An Israeli crane destroys a building in Palestinian President Yasser Arafat’s office compound in Ramallah. (Reuters)

Ramallah, Sept. 21 (Reuters): Yasser Arafat vowed not to capitulate to Israel today after its forces demolished parts of the building where he was under siege and turned most of his sprawling presidential compound into rubble.

But in his first public statement since the siege began on Thursday, the Palestinian leader called for an end to attacks inside Israel, which sent in tanks to encircle his West Bank headquarters after seven people were killed in suicide bombings.

“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 in a written statement released by the Palestinian news agency WAFA.

But the demolition of most of his complex in the city of Ramallah has left him looking weaker than at any point since he returned to the Palestinian territories in 1994 under interim peace deals with Israel.

Israel called on Arafat to hand over 20 wanted Palestinian militants it says are holed up in his headquarters, backing up its demands with guns that roared before daybreak and thunderous detonations of demolition charges.

Palestinian officials said the United States pressured Israel to stop shooting by early today. But armoured bulldozers and a mechanical excavator clanked across the compound to carry on the wrecking work.

Israel’s tightest confinement of Arafat since its forces surrounded the former guerrilla leader in 1982 during the Lebanon war raised fears of a new surge of violence that could complicate Washington’s plans for possible war on Iraq.

Tearing through concrete as if it were paper, the long arm of a mechanical excavator clawed holes through the outer walls of Arafat’s headquarters, only three offices away from the rooms where he took refuge after a tank shell showered him with dust overnight.

Thick black smoke, apparently from a fuel storage facility outside Arafat’s office, filled the late afternoon sky, and Palestinian officials said Israeli forces were also destroying water pipes and tanks. Israel said the aim was to isolate Arafat, not kill him.

“We have said we are not going to harm Arafat personally. We usually stand by our word, unlike Arafat who has yet to meet one of his commitments (to rein in militants),” government spokesman Raanan Gissin said.

Palestinian peace negotiator Saeb Erekat told CNN he had contacted Israel’s dovish foreign minister, Shimon Peres, to help defuse the situation.

“President Arafat is now sitting in a building that is about to collapse because they destroyed all the pillars around it and it’s really very serious,” Erekat said.

Europe stepped up its condemnation of the siege, with France demanding an immediate end to what it described as an “appalling” situation.

The White House called on Israel to consider the consequences of its actions but also said it had a right to defend itself against suicide bombings.

Israel holds Arafat, 73, responsible for the two suicide bombings which ended a six-week lull in such attacks, charging he has failed to rein in militants during the two-year-old Palestinian uprising against Israeli occupation.

“I reiterate my call to the Palestinian people and all our parties to halt any violent attacks inside Israel because (Prime Minister Ariel) Sharon exploits them as a cover to destroy the peace of the brave,” Arafat said in his statement.

A tattered Palestinian flag still flew over rubble near the gate to the complex that had been a symbol of Arafat’s power in Palestinian areas where he now faces pressure to make security and anti-corruption reforms demanded by Washington.

The UN Security Council scheduled an emergency session on the West Asian crisis for Monday, at the behest of council member Syria, diplomats said.

The army said it had razed about 20 buildings or mobile buildings in Arafat’s compound, already battered by other Israeli incursions following Palestinian attacks. Witnesses later reported seeing trenches being dug around the compound.

Arafat — deemed irrelevant by Sharon — looks powerless to rein in militants and also says he cannot carry out reforms because of Israeli blockades in the West Bank and Gaza.

He also has no firepower to resist the army.