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JAKARTA, Indonesia (AP) _ Indonesia's military said Saturday that it had surrounded hundreds of insurgents in a hidden camp in rebellious Aceh province and have demanded they surrender. The guerrillas have refused and vowed to die fighting.

The rare, large-scale standoff comes at a delicate time in the 27-year separatist war in Aceh. Peace talks are set to resume next month and both sides had indicated a willingness to sign a cease-fire.

The latest clash started Oct. 30 when the army launched an attack on a secret rebel base in northern Aceh. After days of fighting that left five dead, the shooting stopped and the two sides started negotiating.

``We are spreading leaflets to the rebels asking them to surrender,'' said military spokesman Maj. Zaenal Muttaqien. ``We haven't exchanged fire in the past two days. But we will keep them surrounded until they surrender.''

Rebels spokesman Sofyan Daud vowed that his men would go down fighting, if attacked by the ``thousands'' of soldiers outside their camp. ``We will not surrender,'' he said. ``We are ready if they attack us, and we are waiting for it.''

The Muslim insurgents have been fighting for independence since 1975 in a conflict that has claimed at least 12,000 lives in the past decade in the resource-rich province of 4 million people. At least 1,500 people have died so far this year.

The fighting is usually on a small scale and large open clashes between the two sides are rare.

Sporadic peace talks, which began in 2000, have picked up pace recently, and negotiators from the Geneva-based Henry Dunant Center for Humanitarian Dialogue have predicted that a breakthrough was possible in Southeast Asia's longest-running war.

The stand off is likely to threaten next month's peace talks.

It also conflicts with a unilateral, month-long rebel cease-fire to mark the Muslim fasting month of Ramadan, which started Nov. 5.

The government has indicated that it would grant sweeping amnesty if the rebels drop their insistence on outright independence. It also offered Aceh a greater share of revenues from its oil and natural gas reserves.

The Acehnese want international monitors to supervise any future agreement, that would likely involve a partial demilitarization of the province and elections for a provincial legislature and administration.

Indonesia has about 28,000 troops in the province and the government says there are 2,000 to 3,000 armed rebels. The separatists claim to have about 10,000 fighters.