By Ellen Francis, Suleiman Al-Khalidi and Maria Kiselyova

BEIRUT/MOSCOW (Reuters) – The Russian government said on Monday it would start talks with Washington on a rebel withdrawal from Aleppo this week as Russian-backed Syrian forces fought to seize more territory from rebels who are struggling to avoid a major defeat.

The latest army attack, which saw fierce clashes around the Old City, aims to cut off another area of rebel control in eastern Aleppo and tighten the noose on opposition-held districts where tens of thousands of people are trapped.

Advances in recent weeks have brought Damascus, backed militarily by Russia, Iran and Lebanon’s Hezbollah, closer to recapturing Syria’s second largest city before the nearly six-year war and a prize long sought by President Bashar al-Assad.

The rebels are now reduced to an area just kilometers across.

While Assad’s allies have in the past year turned the battle in his favor, Western and regional states backing the rebels have been unwilling or unable to prevent a major defeat for groups who have fought for years to topple the Syrian leader.

Russian Foreign Minister Sergei Lavrov said talks with the United States on the withdrawal of rebels would begin in Geneva on Tuesday evening or Wednesday morning. There was no immediate comment from Washington, which has backed some of the rebels.

“Those armed groups who refuse to leave eastern Aleppo will be considered to be terrorists,” Lavrov told a news conference. “We will treat them as such, as terrorists, as extremists and will support a Syrian army operation against those criminal squads.”

While the rebels have said they will not leave, one opposition official, who declined to be identified, conceded they may have no alternative for the sake of civilians who have been under siege for five months and faced relentless government bombardments.

“The people are paying a high price, with no state or organization intervening,” the official said, adding that this was his personal assessment based on reports from the city.

With narrow alleyways, big mansions and covered markets the ancient city of Aleppo became a UNESCO heritage site in 1986. Many historic buildings have been destroyed in the fighting.

BLACK SMOKE RISES NEAR CITADEL

Responding to Russia’s demand for their withdrawal, rebels told U.S. officials on Saturday they would not leave. Reiterating that position on Monday, rebel official Zakaria Malahifji said, “No person in his right mind, who has any sense of responsibility and patriotism, would leave his city.”

“The Russians are trying to do everything they can to make people leave. This is far from reality,” he said, speaking to Reuters from Turkey.

Insurgents, meanwhile, fought back ferociously inside Aleppo. Some of the fighting took place within a kilometre of the ancient citadel, a large fortress built on a mound, and around the historic Old City.

Heavy gunfire could be heard from the Old City and smoke from mortar shell blasts rose from the area, Reuters journalists in a government-held western district said.

Rebels appeared on the verge of being driven from the al-Shaar neighborhood after new advances by Syrian government forces on Sunday. But rebels said they had mounted a counter-attack on Monday, and were recovering ground in some areas.

Clashes raged in the Old City itself, which has long been split between government- and rebel-held areas, the British-based Syrian Observatory for Human Rights monitoring group said.

A Syrian army officer told Reuters intense fighting was taking place around the Old City.

State television broadcast a report from inside a hospital complex seized from rebels on Sunday. The hospital is strategically important because it overlooks surrounding areas held by insurgents.

A government takeover of the eye hospital complex and areas stretching west from there to the citadel would cut the remaining rebel-held areas of eastern Aleppo in two, further isolating embattled rebel groups. Rebels said they were fighting back in that area too on Monday.

REBELS LAUNCH COUNTER-ATTACKS

“They (rebels) are trying to take back all the areas the regime took yesterday (including) the eye hospital, al-Myassar,” Malahifji said.

Moscow said a rebel attack on a mobile military hospital killed one Russian medic and wounded two others.

The United Nations says more than 200,000 people might still be trapped in rebel-held areas, affected by severe food and aid shortages. “We need to reach them,” U.N. aid chief Stephen O’Brien said in Geneva on Monday.

“People have been eking what they can, prices have skyrocketed so there is a real and severe shortage of foodstuffs.”

Russia is expected to veto a U.N. resolution on Monday which calls for a seven-day ceasefire, with Lavrov saying a truce was counter-productive because it would allow rebels to regroup.

State TV said rebel shelling killed seven people in government-held areas of Aleppo on Monday.

More than 300 people have been killed in government bombardments of rebel-held areas since mid-November, and 70 have died in rebel shellings, the Syrian Observatory says.

(Additional reporting by Tom Perry in Beirut, Suleiman al-Khalidi in Amman, Firas Makdesi in Aleppo, Stephanie Nebehay in Geneva and Jack Stubbs in Moscow; Writing by John Davison; Editing by Tom Perry and Peter Millership)