A new civil war is threatening to explode in Iraq as American-backed Iraqi government forces fight Shia militiamen for control of Basra and parts of Baghdad.

Heavy fighting engulfed Iraq's two largest cities and spread to other towns yesterday as the Iraqi Prime Minister, Nouri al-Maliki, gave fighters of the Mehdi Army, led by the radical cleric Muqtada al-Sadr, 72 hours to surrender their weapons.

The gun battles between soldiers and militiamen, who are all Shia Muslims, show that Iraq's majority Shia community – which replaced Saddam Hussein's Sunni regime – is splitting apart for the first time.

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Mr Sadr's followers believe the government is trying to eliminate them before elections in southern Iraq later this year, which they are expected to win.

Mortars and rockets launched from Mehdi Army-controlled districts of Baghdad struck the Green Zone, the seat of American power in Iraq, for the third day yesterday, seriously wounding three Americans. Two rockets hit the parking lot of the Iraqi cabinet. The mixed area of al-Mansur in west Baghdad, where shops had begun to reopen in recent months, was deserted yesterday as Mehdi Army fighters were rumoured among local people to be moving in from the nearby Shia stronghold of Washash. "We expect an attack by the Shia in spite of the Americans being spread over Sunni districts to defend them," said a Sunni resident.

Forty people have been killed and at least 200 injured in Basra in the last two days of violence. In the town of Hilla, south of Baghdad, 11 people were killed and 18 injured yesterday by a US air strike called in support of Iraqi forces following street battles with Shia militia members in the city's Thawra neighbourhood. In Baghdad, 14 have been killed and 140 wounded.

The supporters of Mr Sadr, who form the largest political movement in Iraq, blame the Americans for giving the go-ahead for Mr Maliki's offensive against them and supporting it with helicopters and bomber aircraft. US troops have sealed off Sadr City, the close-packed slum in the capital with a population that is the main bastion of the Sadrists, while the Mehdi Army has taken over its streets, establishing checkpoints, each manned by about 20 heavily armed men. It is unlikely that the militiamen in Basra will surrender as demanded by the government. Sadiq al-Rikabi, an adviser to Mr Maliki, said those who kept their weapons would be arrested. "Any gunman who does not do that within three days will be an outlaw."

Streets were empty in Basra and Baghdad as people stayed at home to avoid the fighting. The Mehdi Army is enforcing a strike in Baghdad with mosques calling for the closure of shops, businesses and schools.

In the Shia city of Kut, on the Tigris south of Baghdad, local residents say that black-clad Mehdi Army militiamen have taken over five districts and expelled the police.

At the same time, Mr Sadr is clearly eager to continue the truce which he declared on 29 August last year after bloody clashes in Kerbala with Iraqi police controlled by the rival Shia political movement, the Islamic Supreme Council of Iraq, and their well-organised militia, the Badr organisation.

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He renewed this ceasefire in February, saying he wanted to purge its ranks of criminals. "The freeze that Sadr has ordered is still ongoing," said one of his chief lieutenants, Luwaa Smaism.

Mr Sadr has sought to avoid an all-out military confrontation with American troops or Badr backed by American forces since he fought two ferocious battles for Najaf against US marines in 2004.

Mr Sadr has sent emissaries to Mr Maliki asking him to remove his troops, numbering some 15,000 men from Basra, and to resolve problems peacefully. But his aides say there will be no talks until the Iraqi army reinforcements are withdrawn. The offer of talks is in keeping with Mr Sadr's past behaviour, which is to appear conciliatory but in practice to make few real concessions. The US is claiming that the Sadrists are not being singled out, only Iran-supported militia factions, but this will find few believers in Iraq.

"This is not a battle against the [Mehdi Army] nor is it a proxy war between the United States and Iran," said a US military spokesman, Major General Kevin Bergner. "It is [the] government of Iraq taking the necessary action to deal with criminals on the streets."

The Sunni population is pleased to see the government and the Americans attacking the Mehdi Army, which they see as a Shia death squad. "Before, the Shia were arresting and killing us and forcing us to leave Iraq for Jordan and Syria where we lived in misery," said Osama Sabr, a Sunni in west Baghdad.

The fighting is threatening to disrupt Iraq's oil production, most of which comes from the Basra area, because workers in the oilfields dare not leave their homes.

The militia

The Mehdi Army

Armed wing of the Sadr movement. Muqtada al-Sadr's militia is divided, with one wing supporting the radical cleric's ceasefire while another has rejected it and continued attacks on Iraqi government forces and the British base at Basra aiport.

The Badr Brigade

Armed wing of the Supreme Islamic Iraqi Council. The Badr Brigade has been involved in numerous clashes with the Mehdi Army and appears not to be the target of the current offensive by the Iraqi government forces. The group has organised "spontaneous" demonstrations against General Mohan and General Jalil.

The Fadhila

A political party and armed group with a localised powerbase. The governor of Basra is a member of the party, and it controls a significant proportion of the region's oil supply.

Secret Cells

Said to be armed and trained by Iran and allegedly carrying out attacks ordered by Tehran.

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