50 Killed as Gunmen Attack City in Russia : Caucasus: Assailants hold hostages, demand Moscow get out of Chechnya. Chechen rebels deny involvement.

Scores of heavily armed men demanding a halt to Russia’s military action in Chechnya struck a southern city in Russia on Wednesday, seizing as many as 300 hostages and engaging police in hours of street fighting that left at least 50 people dead, Russian authorities said.

The raiders’ connection with separatist guerrillas in nearby Chechnya was unclear.

But Russian officials characterized the attack as an act of terrorism unprecedented in Russia since the 1918-20 civil war.

“We’ve never had anything similar,” Interior Ministry spokesman Yevgeny Ryabtsev said.

About 100 men with assault rifles, grenade launchers and mortars launched the midday raid on Budennovsk, an industrial city of 100,000 in Russia’s Stavropol region, 70 miles from the Chechen border.

Intent on sowing panic, they sprayed gunfire, blew up a passenger bus, ran over pedestrians and set houses and cars ablaze, then shot at firefighters trying to douse flames.

On Russian television, the city looked like a battlefield, with smoke pouring from downtown buildings, shattered glass on sidewalks, bodies in the streets and government helicopters and tanks moving into action.

Working in small groups with two-way radios, the attackers shut down the city’s phone system, then stormed City Hall, police headquarters, a hospital and a bank.

By evening, many of the attackers had been killed, captured or sent on the run, but one group was still holding 60 patients and staff in the hospital early today.

The hospital’s director told Russian television that terrorists threatened to blow up the facility unless Russia withdrew its troops from Chechnya and arranged peace talks between President Boris N. Yeltsin and separatist leaders.

Yeltsin’s government blamed the attack on “the anti-human, anti-popular regime” of Gen. Dzhokar M. Dudayev, the Chechen president whose three-year drive for independence prompted a Russian invasion of his tiny Muslim republic in December.

Police said the attackers drove in from Chechnya and, of eight captured, at least two were Chechens.

With his guerrillas driven from the Chechen capital in January, from the lowlands this spring and from their last mountain stronghold on Tuesday, Dudayev had vowed from hiding that the fight would take on “other forms.”

He also said: “The next step is that Russia will burn in hell.”

But while the Chechen leader has often threatened to take the war to Russia’s heartland, Chechen spokesman Khamad Kurbanov denied any responsibility by Dudayev’s fighters for Wednesday’s attack and called it a “provocation by Moscow.”

“Chechens will never spill the blood of innocents,” he said in a statement to Russia’s Postfactum news agency.

In any case, Yeltsin can use the attack to deflect U.S. and other foreign criticism of his army’s brutal campaign in Chechnya, which has killed an estimated 20,000 people and destroyed much of Grozny, the capital.

Yeltsin is to meet President Clinton and other leaders of the Group of Seven industrialized nations this week in Halifax, Canada.

“The president is outraged that such a tragic incident became possible,” Yeltsin spokesman Sergei Medvedev said.

Yeltsin ordered the government to take all measures necessary to capture the gunmen and free the hostages.

Stavropol’s deputy governor said late Wednesday that the authorities were ready to negotiate with the gunmen but were unable to enter or phone the hospital.

The Russian government put its entire North Caucasus military district on alert and closed the region’s airports and most of its roads.

Interior Minister Viktor F. Yerin and Sergei V. Stepashin, chief of the Federal Security Service, went to Budennovsk to supervise the anti-terrorist units arriving there.

Deputy Prime Minister Oleg N. Soskovets, who chaired an emergency Cabinet meeting, also ordered tighter security at 86 potential terrorist targets in Moscow and on all roads into the capital.

There were signs that Budennovsk was one part of a coordinated attack in southern Russia. Police said an unidentified group tried Wednesday to derail a train near the city of Nevinnomyssk, 116 miles to the west.

The government was clearly unprepared. Hours before the incident, Prime Minister Viktor S. Chernomyrdin was asked in a televised interview whether the Chechen war could spread into the rest of Russia.

“No,” he answered. “We will not allow this to happen.”

Officials said most of the gunmen involved in Wednesday’s incident crossed the border from Chechnya in two military trucks and two police vehicles.

They got past Russian military checkpoints by wearing police uniforms and claiming to be carrying dead Russian soldiers back from the front--a cargo rarely inspected.

Once the attack in Budennovsk began, officials said, the attackers in trucks were joined by carloads of others wearing black headbands and shouting “Allah is great!”

City officials reported an exchange of gunfire near a chemical plant that is one of Russia’s largest plastics producers.

Some reports said the attackers planned to blow up the plant to contaminate the area with toxic gas.

Russian news agencies said at least 20 police, 10 gunmen and 20 civilians were killed; 50 others were taken to out-of-town hospitals, barred from the local hospital by the invaders, who placed a machine gun on the roof.

There were conflicting reports on the number of hostages.

Officials said 100 captives, including a deputy mayor, were taken in the siege of City Hall. At least 60 people were held in the hospital, and there were others captured, including children.