Aug. 27 (Bloomberg) -- Thai police surrounded the office of Prime Minister Samak Sundaravej, laying siege to the almost 5,000 protesters in the Bangkok compound who broke in yesterday demanding his resignation.

Police in riot gear set up a perimeter around the office complex, leading to minor scuffles, footage broadcast on Thailand's TNN television station showed. Medical personnel were filmed preparing bandages.

Samak threatened to arrest leaders of the anti-government group that led about 30,000 protesters yesterday to block roads and break into other government buildings. Spending a second day at army headquarters, Samak called their demands ``unreasonable'' and said police will be ``soft and gentle'' to the demonstrators who camped overnight at his office after abandoning other government buildings.

``We will be able to handle the situation by the end of today,'' Nattawut Saikuar, deputy government spokesman, told reporters. ``If the protest leaders are arrested, I believe there won't be violence as people must respect the rule of law.''

The People's Alliance for Democracy says Samak is a proxy for former Prime Minister Thaksin Shinawatra, who was ousted in a 2006 coup and fled to London earlier this month to escape corruption charges. The military has pledged to stay on the sidelines this time as the protests scare off investors, contributing to a 23 percent decline in the benchmark SET Index since they began May 25.

Arrest Warrants Sought

The government has asked the Criminal Court to issue arrest warrants for nine protest leaders who face four charges, including treason, which carries either a death sentence or life in prison. Protest leader Sondhi Limthongkul, a former business associate of Thaksin who fell out with him in 2005 and then formed the People's Alliance, said he won't run away.

``Whenever protest leaders are arrested, that will be the day Bangkok will break loose,'' he told a crowd of supporters last night, according to ASTV, his satellite television station.

Sondhi, who led protests to oust Thaksin two years ago, owns Manager Media Group Pcl, which publishes a Thai-language daily newspaper and controls a satellite television station. Thaksin told supporters in 2006 that Sondhi had turned against him because he was upset by the government's inability to give him a television license, and by the change of management at Krung Thai Bank Pcl, a state-owned lender and creditor to Sondhi's business.

Sondhi and the People's Alliance have called for a mostly appointed parliament to take over from Samak's People Power Party, which is comprised of Thaksin's allies. Last December the party rode a wave of rural support to win the first election held after the coup.

Provoking Violence

Samak, who accused protest leaders of trying to provoke violence, instructed police to prevent supporters from bringing food and water to the demonstrators, while allowing people to leave the compound freely.

The protesters ``want anyone to stop them to make a spark,'' Samak told international journalists yesterday evening in a rare English-language news briefing. ``They want bloodshed in the country. They want the military to come out and stage the coup again.''

Thailand's army chief ruled out a coup and allowed state-run NBT television to broadcast from its headquarters yesterday after protesters seized control of NBT's office.

``I'm just really struck by Samak's restraint as it shows he's got a lot of confidence,'' said Jacob Ramsay, Southeast Asia analyst at Control Risks Group in Singapore. ``The game seems to be up for the People's Alliance. They'll lose a lot of momentum if their leaders are arrested.''

Protests proceeded peacefully at Government House today, with organizers giving speeches and playing nationalist songs from a makeshift stage as a crowd danced, waved flags and slept. Police had abandoned the office complex last night in preparation for the siege.

``We've been rallying for three months to tell Samak about democracy but so far he hasn't listened,'' Amorn Amornrattananon, one of the nine protest leaders facing arrest, said in an interview yesterday.

To contact the reporter on this story: Daniel Ten Kate in Bangkok at dtenkate@bloomberg.net; Rattaphol Onsanit in Bangkok at ronsanit@bloomberg.net

Last Updated: August 27, 2008 03:28 EDT