Two killed in attack on Russian power station

The attack was a blow to Kremlin efforts to contain an Islamist insurgency in the mainly Muslim provinces of the North Caucasus. Rebels have threatened to target economic infrastructure as well as police and civilians.

Four armed people attacked the Baksanskaya station in the Kabardino-Balkaria region at 0200 BST, the Federal Security Service (FSB) said in a statement. Attackers shot dead two security guards before laying several bombs in the turbine hall.

State television showed firefighters tackling a blaze and smoke billowing above the dam. Local media said it took almost three hours to contain the fire.

"This shows the scourge of terrorism is not only not subsiding, but expanding geographically," said Gennady Gudkov, deputy head of the security committee of Russia's parliament.

Kabardino-Balkaria is near Chechnya, Ingushetia and Dagestan, but has suffered far fewer attacks.

State-controlled Rushydro, which operates the station, said the blasts were caused by "a terrorist act."

Three generators were put out of service, halting the work of the station, the Kremlin said in a statement. Rushydro shares fell 1.5 percent at the market open, but were flat by 1112 BST, while the overall Moscow index was up 2 percent.

ECONOMIC WAR?

Federal Security Service chief Alexander Bortnikov said security at major installations in the region had been increased, a Kremlin spokeswoman said.

"I'm afraid this may have been a rehearsal for something much larger," a member of the FSB's National Anti-Terror Committee, Alexander Torshin, told Ekho Moskvy radio.

Analysts said the raid indicated rebels were fulfilling their promise to target economic infrastructure as part of their fight to create an Islamist pan-Caucasus state in south Russia.

Chechen rebel leader Doku Umarov, who calls himself the "Emir of the Caucasus Emirate," has vowed to attack Russia's energy pipelines and power stations.

Umarov claimed responsibility for March suicide bombings in the Moscow metro that killed at least 40 people and his group said it was behind a disaster which killed 75 people at the Sayano-Shushenskaya dam in Siberia in August last year.

"I think this is a change in tactics," said Grigory Shvedov, editor-in-chief of the Caucasian Knot www.kavkaz-uzel.ru Internet news agency. He said it would be reasonable to expect more attacks on economic targets.

The Kremlin at the time dismissed the rebels' claim to have blown up the Sayano-Shushenskaya dam and most analysts agreed it was likely an industrial accident.

Baksanskaya is a relatively small plant built in the 1930s during the Soviet Union's industrialisation drive. It has an installed capacity of 25 megawatts, which is less than half a percent of the capacity of the Sayano-Shushenskaya dam.

Media reports said local power supplies were unaffected because energy was rerouted from elsewhere.

(Additional reporting by Dmitry Solovyov, John Bowker and Alexei Anishchuk in Moscow and Denis Dyomkin in Helsinki; Writing by Guy Faulconbridge and Conor Humphries; Editing by Janet Lawrence)