A FIREBRAND Shi'ite cleric yesterday defied demands from Iraq's interim government that his militia pull out of Najaf, after days of fierce clashes with US Marines who say they have killed 360 of his fighters.

IRAQ’S prime minister ordered Shi’ite fighters to lay down their weapons and leave the holy city of Najaf last night, but fighting raged on with US helicopter gunships pounding guerrilla positions.

MUSLIM gunmen sprayed bullets and lobbed grenades at a liquor store in central Baghdad yesterday before kidnapping the owner’s brother-in-law in the fifth such attack this week, staff and police said.

SABOTEURS have struck a new blow to Iraq's vital oil industry, cutting exports to a third of their previous level. Oil Minister Thamir Ghadhban confirmed blasts at a pipeline which fed storage tanks at Basra oil terminal in the Gulf.

IRAQ'S new prime minister has called for a "rational dialogue" with Shi'ite rebel leader Moqtada Sadr, and asked other Muslim nations to contribute to the multinational force in Iraq once his government takes power on June 30.

ESCORTED by Iraqi forces, US Marines entered the centre of Fallujah yesterday for the first time since the end of the bloody siege last month.

IRAQI Shi'ite cleric Moqtada al-Sadr yesterday defied American troops closing in on his militia army, vowing in a sermon to drive out an army he said was discredited by prisoner abuse.

The governor’s office in the Iraqi city of Basra has been taken over in protest at coalition actions against radical Shia Muslim cleric Moqtada Sadr.