(Agencies)
Updated: 2008-03-26 10:34

BAGHDAD -- Iraq's leaders faced their gravest challenge in months Tuesday as Shiite militiamen loyal to anti-American cleric Muqtada al-Sadr battled government forces for control of the southern oil capital, fought US and Iraqi troops in Baghdad and unleashed rockets on the Green Zone.

Armed Mahdi Army militiamen appeared on some Baghdad streets for the first time in more than six months, as al-Sadr's followers announced a nationwide campaign of strikes and demonstrations to protest a government crackdown on their movement. Merchants shuttered their shops in commercial districts in several Baghdad neighborhoods.

A masked Mahdi Army militiaman patrols Baghdad's poor neighborhood of Sadr City in 2006. Iraq's radical Shiite cleric Moqtada al-Sadr has threatened a countrywide campaign of civil revolt as security forces battled his militiamen in the southern city of Basra. [Agencies]

US and Iraqi troops backed by helicopters fought Shiite militiamen in Baghdad's Sadr City district after the local office of Prime Minister Nouri al-Maliki's Dawa Party came under attack, the US said. Residents of the area reported intermittent explosions and gunfire in the area late Tuesday.

An American soldier was killed in fighting Tuesday afternoon in Baghdad, the US military said. No further details were released, and it was unclear whether Shiite militiamen were responsible.

Although all sides appeared reluctant to trigger a conflagration, Brig. Gen. Ed Cardon, assistant commander of the US task force operating south of Baghdad, said the situation in the south was "very complicated" and "the potential for miscalculation is high."

The burgeoning crisis -- part of an intense power struggle among Shiite political factions -- has major implications for the United States. An escalation could unravel the cease-fire which al-Sadr proclaimed last August. A resumption of fighting by his militia could kill more US soldiers and threaten -- at least in the short run -- the security gains Washington has hailed as a sign that Iraq is on the road to recovery.

The confrontation will also test the skill and resolve of Iraq's Shiite-led government in dealing with Shiite militias, with whom the national leadership had maintained close ties.

Underscoring the serious stakes at play, al-Maliki, a Shiite, remained in the southern city of Basra to command the security operation. Sweeps were launched at dawn to rid the city of militias and criminal gangs that ruled the streets even before the British handed over control to the Iraqis in December.

US and Iraqi officials believe some factions of al-Sadr's movement maintain close ties with Iran, which provides them with weapons, money and training. Iran denies the allegation.

Basra, located near the Iranian border about 340 miles southeast of Baghdad, is the center of the country's vast oil industry. Stability in the city is essential if Iraq is to attract huge investments needed to restore its neglected oil fields and export facilities.

Throughout the day, the sounds of explosions and machine gunfire echoed through Basra's streets as Iraqi soldiers and police fought the Mahdi Army in at least four strategic neighborhoods.

At least 31 people were killed and 88 wounded, according to police and hospital officials, speaking on condition of anonymity because they were not supposed to release the information.

Associated Press Television News video showed smoke rising over Basra, and coalition jets prowling the skies while ambulances raced through the streets.

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