Sudan severed ties with Chad Sunday, accusing its neighbor of backing a rebel assault on the capital and raising the possibility of new border clashes that could worsen Darfur's humanitarian crisis.

A curfew was lifted in Sudan's capital but residents hunkered inside and security remained tight a day after the government repulsed an unprecedented assault on Khartoum by Darfur rebels.

In the capital's twin city of Omdurman, frightened residents emerged slowly to find buildings pockmarked with bullet holes and streets littered with charred cars. Women draped in flowered gowns stepped around huge armored personnel carriers, inspecting the damage. The city's main market was closed and residents milled around on side streets, staying off main roads lined with checkpoints.

"We were worried at first, that Khartoum may again be unsafe," said Hatem, a 45-year-old Omdurman resident who would not give his last name, fearing government reprisal. "We are extremely cautious."

"Police are searching for rebels on the run and are pestering us for IDs," he said.

A curfew was lifted in Khartoum but not in Omdurman, where police told state media that more than 300 rebels were arrested and many more had tossed away their camouflage uniforms to blend in with urban civilians.

State television paraded images of captured and bloodied fighters, including the body of a man it said was an aide to a top rebel leader. Army generals received congratulations in the streets and women praised them with traditional ululating screams.

But a leader of Darfur's Justice and Equality Movement, which carried out Saturday's attack, said his fighters were still in Omdurman and would ultimately bring down the Khartoum regime.

"The government didn't finish us off," JEM commander Suleiman Sandal told The Associated Press by telephone. He said he was in Omdurman. The call was interrupted several times as Sandal dictated orders to his fighters.

"We are dealing with all this military force with all our might," he said. "This was just practice. We promise to hit Khartoum one more time unless the (Darfur) issue is resolved," Sandal said.

For the first time ever, state TV broadcast a file photo of JEM leader Khalil Ibrahim, asking citizens to call a special hotline if they saw him. The government also announced a reward of $122 million for information leading to the Ibrahim's capture. By comparison, Washington has set a $25 million bounty on Osama bin Laden.

Sandal said Khalil was still commanding rebel fighters inside Omdurman.

"He is among us," Sandal said.

Saturday's daring attack was the closest Darfur rebels have ever come to Sudan's seat of government, hundreds of miles from their bases in the far west of the country.

Sudanese President Omar al-Bashir declared Chad to blame, and immediately cut ties with the neighboring country.

"These forces come from Chad who trained them ... We hold the Chadian regime fully responsible for what happened," al-Bashir said in a televised address, wearing military fatigues. "We have no choice but to sever relations."

Al-Bashir said he reserved the right to retaliate against Chad's "outlaw regime," raising the specter of a border war between the two countries who have long traded accusations over support for each others' rebels.

In February, Chadian rebels launched a failed assault on Chad's capital, and the country's president accused Sudan of supporting and arming the rebels. The Sudanese government denied any involvement, and the two later signed a peace agreement. Continued...