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 Police said they knew of one armed assailant involved in the
incident at the Lindt chocolate cafe in the heart of Sydney's
financial district, but there could be more.
Police, including paramilitary officers, cordoned off several blocks
around the cafe as negotiators tried to defuse one of the biggest
security scares in Australia for decades. Snipers and a SWAT team
took up positions around the cafe and police helicopters flew
overhead. At least five hostages have been released or escaped since
the mid-morning siege began, with terrified cafe workers and
customers seen running into the arms of paramilitary police.
About 15 hostages could still be seen inside the cafe, said Chris
Reason, a reporter at Channel Seven, whose office is opposite the
cafe.
"From inside Martin Place newsroom we can see gunman is rotating
hostages, forcing them to stand against windows, sometimes 2 hours
at a time," Reason said on Twitter.
Prime Minister Tony Abbott, who has warned of militant plans to
strike Australian targets, said there were indications the
hostage-taking was politically motivated.
 "This is a very disturbing incident. I can understand the concerns
and anxieties of the Australian people," Abbott told reporters in
Canberra.
Australia, a staunch ally of the United States and its escalating
action against the Islamic State in Syria and Iraq, is on high alert
for attacks by home-grown militants returning from fighting in the
Middle East.
"We have moved to a footing that would be consistent with a
terrorist event," Andrew Scipione, police commissioner for the state
of New South Wales, told reporters, declining to comment on a
possible motive, the number of assailants or hostages.
News footage showed hostages holding up a black and white flag
displaying the Shahada - a testament to the faith of Muslims. The
flag has been popular among Sunni Islamist militant groups such as
Islamic State and al Qaeda.
The incident forced the evacuation of nearby buildings and sent
shockwaves around a country where many people were turning their
attention to the Christmas holiday following earlier security
scares.
In September, anti-terrorism police said they had thwarted an
imminent threat to behead a random member of the public and days
later, a teenager in the city of Melbourne was shot dead after
attacking two anti-terrorism officers with a knife.
The siege cafe is in Martin Place, a pedestrian strip popular with
workers on a lunch break, which was revealed as a potential location
for the thwarted beheading.
"We're possibly looking at a lone wolf who has sympathies to global
jihad or someone with mental health issues in search of a cause,"
said Adam Dolnik, a professor at the University of Wollongong who
has trained Sydney police in hostage negotiations. "This is all
about attention."
 "PRETTY WEIRD"
Scores of armed police surrounded the cafe after the siege began
around 9:45 a.m. (1745 ET on Sunday). The area is home to the
Reserve Bank of Australia, commercial banks and close to the New
South Wales state parliament.
"I walked up to the door and then everyone was sitting down and the
door's locked which is pretty weird because it's never locked and
there was one guy walking around with a hat and a beard," a man who
identified himself as Bruno, a worker at the cafe, told the
Australian Broadcasting Corp, referring to the suspected assailant.
He said he then turned away.
Grainy images of the suspected assailant showed what appeared to be
a middle-aged man wearing a headband and a white shirt.
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The Reserve Bank of Australia said staff had been locked down inside
the building and were all safe. The nearby U.S. consulate was also
evacuated, according to an embassy spokeswoman, along with the
Sydney Opera House. Tourists were being let back into the
world-famous venue by early afternoon but performances on Monday and
Tuesday were canceled.
India's parliamentary affairs minister said an Indian IT
professional may be among the hostages.
"Whatever steps need to be taken, are being taken. We don't want to
discuss it because there is some information that one of our Indian
IT professionals also is there," Venkaiah Naidu told reporters.
BANKS AND SHOPS CLOSE
In the biggest security operation in Sydney since a bombing at the
Hilton Hotel killed two people in 1978, major banks closed their
offices in the central business district and people were told to
avoid the area. As night fell, large parts of the central city were
all but deserted.
Muslim leaders urged calm, with the Australian National Imams
Council condemning "this criminal act unequivocally" in a joint
statement with the Grand Mufti of Australia. An inter-faith prayer
meeting at one of Sydney's grand mosques passed off peacefully
despite threats of protests from far-right groups.
Currency market traders said the hostage news may have contributed
to a dip in the Australian dollar, which was already under pressure
from global risk aversion as oil prices fell anew.
Several media outlets reported they had been contacted by hostages
passing on claims and demands from the gunman, including the
possible presence of explosives in the building and elsewhere in the
city.
 Police said they were aware of media reports but said the "situation
is contained in one area".
Concerns about an attack in Australia by Islamists have been growing
for more than a year, with the security agency raising its national
terrorism public alert to "high" in September.
That month, a spokesman for the Islamic State urged supporters in
Western nations, including Australia, to attack civilians or
military personnel at home.
(Writing and by Lincoln Feast; Additional reporting Swati Pandey,
Colin Packham, Wayne Cole and Jason Reed; Malini Menon in New Delhi;
Editing by Paul Tait, Raju Gopalakrishnan, Robert Birsel)
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