Sept. 3 (Bloomberg) -- Russian troops stormed a school in the southern town of Beslan, killing terrorists and freeing hundreds of hostages, many of them children, after a three-day siege. More than 100 of the captives died.

Aslanbek Aslakhanov, an adviser to President Vladimir Putin, told Interfax that the death toll may be ``much higher'' than 150. Of 20 terrorists killed, 10 came from Arab states, the Russian news service said, citing government officials. The armed group took as many as 1,000 hostages on Wednesday, demanding Russia grant independence to Chechnya.

``We were keeping a dialogue to avoid bloodshed,'' Aslakhanov said. ``We didn't expect this.'' Officials told Interfax the decision to storm the school was taken when terrorists began firing on hostages escaping from the gymnasium.

Chechen rebels have attacked Russia three times in 10 days. Two passenger planes crashed Aug. 24 when explosives went off, killing 89 people, and 10 died Monday in a suicide bombing near a Moscow subway station. A group calling itself the Islambouli Brigades, linked by Putin to al-Qaeda, took responsibility for both attacks.

Theater Siege

The school siege in Beslan, North Ossetia, may be Russia's worst-ever terrorist attack, surpassing the death toll from the October 2002 siege of a Moscow theater, when Chechen rebels took more than 800 hostages. At least 129 of the captives were killed when special forces stormed the theater after a three-day standoff, killing all 41 terrorists.

``We stand with the people of Russia,'' President George W. Bush said during a political rally in Milwaukee. The Beslan siege was ``yet another grim reminder of the lengths to which terrorists will go to threaten the civilized world.''

The three-day crisis and its violent conclusion were unusual for being played out worldwide on cable television. Cable News Network and Sky News, among other services, provided almost 24- hour coverage.

The hostages fled the school when two bombs went off just after 1 p.m. Moscow time. The explosions occurred as rescuers entered with the terrorists' permission to collect the bodies of more than 10 people killed when the siege began, Valery Andreev, head of the North Ossetia division of the Federal Security Service, said on NTV television. North Ossetia borders Chechnya.

Children Flee

A group of 40 children broke out of the school. Terrorists started firing at them, and armed bystanders in turn shot at the hostage-takers, he said. The terrorists responded by detonating a bomb that partly destroyed the roof of the school.

Russian soldiers then opened fire at rebels who tried to flee by mingling with the hostages, Andreev told Rossiya television. Some special forces troops also were killed, he said. Three of the terrorists were captured, Sky News reported.

More than 60 bodies were identified by relatives, Andreev told Interfax. He declined to comment on the total dead and wounded. More than 640 people were in hospitals as of 9:00 p.m. Moscow time, Pervyi Kanal television reported, many of them wounded by shots in the back.

Russia has about 80,000 soldiers in Chechnya, whose separatist movement fell under the influence of Muslim fundamentalists amid Russian brutality toward civilians in a war from 1994 to 1996, when Arab mercenaries joined the conflict. The republic last Sunday elected Alu Alkhanov president in a vote organized by the pro-Putin government to replace Akhmad Kadyrov, who was assassinated in May.

`Bankrupt' Approach

``The Kremlin's approach is bankrupt,'' said Sarah Mendelson, senior fellow at the Center for Strategic and International Studies in Washington. ``It has bred extremism rather than contained it. The international community must both condemn the horror that we witnessed this week in Russia, but also address the decade of catastrophe in Chechnya.''

As many as 1,500 people, mostly women and children, were taken captive in the school on Sept. 1, Zalina Dzandarova, a hostage who was released yesterday, said earlier today. The hostages were taken during a ceremony to begin the Russian school year, when children and parents wear their best clothes and carry flowers for teachers.

The terrorists demanded the separation of Chechnya from Russia, North Ossetian President Alexander Dzasokhov told Agence France Presse. Beslan is about 60 kilometers west of the Chechen capital, Grozny.

To contact the reporter on this story: Halia Pavliva in Moscow at at hpavliva@bloomberg.net

Last Updated: September 3, 2004 14:26 EDT