In Arafat's bunker, the mood is defiant as Israel unleashes ever deadlier force

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It was a pledge no sooner made than broken. Less than a day elapsed after Ariel Sharon, Israel's Prime Minister, declared his arch-enemy Yasser Arafat was free to move again in the occupied territories before Israel's tanks penetrated the Palestinian leader's shattered fiefdom again, with even more armour and deadly force.

Israel's tanks rolled deep into the Gaza Strip, killing more than two dozen Palestinians. The toll at the end of a bloody day was six Israelis and two gunmen killed in a Galilee ambush, and an Israeli shot in the West Bank, taking the total to 39 on both sides in 24 hours.

The tanks rumbled through Ramallah by the score, backed by 20,000 Israeli troops, raiding yet another refugee camp and drawing up within a stone's throw of the compound in which Mr Arafat is confined.

He has been trapped for three months, but last night Mr Arafat and his coterie of officials seemed more under siege than ever. The streets around his compound, enveloped by a thick, nocturnal fog, echoed with the sudden hammering of heavy machine-gun fire. As a deserted Ramallah awaited more punishment from Israel with Apache helicopters overhead, knots of gunmen began to roam the centre.

Guards at Mr Arafat's headquarters, litter-strewn and badly war-damaged, moved around the corridors in the darkness. Barely a light was on. Inside, Mr Arafat did not seem surprised by the invasion, or by knowing that as Mr Sharon's so-called concessions were leading news bulletins worldwide on Monday, Israeli forces were preparing for the biggest ground offensive since the 1982 invasion of Lebanon, another disastrous operation also masterminded by Mr Sharon.

"This is rudeness, rudeness," Mr Arafat said, as he sat in his office, unblemished by any sign of crisis apart from dead flowers, "Who can accept this? What is the meaning of following this statement by this military escalation everywhere?"

The President looked well, despite a sleepless night caused by the Israeli assault, and largely free of his usual tremor. Asked whether Mr Sharon was raiding as much of the West Bank as possible before the arrival of the US envoy, General Anthony Zinni, he announced that this was a "very silly plan".

Mr Arafat added: "He [Sharon] needs to remember how many times he has been defeated in front of me before. As an example, what happened in the siege of Beirut." His past – nearly 40 years as the figurehead of the Palestinian cause – seemed to consume his attention in a manner in which the present does not. In a mere half-hour, he mentioned the late President Dwight Eisenhower, the 1967 war, the Suez crisis, the Palestinian victory at Karameh in Jordan in 1968.

And now, what about now, we asked? "Now we are more powerful than before," he declared, without supplying evidence. He expressed condemnation of suicide bombers, and said the al-Aqsa Martyrs Brigades, now leading the battle against Israel, did not always obey his orders.

Although he was not optimistic about General Zinni's chances, he said he was committed to peace, but Mr Sharon was not. "They only want to give the idea that they want peace. But on the ground it is something different."

And it was truly different on the rubble-strewn ground yesterday. The sun rose over Ramallah's main square, a few hundred yards from Mr Arafat's compound, to illuminate the lean corpse of a 21-year-old man, Raed Liftawi. He was hanging upside down by his feet. His front, punctured by a bullet in the forehead with two more in his torso, was turned towards a gigantic poster of Yasser Arafat. His feet were roped to a metal frame, part of a monument. There is no mercy among Palestinians these days for collaborators, even if they are barely out of their teens.

The square – in fact, a circle with four carved lions as its centre-piece – symbolises the cosmopolitan, secular town that Ramallah tried to become before the war with Israel wrecked its dreams. Eighteen months ago the nearby bistros and gold shops were busy with tourists, international diplomats, even a few Israelis, and progressive young Palestinian-American businessmen who came home mistakenly believing in peace.

Yesterday the square was taken over by scores of young, angry-eyed gunmen with Kalashnikovs tucked under their arms, from the Tanzim militia of Fatah, from the Palestinian "national" security forces, from the police. You could hear the gunfire from the al-Amari refugee camp, on the town's southern edge, where Israeli troops were going house-to-house, and ordering all men between 15 and 40 to appear at a school hall to be bound, blindfolded and interrogated. In other operations – to the horror of at least one Israeli Holocaust survivor – troops wrote their ID numbers on their arms.

Raed Liftawi was strung up, we were told by the men on the street, as an example to others. They were in no doubt he was a collaborator with Israel, responsible for Israel's recent assassination of a senior aide to Marwan Barghouthi, the Tanzim's top man in the West Bank, and possibly others.

Troops manning the Israeli military road-blocks ringing Ramallah said the town was closed. Hours earlier Israeli forces had fired on journalists on top of a hotel, trying to watch the invasion from a safe spot. Seven bullets hit a camera from America's ABC network, one going straight into the lens. Miraculously, no one was hurt.

According to the Oslo interim accords between Israel and the Palestinians, much of Ramallah is supposed to be run entirely by the Palestinian Authority. Ariel Sharon has systematically destroyed the meaning of these agreements by repeatedly reoccupying Palestinian-run territory.

So what happens next? Mr Arafat told us he had yet to order his forces to engage, although there is no doubt many already are. But, he said ominously: "Patience has its limits."