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Lyon: A French delivery driver linked to Islamist radicals left his boss' decapitated head hanging on a factory gate, flanked by Arabic flags, before ramming his car into gas canisters and triggering an explosion.
The attacker, named as 35-year-old Yacine Salhi, was previously investigated by authorities as a "person who could become radicalised", a French prosecutor said.
And a French newspaper said it was "entirely possible" that he was radicalised by French terrorist Frederic "Ali" Salvi, who in 2010 allegedly took part in a car-bombing plot whose targets included the Australian embassy in Jakarta, Indonesia, and which was linked to the radical Indonesian cleric Abu Bakar Bashir.
Barely six months after the Charlie Hebdo massacre, this new atrocity – with Islamist overtones – has reignited the debate in France over what some right-wing politicians have dubbed the "enemy within".
Whether a terrorist or not, the attacker inspired terror.
Three teenagers from the quiet village of Saint-Quentin-Fallavier in south-east France came to peek at the media, gathered on a road on the edge of town – a few hundred metres from the site of the attack.
"We are afraid," Bastien, 16, told Fairfax. "If the terrorist attacks here then the terrorist can attack anywhere, any time.
"Terrorists normally attack Paris, not a town like this. This town is quiet, cool. Small."
Saint-Quentin-Fallavier could not be a more typical French country village. There is a small stone church, a couple of cafes, a Catholic high school.
On the hill above the town is the 13th-century castle from whose battlements – on a clear day – you can see the snowy peaks of the Alps.
But the village was unusually quiet on Friday evening. One café owner told France 24 that business was slow because "everyone is afraid and hiding in their houses".
Down the hill from the village is a large industrial estate. One of the sprawling factories is Air Products, an American-owned plant that manufactures gas products such as oxygen and nitrogen for industrial use.
On Friday morning, about 10am, a car rammed into gas canisters inside the factory compound, causing them to explode.
"The windows shook," one neighbour told France 24.
"I thought someone was trying out fireworks," said another.
The alleged attacker was injured in the explosion, and firefighters at the factory managed to stop him before he could cause any more damage. Mr Salhi, was arrested at the scene.
But they made another, horrific discovery – the decapitated head of a man, hanging at the gate of the factory, flanked (according to French prosecutors) by flags bearing the Islamic "Shahada" creed that features on Arabic flags.
There were also reportedly inscriptions in Arabic on the decapitated man's body.
The victim was said to be Mr Salhi's 50-year-old boss at the transport company he worked for. According to one report he had been due to travel with the suspect to the Air Products site to make a delivery.
According to some media reports, gendarmes later arrested a man named as Mr Salhi's accomplice. They also arrested his wife, at his home in Saint-Priest, about 20 minutes drive away.
Saint-Priest is a suburb of Lyon – a clean, tidy multicultural urban village at the end of the tramline out of the city.
Neighbours told France Infor that Mr Salhi was a "quiet" person.
"They are a very normal family," a neighbour who gave her name as Brigitte told France 24. "I only talked with madame, he didn't say hello or goodbye."
Before being detained by police, Mr Salhi's wife told French radio "yesterday he was at work, he came home as usual. We spent a normal evening and in the morning he left for work and didn't come home between noon and 2. I was waiting for him."
French Minister for the Interior Bernard Cazeneuve said Mr Salhi had been "in contact with a Salafist movement".
Police said Mr Salhi had been listed in their files in 2006 as a person who could become radicalised, but he had been removed in 2008 after showing no sign of terrorist activity.
However, French media said he had come back on the domestic security radar in 2013, described as a "hardcore Muslim" in one intelligence memo, RTL radio said. In May 2014 he was said to have undergone a "radical change", losing weight,shaving his beard and leaving home for weeks at a time with no explanation.
The memo said he held meetings at his home, hosting men who wore combat fatigues, and talking to them about jihad.
One French newspaper, Est Republicain, reported that Mr Salhi was married with three children. His father, deceased, was of Algerian origin and his mother from Morocco.
The newspaper said he used to live in Pontarlier, near the Swiss border. While there he attended the Pontarlier mosque and may have been radicalised by a "fanatic" named "Ali", who had tried to gain influence at the mosque in the early 2000s, and had been linked to a terror attack in Indonesia.
In 2010 the ABC reported that "Ali", whose real name was Frederic Salvi from Pontarlier, had provided a Mitsubishi Galant to a car-bombing cell in Indonesia linked to radical cleric Bashir.
Bashir was arrested and accused of playing a key role in the cell, whose list of targets included international hotels and foreign embassies including Australia's.
"Ali" is now believed to be in Morocco.
Mr Hollande called a meeting of security services on Friday afternoon at the Elysee Palace in Paris, announcing the "highest possible security measures" would be put in place at factories and train stations near the attack location.
The attack triggered an immediate political storm in a country still raw from the Charlie Hebdo massacres.
Mr Hollande called for unity, saying: "We all remember what has happened in our country, and not just in our country. So there is plenty of emotion. But emotion cannot be the only response – that must be action, prevention and dissuasion.
"It is thus necessary to wear [our] values and never succumb to fear, to not create unnecessary divisions or suspicions that would be intolerable, and to rise to every situation."
However former president Nicolas Sarkozy said the government had not done enough to make the country safe, saying he hoped they would "learn all the imperative lessons from this new attack".
Prime Minister Manuel Valls recently announced an increase to the intelligence budget and funding for more spies. A new law, passed last week, legalised the mass collection of metadata from internet providers.
Far-right National Front leader Marine Le Pen said there should be immediate steps to "defeat Islamism" and all sermons in mosques should take place "under supervision.
Her vice-president Florian Philippot called or an end to a "policy of mantras (and) emotions".
"Nothing has been done since January. What's lacking is determination and action. We must defeat the fundamentalist beast," he said.
Speaking from a European Union summit in Brussels, Mr Hollande described the incident as a terrorist attack and said all measures would be taken to stop any future strikes on a country still reeling from Islamist assaults in January.
Referring to a separate gun attack at a hotel in Tunisia, which killed 37 people and a suicide attack in Kuwait that killed 25, Mr Hollande called for nations to work together to combat security threats.
"There is no other link other than to say that terrorism is our common enemy," he told reporters on his return to Paris.
France's terrorism alert has been at it highest level since the January attacks in Paris, which were carried out by a radicalised trio, catapulting France's capital onto the front pages of newspapers around the world.
The attack led the French government to mobilise 10,000 soldiers to guard vulnerable sites around the country.
Air Products, the US company that owns the factory, released a statement: "Our priority at this stage is to take care of our employees, who have been evacuated from the site and all accounted for.
Emergency services are on site and have contained the situation. The site is secure. Our crisis and emergency response teams have been activated and are working closely with all relevant authorities ... Further information will be released as soon as it becomes available," the statement read.
The chairman and chief executive of Air Products is Seifi Ghasemi, who in 2011 testimony to a US Senate committee described himself as Iranian-born. Mainly Shiite Iran is a sworn enemy of Sunni-dominated Islamic State.
No group claimed responsibility for the attack and the motive was unknown.
Australian Foreign Affairs Minister Julie Bishop said the early reports appear to indicate that the incident was a terrorist attack.
"If the early reports are true, this is another horrific reminder of the brutality of these terrorist organisations that are attacking civilians in a most violent and barbaric way," Ms Bishop said addressing the media just after 8pm on Friday.
"There is an indication that a black flag with Arabic writing was found near the scene and that there was a decapitated head. That would be consistent with other terrorist attacks that we have seen in recent times," she said.
Ms Bishop's visit to Paris in April was marred by an attempted terrorist attack thwarted by French security.
"France has been on alert for some time," Ms Bishop said.
She said Australians in France should contact the Australian embassy in Paris if they had concerns.
"It seems to be isolated in the south-east of France and we are getting a briefing from our ambassador as we speak," she said.
Saint-Quentin Fallavier, with its good air, rail and road links, is one of Europe's major logistics hubs, venue to some 1.5 million square metres of depots, with through-traffic of 5000 trucks a day.
The attack underlined again the difficulty for authorities across Europe and elsewhere of protecting so-called "soft" targets against strikes by assailants operating by themselves or in smal undercover cells.
At least 27 people were killed on Friday in a gun attack on a beachside hotel in Tunisia. In Kuwait, Islamic State claimed responsibility for a suicide bombing that killed more than 10 people at a packed Shiite mosque.
Reuters, AFP, Bloomberg