to prevent a massacre, (the coalition) must act much more comprehensively," she told Reuters by phone from Kobani, adding that air strikes elsewhere in Syria had pushed Islamic State fighters towards the border town.

TURKEY HESITANT

The Turkish parliamentary vote extended a mandate initially intended to allow Ankara to strike Kurdish militants in northern Iraq and to defend itself against any threat from Syrian President Bashar al-Assad's forces.

But it does not necessarily signal imminent action. President Tayyip Erdogan insists U.S.-led air strikes alone will not contain the Islamic State threat and is calling for the removal of Assad, an aim not shared by the U.S.-led military coalition for the current military campaign. Ankara is unlikely to act alone.

The Turkish army has, however, vowed to defend the tomb of Suleyman Shah, grandfather of the founder of the Ottoman Empire, in a Turkish enclave in northern Syria, telling its troops there it would rush to their defense if needed.

"One call and we will immediately be at your side," Chief of the General Staff General Necdet Ozel said in a statement.

Ankara is also reluctant to take action that may strengthen Kurdish fighters allied to the Kurdistan Workers Party (PKK), a militant group that has fought the Turkish state for three decades and with which it is conducting fragile peace talks.

"If this massacre attempt achieves its goal it will end the process (with Turkey)," PKK leader Abdullah Ocalan said in a statement released by a pro-Kurdish party delegation which visited him on Wednesday in his island prison near Istanbul.

"I urge everyone in Turkey who does not want the process and the democracy voyage to collapse to take responsibility in Kobani," he said in the statement.

Kurdish forces allied to the PKK, the People's Defence Units (YPG), are fighting against the Islamic State insurgents attacking Kobani. The PKK is designated a terrorist group by Turkey, the United States and European Union.

A spokesman for the YPG said a U.S. citizen, Jordan Matson, had joined Kurdish forces in their fight in Syria.

'HELL OF A LONG FIGHT'

Islamic State has carved out swathes of eastern Syria and western Iraq in a drive to create a cross-border caliphate, terrifying communities into submission by slaughtering those who resist.

U.S. Vice President Joe Biden said in a speech on Thursday that the battle to stop the Islamic State militants' advance in Syria and Iraq was going to be a "hell of a long fight" for the United States and its coalition partners.

In a speech at Harvard, he defended the U.S. decision to wait until last month to begin air strikes against Islamic State targets in Syria, saying Washington needed to wait for nations including Saudi Arabia and Qatar to be willing to offer support.

The United States has been carrying out strikes in Iraq against the militant group, which is commonly known by its former acronym of ISIS, since July and in Syria since last week with the help of Arab allies. Britain and France have also struck Islamic State targets in Iraq.

U.S. Defense Secretary Chuck Hagel said on Thursday he discussed with France its possible involvement in the U.S.-led campaign in Syria. But his French counterpart, Jean-Yves Le Drian, would not be drawn on whether Paris might join in air strikes.

Iraqi Kurdish troops drove Islamic State fighters from a strategic border crossing with Syria on Tuesday and won the support of members of a major Sunni tribe, in one of the biggest successes since U.S. forces began bombing the Islamists.

Islamic State fighters on the border with Turkey have yet to be dislodged.

"(Islamic State) is Turkey's greatest existential threat since 1946, when Joseph Stalin demanded that Ankara cede control of the Bosphorus and other territory to the Soviet Union," said Soner Cagaptay, director of the Turkish Research Program at The Washington Institute.

"Erdogan and Prime Minister Ahmet Davutoglu know that only the United States has the necessary military hardware and intelligence assets to defeat ISIS in the long term," he said, forecasting that while Turkey would offer logistics and intelligence support, it was unlikely to back wholeheartedly a military strategy that does not target Assad.

(Additional reporting by Orhan Coskun and Tulay Karadeniz in Ankara, Daren Butler in Istanbul, Stephen Brown in Berlin, Rahim Salman and Yara Bayoumy in Baghdad, Stephanie Nebehay in Geneva, Fiona Ortiz in Chicago, Phil Stewart and David Alexander in Washington, Scott Malone in Cambridge, Mass., and John Irish in Paris; Writing by Nick Tattersall; Editing by Anna Willard, Giles Elgood, David Stamp and Peter Cooney)

• Politics & Government
• Unrest, Conflicts & War
• Turkey
• Syria

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Australia authorizes special forces troops to go to Iraq

By Lincoln Feast

SYDNEY (Reuters) - Australian special forces troops will be deployed in Iraq to assist in the fight against Islamic State militants, Prime Minister Tony Abbott said on Friday, and its aircraft will also join U.S.-led coalition strikes.

Abbott said in a nationally televised news conference the Australian troops would be engaged in an "advise and assist" capacity to support the Iraqi army in their battle against the militant Islamist group.

The United States has been bombing Islamic State and other groups in Syria for almost two weeks with the help of Arab allies, and hitting targets in neighboring Iraq since August.

European countries have joined the campaign in Iraq but not in Syria.

Last month, Abbott sent aircraft and 600 personnel to the United Arab Emirates in preparation for joining the coalition. He has since said it was likely Australian aircraft would join the strikes to combat Islamic State, which he described as a "murderous death cult".

While the involvement of Australian aircraft had been flagged, the use of Australian troops on the ground in Iraq was not as widely anticipated.

"Today, cabinet has authorized Australian air strikes in Iraq at the request of the Iraqi Government and in support of the Iraqi government," Abbott said.

"Also, subject to final legal documentation, cabinet has authorized the deployment of Australian special forces into Iraq to advise and assist Iraqi forces."

So far Australian aircraft have been limited to humanitarian aid and delivering arms to Iraqi government-backed forces.

Australia is on high alert for attacks by radicalized Muslims or by home-grown militants returning from fighting in the Middle East, having raised its threat level to high and undertaken a series of high-profile raids in major cities.

Officials believe up to 160 Australians have been either involved in fighting in the Middle East or actively supporting groups fighting there. At least 20 are believed to have returned to Australia and have been said to pose a security risk.

One man was charged on Tuesday with funding a terrorist organization, while another was arrested last month after police said they had thwarted a plot to behead a randomly selected member of the public.

Prominent Australian Muslims say their community is being unfairly targeted by law enforcement and threatened by right-wing groups, and there are concerns that policies aimed at combating radical Islamists could create a backlash.

Abbott said Islamic State poses a grave threat to both Australia and the wider world and that Canberra could not afford to shirk its responsibility to contribute militarily to "degrading" the group's capabilities.

"The Americans certainly have quite a substantial special forces component on the ground already," he said.

"My understanding is that there are U.K. and Canadian special forces already inside Iraq, so we'll be operating on a much smaller scale but in an entirely comparable way to the United States special forces."

The Australian contingent in the UAE is made up of eight Super Hornet fighter jets, an early warning and control aircraft, an aerial refueling aircraft, along with 400 air force personnel and 200 special force soldiers.

(Additional reporting by Matt Siegel in Sydney; Editing by Paul Tait)

• Politics & Government
• Unrest, Conflicts & War
• Islamic State
• Iraq
• Australia
• special forces

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