Troops rout guerrilla raid on Israeli holiday beaches.

four guerrillas and capturing 12.

Chief of Staff Dan Shomron said the Palestine Liberation Front led by

Mahmoud Abbas (known as Abu Abbas), the organisation behind the 1985

hijack of the Italian cruise ship Achille Lauro, carried out the attack

to coincide with an Arab summit meeting in Baghdad.

One of the two guerrilla boats reached the crowded beach of Nitzanim,

south of Tel Aviv, where troops on foot and aboard helicopter gunships

shot dead four gunmen and captured seven in the sand dunes.

Terrified bathers said they saw the guerrillas' grey speedboat come

ashore and the black-uniformed gunmen race for the dunes.

There were no Israeli civilian or military casualties although the

beaches were packed with bathers on a Jewish religious holiday.

The other boat was intercepted earlier by an Israeli naval patrol off

the coast at Ga'ash, north of Tel Aviv, and all five gunmen aboard were

captured alive, the army said.

The PLF said the coastal attack was launched to avenge the mass

killing of Arab workers last week. An Israeli described as deranged shot

dead seven Arab labourers in the town of Rishon LeZion on May 20.

''In response to the tears of mothers and the screams of children and

the wounded and in retaliation for the Zionist massacre against our

workers . . . our elite naval units moved to teach the enemy a lesson of

combat on the coast of Palestine,'' the PLF, which supports PLO chairman

Yasser Aarafat, said in a statement.

It was unclear if the attack had the endorsement of Arafat, who

pledged to abandon terrorism as part of the initiative he launched in

December 1988 to start a dialogue with the United States and ultimately

peace talks with Israel.

The group added that the attack was ''to draw up new features for

armed struggle against the Zionist enemy, to liberate Palestine and

achieve the freedom of our struggling people.''

In a communique issued in Baghdad, where the Arab summit was winding

up, the PLF said guerrillas aboard the speedboats aimed to clash with

the Israeli navy and land to attack selected targets.

''All six boats succeeded in reaching their targets . . . and were

continuing to clash in all positions,'' it said. Israel said only two

boats reached the coast.

Shomron said later: ''All of the terrorist boats that were on their

way to attack the state of Israel were caught. Some of the terrorists

were killed and some were caught.

''The aim of this operation was to kill civilians in the most

populated areas of Israel, the central beaches in the Tel Aviv area.''

Israeli intelligence chief, Major-General Amnon Shahak, said the

Government of Libyan leader Colonel Muammar Gaddafi had helped the

guerrillas prepare for the attack and gave them a place to train. The

speedboats were Libyan-made.

''The goal was to attack the hotels in the Tel Aviv region to conduct

a massacre,'' he told reporters.

Shomron told a news conference in Tel Aviv that the operation began

three days ago when a mother ship set off from the Libyan port of

Benghazi with six smaller boats aboard.

The aim was to send five speedboats ashore loaded with Katyusha

rockets, ammunition and guerrillas with a sixth cruising offshore to

back up the others.

The mother boat dropped the five attack boats about 120 miles from the

Israeli coast but three broke down and only two reached the shore at

Nitzanim and Ga'ash, about 35 miles apart on either side of Tel Aviv.

Military sources said earlier that the mother ship then headed for

Port Said, Egypt. They said Israel had informed the Egyptian

authorities.

Witnesses said the attack at Nitzamin began at about 10am (0700 GMT).

A spotter plane sighted the speedboat and a navy patrol chased it

unsuccessfully towards the beach, crowded with holidaymakers.

''It was a miracle that no-one on the beach was killed,'' a soldier

guarding the guerrillas' boat told reporters later.

The army set up roadblocks on Israel's coastal highway and closed off

a large area of coastline as reports spread that some of the gunmen were

on the loose and might have commandeered a car and driven towards Tel

Aviv.

Six Cobra assault helicopters hovered low over the dunes and many

hundreds of soldiers and police combed the area. Military censors

suppressed all news of the attack for nearly five hours.

On the beach, holidaymaker Shlomo Mano said: ''We were sitting there

having a cup of coffee and we saw a boat about 150 metres away coming

towards the shore and I said to my brother-in-law 'You know what? I

think they're terrorists.'

''Before I had finished the joke we heard the navy boat firing, then

there were planes and Cobras and there was a war there,'' he said.

Aboard the attack boat, Israeli troops found a street map of Tel Aviv

and pictures of the crowded Tel Aviv beach area, apparently meant to

help the gunmen identify their targets.

It was the most serious attack on the Israeli coast since Palestinian

gunmen came ashore in 1978 and hijacked a bus on the coastal highway

north of Tel Aviv, killing 31 passengers. Six guerrillas of Yasser

Arafat's Fatah organisation were killed in that raid.

There have been numerous attempts since then to penetrate Israel's

coastal defences but no boat has reached the shore.

Military commanders said they did not believe the sea raid was an act

of revenge for last week's mass murder of seven Arab workers by a crazed

Israeli gunman in Rishon LeZion, near Tel Aviv, which re-ignited the

Palestinian uprising.

They said the complex operation required long-term planning and had

begun well before the May 20 killings.

Deputy Foreign Minister Benjamin Netanyahu sasid Arafat must have

known about the raid.

''It tooks months of planning. It involved hundreds of people. It

involved Libya. It is inconceivable that the PLO chief did not know,''

he said.

Israeli leaders seized on the attack as proof that the PLO, of which

Abu Abbas's PLF is a member, was continuing attacks on Israeli civilians

despite Arafat's public renunciation of terrorism.

Foreign Minister Moshe Arens said in a statement: ''At the Baghdad

Arab summit . . . the Arab states did not decide to put an end to the

state of war with Israel and meanwhile PLO terrorists came from Libya to

try to kill innocent men, women and children in Israel.

''It is not surprising that while the Arab countries declare war on

the Jews' right to immigrate to Israel, PLO terrorists try to

assassinate Jews on Israeli soil,'' he said.

Later, Israel said the United States should now end its dialogue with

the PLO.

Arens told Israel Radio: ''The US holds talks with the PLO on the

assumption that the PLO has ceased terrorism, and now we have additional

proof that the PLO in fact continues terrorism. We hope this last event

will convince the administration of the real situation.''--Reuter.