OCCUPIED JERUSALEM, 22 September — Braving tank fire, Yasser Arafat yesterday vowed not to capitulate to Israel even as Israeli forces ordered everyone inside the Palestinian leader’s besieged compound to surrender or face certain death.

But the Palestinian leader — earlier showered by masonry dust after Israeli tank fire — called for an end to attacks inside Israel in his first public statement since the siege began Thursday.

"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," Arafat said in a written statement released by the Palestinian news agency WAFA.

Israel called on Arafat, whom it accuses of doing nothing to prevent anti-Israeli attacks, to surrender 20 wanted men it says are holed up in his headquarters and rejected international calls to ease up on the 73-year-old leader. It backed up its demands with guns that roared before daybreak and thunderous detonations of demolition charges.

Troops late yesterday called on everyone inside the besieged headquarters to evacuate the building immediately as there was going to be a "huge explosion." Speaking in Arabic over loudspeakers, soldiers called on everyone inside the building to "come out immediately one by one with your hands up because a huge explosion is going to happen," a witness reported. They also called on Palestinian residents in the area to evacuate their homes ahead of the explosion, he said.

"They have called on us to give up and surrender or they will blow up the offices on our heads," a Palestinian security officer inside Arafat’s offices said by satellite phone.

An army spokeswoman confirmed that troops were calling on everyone to leave the building ahead of an explosion, which was "part of an ongoing operation", but she refused to give further details.

Another Palestinian security officer inside the compound said that despite the warning, "nobody was going to surrender".

Local resident Hamad Ziyadeh, who lives close to the compound, said Israeli troops had told him to open the doors and windows of his house because a "big explosion" was due to happen. "Both my neighbor and I have taken our children out of the house because we are afraid the explosion will do serious damage," he said.

He said he saw a number of Israeli tanks drawing back from Arafat’s battered offices, in what he believed was a move to pull back from the scene ahead of the threatened blast.

Earlier, a Palestinian security source inside the building said the army had laid wires around Arafat’s office, and that those trapped inside were expecting Israeli troops to enter the compound in the coming hours.

Palestinian officials said the United States pressured Israel to stop shooting early yesterday. But armored bulldozers and a mechanical excavator carried on demolition work that left only two buildings standing.

Israel’s tightest confinement of Arafat since its forces surrounded him 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.

Senior Palestinian officials said Israeli Prime Minister Ariel Sharon had turned down a US proposal to let Palestinian negotiators into the compound to start talks on ending the stalemate. Israeli government sources said Sharon would not budge from his demand Arafat hand over the men.

"Sharon does not want negotiations. He wants total surrender and the situation will keep deteriorating until the surrender. This time, it’s serious," said one official familiar with the US offer.

Hammering home a tough message, the long arm of an Israeli mechanical excavator clawed into 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 tank outside Arafat’s office, filled the late afternoon sky, and Palestinian officials said Israeli forces had cut off running water to the building, as they had during a previous raid in April.

The European Union’s foreign policy chief, Javier Solana, said he had spoken to Israeli leaders "to convey my greatest concerns about the situation and particularly the siege of the Palestinian leadership".

But a statement by Shimon Peres’ office said the foreign minister told Solana the Palestinians should appoint a prime minister "to take care of business, including security".

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

French President Jacques Chirac spoke to Arafat by telephone and said peace could only be achieved through diplomacy, Chirac’s spokeswoman said. "The president said he was appalled at how the situation is evolving. As France has repeatedly said, isolating the Palestinian Authority cannot have positive effects," the spokeswoman said.

The UN Security Council scheduled an emergency session on the Middle East crisis for tomorrow, at the behest of Council member Syria.

Egypt’s foreign minister, Ahmed Maher, called French Foreign Minister Dominique De Villepin and asked France to intervene to stop the Israeli action. Maher told reporters that Israel’s actions "violate all agreements and humanitarian principles.".

Syria’s press said the siege of Arafat’s headquarters was part of a wider plan by Sharon to use the world’s preoccupation with Iraq to unleash an offensive that would drive Palestinians from the West Bank. "Sharon has unleashed his bellicose instincts, taking advantage of the fact that the world is wrapped up with the case of Iraq," said an editorial in the official Tishreen daily.