The US defence secretary, Leon Panetta, has called an Islamist militant attack on an Algerian gas field a "terrorist act" and hinted at a potential military response.
A Briton and an Algerian were killed and western contractors, including Americans and Norwegians, were taken hostage when a group of well-armed attackers seized control of the gas facility, apparently in reprisal for France's military intervention in neighbouring Mali.
Panetta's warning came as Algerian forces were in a standoff with the attackers at the plant, part-owned by BP and a Norwegian firm, near Ain Amenas on the border with Libya. There were unconfirmed reports that a French national also died in the attack. Six other people were wounded, including two Britons.
The Algerian government said about 20 hostages were taken. US officials said they included an undetermined number of Americans.
Among the others held prisoner were nine Norwegians, five Japanese, several Britons as well as citizens of Ireland, France and Austria.
Scores of Algerian workers were also reported held.
"By all indications this is a terrorist act. It is a very serious matter when Americans are taken hostage along with others," said Panetta. "I want to assure the American people that the United States will take all necessary and proper steps that are required to deal with this situation."
The British foreign secretary, William Hague, called it an "extremely dangerous situation".
According to the Mauritanian news agency ANI, an Islamist group claiming to have seized the hostages said its fighters rigged explosives around the site and warned that any attempt to free the foreigners would result in a "tragic end".
The Algerian interior minister, Daho Ould Kablia, said late Wednesday that Algerian troops had surrounded a wing of the living quarters at the gas field where the jihadists were holding the hostages. "We reject all negotiations with the group, which is holding some 20 hostages from several nationalities," Kablia declared on national television.
Panetta said he did not have firm information on whether the attack was linked to the situation in Mali but the group believed responsible said it was in retaliation for the French intervention, and for Algeria permitting the French military to use its airspace to send troops to Mali.
Kablia said that there were "about 20 terrorists" involved, adding that they had not come from a neighbouring country, implying they were Algerian, and that "they are acting under the orders of" Mokhtar Belmokhtar, an Algerian jihadist with close ties to al-Qaida.
Belmokhtar, a one-eyed veteran of Algeria's civil conflict, was a deputy commander of al-Qaida in the Mahgreb (AQIM), until last month when he broke away and set up his own group which he referred to as the Masked Brigade and "Signers in Blood", dedicated to resisting western efforts to suppress the jihadist uprising that has taken over northern Mali and spilled into the surrounding region.
The Algerian interior ministry said that the attack began at 5am when heavily-armed jihadists arrived at the living quarters on the complex in three vehicles.
"The attack began on a bus which was leaving the base, taking foreigners to the airport in Amenas," according to a statement quoted by the Algerian Press Service. "After this failed, the terrorist group headed towards the camp, taking over part of it and taking hostage an unknown number of workers, among whom were foreign nationals."
Panetta's warning came as Washington is considering a request from neighbouring Mali for military assistance to back the French intervention against the Islamist militant takeover of the north of the country.
The US and other European countries have supported the French intervention, Operation Serval, by sending transport planes. US officials said that additional support is likely to be forthcoming but Washington will not send combat troops.
American officials said that among other things France is seeking help to airlift troops, including African forces. The US said that one option would be for Washington to pay countries such as South Africa or Nigeria, which have the necessary planes, to carry out the operation.
The state department spokeswoman, Victoria Nuland, said: "They've asked for support with airlift. They've asked for support with aerial refuelling. We are already providing information, and we are looking hard today at the airlift question, helping them transport forces from France and from the area into the theatre, and also at the refuelling question."
A senior state department official said there is also continuing co-operation on intelligence. "We have always had an information sharing platform with the French. We have in recent days, in response to the requests that have been made, we have augmented and expanded it. We think that it's important to help them as much as we possibly can," he said.
US intelligence assistance is believed to be particularly important in helping the French target its enemy.
However, the Obama administration is having to contend with US law which forbids direct assistance to Mali's military government because it overthrew an elected administration.
"Our goal is to do what we can," Panetta said on Tuesday. "The fundamental objective is to ensure that AQIM – al-Qaida – never establishes a base of operations in Mali or anywhere else."
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image: © Aaron Logan