Proving that it was purely a terrorist operation, the gunman believed to be in his late 40s, has told police that there are four bombs planted around the city and has requested for a flag of the Islamic state.
The armed man has also demanded to speak with Australia’s Prime Minister, Tony Abbot
About five people have since been able to escape from the building. It is not clear how many remain inside.
According to a BBC report,
The incident began as people were arriving for work in Martin Place on Monday. Witnesses saw a man with a bag and gun walk into the Lindt chocolate shop and cafe.
Lindt said about 10 employees and 30 customers were thought to be inside at the time. Nearby offices were evacuated and police asked people to remain indoors and away from open windows.
The BBC's Jon Donnison in Sydney says an enormous police operation is in place, on a scale few Sydney residents will have seen.
About six hours into the siege, three people were seen running from the building housing the cafe. Two more people followed about an hour later. It is not clear whether they escaped or were released.
In the words of New South Wales Police deputy commissioner Catherine Burn,"Those people are now being assessed to make sure their health is okay and then police will talk to them."
"Our approach is to resolve this peacefully. It might take a bit of time but that is our priority,"
Police negotiators were in contact with the gunman, Ms Burn confirmed. The suspect also contacted local media and reportedly issued demands.
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