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* Rebel leader has mocked army; helicopter shot down

* Humala orders offensive, indigenous people evacuated

* Gas pipelines, chemical plant plans seen at risk

By Teresa Cespedes and Marco Aquino

LIMA, April 20 (Reuters) – Peru’s army is preparing one of

its largest offensives in two decades against Shining Path

rebels, officials said on Friday, hoping to quash remnants of

the group that embarrassed the government over the weekend.

To avoid civilian casualties, the military was evacuating

hundreds of indigenous people from villages in a treacherous

bundle of serpentine jungle valleys known as the “Dog’s Ear,”

where the Maoist rebels have used landmines, snipers and

ambushes against government forces.

Thousands of troops were being deployed as President Ollanta

Humala, a former military officer, responds to a public outcry

that rebels brazenly kidnapped 36 natural gas workers, shot down

a helicopter and killed six security agents in recent days.

The leader of the group, Martin Quispe Palomino, who had

never before shown his face to the media, appeared on local

television this week and openly mocked the army’s losses. He

said the hostages, who were released on Saturday, were taken as

a ruse to lure soldiers into ambushes.

“What’s coming is an all-out military operation. It’s all or

nothing,” said one high-ranking military official. “It was a

setback for us. There were deaths and a helicopter was lost. So

a very strong military offensive is coming because there is very

intense political pressure to show results.”

One of the army’s concerns was that some of the rebels might

have hidden their weapons and were mingling with villagers to

avoid capture.

“Humala has demanded results because he wants to pacify the

region and has said that somebody will be held responsible for

every death we’ve suffered,” the same official said.

Taking control of the lawless region in the Ene and Apurimac

River Valleys of southeastern Peru, where the military estimates

there are about 400 rebels, is crucial for Humala’s economic

plans.

Peru’s main natural gas pipeline originates in the nearby

Camisea fields and last month Humala said construction would

start soon on a second, $3 billion pipeline to feed a new

petrochemical complex on the Pacific coast that would draw $13

billion in foreign investment.

A second official, from Peru’s defense ministry, made clear

that the president, who has twice donned fatigues in recent

days, has pushed for the planned assault, which could start at

any time.

“The offensive has been ordered by President Humala

himself,” the second official said. “Villagers are being

evacuated from the theater of operations to avoid collateral

damage.”

The rebels in the lawless region are led by Quispe Palomino,

who is known as Comrade Gabriel, and his brothers. The United

Nations has called it the most productive coca-growing region in

the world.

Holdout rebels, who are now too weak to threaten the

government, went into the cocaine-trafficking business after the

founders of the group were arrested in the early 1990s.

On Thursday, Interior Minister Daniel Lozada said the

government had uncovered a money laundering ring with assets of

$100 million that financed the Quispe Palomino group.

The Shining Path, or Sendero Luminoso in Spanish, launched a

war to overthrow the state in 1980, and some 70,000 people were

killed in the conflict. In 2003, the group captured 70 workers

employed by an Argentine company called Techint who were

building the Camisea pipeline. Over the last three years, some

60 security agents have died in skirmishes with the rebels.

(Reporting By Terry Wade; Editing by Eric Walsh)