* U.S. warns of devastating sanctions, 'great harm' to ties
* Erdogan says he will not stop 'no matter what anyone says'
* War monitor says 143 killed, including 20 civilians
* Turkish military says 415 Kurdish YPG fighters 'neutralised'
By Daren Butler
ISTANBUL, Oct 12 (Reuters) - Turkish forces stepped up their bombardment around a town in northeast Syria on Saturday, the fourth day of an offensive against a Kurdish militia, after U.S. troops in the region came under artillery fire from Turkish positions.
The United States has ramped up its efforts to persuade Ankara to halt the incursion against the U.S.-backed Kurdish forces, saying Ankara was causing "great harm" to ties and could face sanctions.
Turkey opened its offensive after U.S. President Donald Trump spoke by phone on Sunday with Turkey's President Tayyip Erdogan and withdrew U.S. troops who had been fighting alongside Kurdish forces.
On Friday evening, Erdogan dismissed mounting international criticism of the operation and said Turkey "will not stop it, no matter what anyone says".
On the frontlines, thick plumes of smoke rose around Ras al Ain, one of two Syrian border towns targeted in the offensive, as Turkish artillery targeted the area on Saturday, said a Reuters reporter across the frontier in the Turkish town of Ceylanpinar.
Intense gunfire also resounded from within the town of Ras al Ain itself, while warplanes could be heard flying overhead, he said.
It was quieter at Tel Abyad, the operation's other main target some 120 km (75 miles) to the west, with only occasional shell fire heard in the area, another Reuters reporter said.
Earlier, the Pentagon said U.S. troops came under artillery fire from Turkish positions on Friday but none of its soldiers were wounded, near Syria's Kobani, some 60 km (37 miles) west of the main area of conflict.
Turkey's Defence Ministry said its forces did not open fire at the U.S. base and took all precautions to prevent any harm to it while it was responding to fire from a nearby area by the Kurdish YPG militia, which Ankara regards as a terrorist group.
"U.S. and coalition soldiers were definitely not hit. Indeed the necessary coordination is being carried out by our headquarters and the Americans," Turkish Defence Minister Hulusi Akar was quoted as saying on Saturday.
Akar was speaking as he and military commanders visited operation headquarters along the border, state-owned Anadolu news agency reported.
Seventy-four Kurdish-led fighters, 49 Turkey-backed Syrian rebels and 20 civilians have been killed in the fighting, according to war monitor, the Syrian Observatory for Human Rights.
The United Nations has said 100,000 people have fled their homes.
Turkey's Defence Ministry said 415 YPG militants had been "neutralised" since the operation began, a term that commonly means killed.
The Syrian Democratic Forces (SDF), with the Kurdish YPG as its main fighting element, now holds most of the territory that once made up Islamic State's "caliphate" in Syria, and has been keeping thousands of fighters from the jihadist group in jail and tens of thousands of their family members in camps.
The Kurdish militia say the Turkish assault could allow the jihadist group to re-emerge as some of its followers were escaping from prisons.
In its first big attack since the assault began on Tuesday, Islamic State claimed responsibility for a deadly car bomb in Qamishli, the largest city in the Kurdish-held area, even as the city came under Turkish shelling.
Five Islamic State fighters fled a jail there, and foreign women from the group being held in a camp torched tents and attacked guards with sticks and stones, the SDF said.
U.S. Defense Secretary Mark Esper has told his Turkish counterpart they should deescalate the situation before it becomes "irreparable", while European Council President Donald Tusk warned it could lead to a "humanitarian catastrophe".
Erdogan's spokesman, Ibrahim Kalin, responded to the criticism on Saturday, saying "Turkey's fight is against terrorists, not Kurds or civilians", and telling those who condemn Turkey that thousands of civilians were killed in U.S.-led coalition operations in Syria's Raqqa and Iraq's Mosul.
"Blackmail and threats will never deter Turkey from its just cause," Kalin wrote on Twitter. "God willing victory will be ours."
U.S. lawmakers introduced more legislation on Friday seeking stiff sanctions on Turkey over the offensive, underscoring unhappiness from both Democrats and President Trump's fellow Republicans in Congress over his Syria policy.
U.S. military officials denied lawmakers' accusations that the Trump administration had abandoned U.S. allies to a Turkish military onslaught.
Ankara says it aims to defeat the YPG, which it sees as an enemy for its links to PKK militants who have fought a decades-old insurgency in Turkey in which 40,000 people have been killed.
U.S. Treasury Secretary Steven Mnuchin said Trump had authorized the drafting of "very significant" new sanctions against Turkey, a NATO ally. Washington was not activating the curbs now but would do so if necessary, Mnuchin said.
Turkey aims to set up a "safe zone" inside Syria, where it can resettle many of the 3.6 million refugees it has been hosting. Erdogan threatened to send refugees to Europe if the European Union did not back his assault, prompting a furious response from the EU.
(Reporting by Daren Butler, Tom Perry in Beirut, and Reuters correspondents in the region Editing by Angus MacSwan and Frances Kerry)
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