* Kurdish-led forces deny losing centre of Ras al Ain town
* Say they are counter-attacking against Turkish advance
* U.S. warns Turkey of sanctions, harm to ties over incursion
* Erdogan says he won't stop "no matter what anyone says"
* Nearly 200,000 people displaced by Turkish attack -Kurds
* U.N. puts figure at over 100,000 in two Syria border towns
* War monitor says over 150 killed, including 30 civilians
* Turkish military: 415 Kurdish YPG fighters "neutralised" (Adds Turkish foreign minister, SDF officials)
By Orhan Coskun and Tom Perry
ANKARA/BEIRUT, Oct 12 (Reuters) - Turkish-backed Syrian rebels advanced into Ras al Ain in northeast Syria on Saturday but it was unclear how far, with Turkey saying the town centre had been taken and Kurdish-led forces denying this and saying they were counter-attacking.
The battle for Ras al Ain raged as Turkey pursued a four-day-old, cross-border offensive against a Syrian Kurdish militia despite an outcry from the United States and European Union and warnings of possible sanctions unless Ankara desisted.
U.S. President Donald Trump's administration said Turkey's incursion was causing "great harm" in relations with its NATO ally. Germany, also a NATO ally, said it was banning arms exports to Turkey and the head of the Arab League denounced the offensive.
Ankara began its onslaught against the YPG militia, which it says is a terrorist group backing Kurdish insurgents in Turkey, after Trump withdrew some U.S. troops who had been backing Kurdish forces in the fight against Islamic State.
The assault has raised international alarm over its mass displacement of civilians and the risk it could trigger a revival of an Islamic State insurgency in Syria, with a heightened possibility of IS militants escaping Kurdish prisons.
The Kurdish-led administration in Syria's northeast said nearly 200,000 people had been uprooted so far by the fighting, while the U.N. World Food Programme put the figure at more than 100,000 in the towns of Tel Abyad and Ras al Ain.
Turkey's stated broader objective is to set up a "safe zone" inside Syria to resettle many of the 3.6 million Syrian war refugees it has been hosting. Erdogan has threatened to send them to Europe if the EU does not back his assault.
Turkish officials posted photos on Saturday showing deserted streets and Syrian rebels standing on Kurdish militia flags in Ras al Ain.
"The (Syrian rebel) National Army took control of (Ras al Ain) town centre this morning," a senior Turkish security official said, referring to the Syrian rebels Ankara backs. "Inspections are being conducted in residential areas. Mine and booby trap searches are being carried out."
The Kurdish-led Syrian Democratic Forces (SDF), in which the YPG comprises the main fighting element, denied losing the centre of Ras al Ain. Marvan Qamishlo, an SDF spokesman, said they had only carried out a "tactical retreat" in response to hours of heavy Turkish bombardment.
"Now the SDF's attack has started and there are very fierce clashes," he told Reuters. "The clashes are continuing in the industrial district," he said, saying this was the part of Ras al Ain closest to the border.
Speaking as night fell Mustafa Bali, head of the SDF media office, said the SDF was still in control inside Ras al Ain, and fierce clashes were going on there.
The senior Turkish official said "nearly all" YPG forces had fled south from Ras al Ain. Turkish artillery continued to shell parts of the town, a Reuters reporter said.
The SDF holds most of the northern Syrian territory that once made up Islamic State's "caliphate" in the country, and has been keeping thousands of fighters from the jihadist group in jail and tens of thousands of their family members in camps.
TURKEY SEEKS 'SAFE ZONE'
In the latest international censure of Turkey's incursion, Arab League Secretary General Ahmed Aboul Gheit called it an "invasion of an Arab state's land and an aggression on its sovereignty".
Iraq, the current president of the League, said the offensive "will exacerbate humanitarian crises, increase the suffering of the Syrian people and strengthen the ability of terrorists to reorganise their remnants."
Turkey dismissed the criticism, saying Syrian Arabs had been the biggest victims of the YPG, which it said had driven hundreds of thousands from their homes in areas it controls.
The foreign ministry said that by accusing Turkey, rather than a "terrorist organisation that threatens the territorial integrity of Syria", the League was betraying the Arab world.
Foreign Minister Mevlut Cavusoglu also dismissed an offer by U.S. President Donald Trump to mediate between Ankara and Kurdish YPG forces. "We don't mediate, negotiate with terrorists," he told German broadcaster Deutsche Welle. "The only thing to be done is for these terrorists to lay down arms."
NO GERMAN ARMS
Germany halted arms exports to Turkey. "Against the backdrop of the Turkish military offensive in northeastern Syria, the Federal Government will not issue any new permits for all military equipment that could be used by Turkey in Syria," Foreign Minister Heiko Maas told Bild Am Sonntag.
A senior French official said that next week's European Union summit would discuss possible sanctions against Turkey.
Erdogan has dismissed mounting international condemnation of the operation and said on Friday evening that Turkey "will not stop it, no matter what anyone says".
The Turkish-backed National Army said earlier they had cut a road linking Ras al Ain and Tel Abyad, the two main targets of Ankara's offensive, and had captured 18 villages since the operation began.
Seventy-four Kurdish-led fighters, 49 Turkey-backed Syrian rebels and 30 civilians have been killed in the fighting, according to Syrian Observatory for Human Rights, a war monitor.
In Turkey, 18 civilians have been killed in cross-border bombardment, Turkish media and officials say, including eight people in a mortar and rocket attack on the border town of Nusaybin, the local governor's office said.
Turkey said 459 YPG militants had been "neutralised" since the operation began, a term that commonly means killed.
FEARS OF ISLAMIC STATE REVIVAL
Overnight a car bomb exploded outside the wall of the prison in Hasaka in northeast Syria, causing serious damage but no casualties, a statement from security forces in the region said. It did not say if any Islamic State prisoners there had escaped.
The SDF's Qamishlo said the attack was carried out by IS sleeper cells and another senior SDF official said the Turkish assault had given new life to the jihadist group.
"The Turkish invasion is no longer threatening the revival of Daesh (Islamic State), rather it has revived it and activated its cells in Qamishli and Hasaka and all the other areas," SDF official Redur Xelil said, noting car bombs in each of the cities in the last day.
He said the SDF was now fighting on two fronts - continuing to cooperate with the U.S.-led coalition against Islamic State while also confronting the Turkish armed forces.
In its first big attack since the assault began, IS claimed responsibility for a deadly car bomb in Qamishli, the largest city in the Kurdish-held area.
Five IS militants 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.
(Reporting by Daren Butler, Tom Perry in Beirut, Omar Fahmy in Cairo, Reuters correspondents in the region and Arno Schutze in Berlin Editing by Mark Heinrich and Frances Kerry)
