By Ricardo Brito and Gram Slattery
BRASILIA/SAO BERNARDO DO CAMPO, Brazil (Reuters) - Brazil's former President Luiz Inacio Lula da Silva will not turn himself in to serve a 12-year prison sentence for bribery until a higher court rules on a last-minute appeal, a party source with knowledge of the matter said on Friday.
Lula's lawyers urged the Superior Court of Justice, Brazil's top appeals court, to suspend the prison order. They argue they have not exhausted procedural appeals and painted the case as an effort to remove Lula from the presidential race he leads.
It was not clear if the higher court would rule before a 5 p.m. (2000 GMT) deadline for the former president to start serving his sentence. Federal police in Sao Paulo declined to say if they would attempt to forcibly take Lula into custody, a move that could trigger intense clashes with his supporters.
The court on Friday rejected a third-party's request that Lula remain free, but had yet to rule on the same plea made by Lula's own lawyers, his legal team said.
Lula spent his last hours ahead of the deadline with aides and allies at the headquarters of a steelworkers union he once led in metropolitan Sao Paulo.
Hundreds of die-hard supporters, dressed in the trademark red shirts of Lula's Workers Party, surrounded the union building on Friday afternoon. They cheered spirited defences of Lula made by union leaders standing atop a sound truck.
Union leaders said in an statement posted on their website that Lula would speak to the crowd at 3 p.m. (1800 GMT).
Many of those in the crowd, including workers, students and land rights activists, had camped overnight in the streets.
"We are here to show that the workers will resist this attack against democracy," said Jorge Nazareno, a union leader who said he had met briefly with Lula on Friday morning.
The same union was the launch pad for Lula's political career nearly four decades ago, when he led nationwide strikes that helped to end Brazil's 1964-85 military government.
Lula's everyman style and unvarnished speeches electrified masses long governed by the elite and eventually won him two terms as president, from 2003 to 2011, when he oversaw robust economic growth and falling inequality amid a commodities boom.
He left office with sky-high approval of 83 percent and was called "the most popular politician on Earth" by former U.S. President Barack Obama.
Lula's downfall has been as stunning as the unprecedented corruption probes that have convulsed Brazil for the last four years, jailing dozens of politicians and business leaders long considered above the law.
Federal Judge Sergio Moro, who has handled the bulk of cases in Brazil's biggest-ever graft investigation and issued Lula's prison order, wrote that he should not be handcuffed and would have a special cell in Curitiba, where he stood trial.
Lula was convicted last year for taking bribes from an engineering firm in return for help landing contracts with state-run oil company Petroleo Brasileiro SA.
Brazil's Supreme Court on Thursday rejected Lula's plea to remain free until he exhausts all his appeals, in a case he calls a political witch hunt.
The ruling likely ends his political career and blows October's election wide open, leaving Brazil's left without an obvious candidate to regain power from the unpopular President Michel Temer.
Under Brazilian electoral law, a candidate is forbidden from running for office for eight years after being found guilty of a crime. Rare exceptions have been made in the past, and the final decision would be made by the top electoral court if and when Lula officially files to be a candidate.
Brazilian financial markets rallied on Thursday after the Supreme Court cleared the way for Lula's imprisonment, which increased the chances of a market-friendly candidate winning the election, according to analysts and political foes.
Cassio Goncalves, a labour safety specialist at the union headquarters, said the Workers party had not considered alternatives in the presidential race. "We have no other plan," he said. "Plan A, B and C is Lula, because he is innocent. He will be our president."
(Reporting by Ricardo Brito in Brasilia and Gram Slattery in Sao Bernardo do Campo; Additional reporting by Eduardo Simoes in Sao Paulo; Writing and additional reporting by Brad Brooks; Editing by Brad Haynes, David Gregorio and Rosalba O'Brien)