Azerbaijan faces political crisis and military defeat: Armenian forces closing in on important town as domestic opposition warns of a 'police state'

BAKU (Reuter) - Azerbaijan stared a fresh military disaster in the face yesterday after Armenian forces broke through Azeri lines and closed in on the important central town of Agdam. The thrust by Armenian forces from the territory of Nagorny Karabakh took them to within 1km of Agdam, which lies just outside the enclave.

'Armenian forces are very close to the town. There is non-stop shelling. We have many casualties,' said Nadir Ismailov, the mayor of Agdam.

The recently installed Azeri prime minister, Suret Guseinov, issued an urgent appeal for all men with military training to report for duty soon or face punishment.

At the same time, nationalists in the republic warned that a police state was in the making after the veteran Communist leader Geidar Aliyev appointed hardliners to important security posts. Mr Aliyev, the acting president, appointed a KGB officer, Nariman Imranov, as security boss. Parliament has named another Aliyev protege, Vagif Novruzov, once Baku's police chief, as Interior Minister.

'It is clear that the new junta government is establishing a police state. We are warning the world,' said Ibrahim Ibrahim Oglu, a senior official of the Popular Front. The Front won power last year with the election of Abulfaz Elchibey, a nationalist, as President. Since his overthrow it has found itself again in opposition.

Parliament also named a new chief prosecutor, Ali Omarov, who is seen as close to Mr Guseinov who gained the premiership only last week after leading an armed rebellion which forced Mr Elchibey to flee Baku more than two weeks ago.

'We will continue our struggle through peaceful and democratic means,' Mr Ibrahim Oglu said. But, he added, 'we have a lot of experience underground. If our legal and democratic activities are blocked by the government . . . then we will have to think about illegal methods as well.'

Hundreds of armed police and soldiers cracked down on a Front rally in central Baku on Saturday, beating up demonstrators, harassing Western journalists and arresting scores of people. With most of its members fleeing underground, diplomats said the Front was unlikely to be able to put up much resistance.

Mr Aliyev claimed the Front had no social base beyond a few thousand demonstrators. Mr Elchibey, he said, had fallen because the nation had lost its trust in him.

The test for Mr Aliyev and Mr Guseinov will lie - as it did for Mr Elchibey - in how they manage to re- assert Azeri sovereignty over Karabakh and other territory now held by Armenian forces. Mr Aliyev called for a ceasefire as a first step to resolve the Karabakh conflict, and appealed to Turkey, the US and Russia to use their influence. International mediators were expected in Baku today.

Mr Guseinov, 34, a wealthy former merchant, has wrested control of the ministries of defence, security and the interior from Mr Aliyev and Western diplomats say he may soom come to blows with the acting president.