Police have ended a siege in the city of Makhachkala in the North Caucasus. Two gunmen are reported to have been killed, and one policeman has been injured.

The suspected militants have been identified and they are believed to be members of a known Dagestani terrorist group.

The counter-offensive began on Sunday night after suspected militants opened fire from a building.

This first shoot-out did not last long. Police spent the rest of the night trying to convince the gunmen to surrender. But their efforts were fruitless and the shoot-out resumed early morning.

It's not clear how many people were holed up in the block of flats.

Heavy fighting raged for more than fifteen hours.

The extremists were armed with hand grenades, explosives, and machine guns.

Using grenade guns and tear gas, police broke into the hide-out, where they found the bodies of the suspected militants.

The operation was the latest in a string of stand-offs between security forces and armed groups in Russia’s Republic of Dagestan, which borders Chechnya.

Although millions of roubles are being poured into the region, poverty and unemployment rates are still high.

And these factors are seen by many as the breeding ground for extremism.

Andrey Kortunov from Moscow's Eurasia Foundation says the growing number of attacks in Dagestan are a result of the inflow of militants from Chechnya, where tight security measures are pushing fighters out of the republic.

“We know that there are still radical elements in the republic. We know that some of these elements have connections abroad and get support from outside forces,” he said.

Aleksandr Pikaev from the Institute for World Economy and International relations, believes the same.

“It’s very interesting that while the situation in Chechnya is stabilising, militants are squeezing out there and going to more peaceful neighbouring areas,” said Aleksandr Pikaev.   

Meanwhile, Russian authorities say the situation in Dagestan is stable but difficult.