Fallujah truce shaken by heavy nightly fighting

US warplanes strafed gunmen in Fallujah and more than 100 guerrillas armed with rocket-propelled grenades pounded a lone US armoured vehicle – a sign of heavy battles ahead if troops resume a full assault on this besieged city.

With the truce in Fallujah crumbling, a top UN envoy proposed an Iraqi caretaker government in a formula that abandons a US-favoured plan.

Meanwhile, Iraqi militants executed one of four Italian hostages, Italian officials confirmed early today.

The captors threatened to kill the three others if their demands – including the withdrawal of US forces from Iraq – are not met, according to the Arabic-language TV network Al-Jazeera, which said it received a videotape of the murder.

The killing of the Italian, a security guard, is the first known execution of a foreign hostage in Iraq and could further dissuade international aid workers, contractors and journalists, some of whom are already restricting their activities in the country. Earlier yesterday, Russia announced it will evacuate its citizens.

With 22 foreigners currently held captive and at least 87 US troops killed in April alone, the unprecedented violence has largely eclipsed the political process. Negotiations were being held on both fronts – at Fallujah in central Iraq and at Najaf in the south – but the US military has warned it will launch new assaults if talks do not bear fruit.

In the south, the country’s top cleric, Grand Ayatollah Ali al-Husseini al-Sistani, persuaded radical cleric Muqtada al-Sadr to drop defiant negotiating demands – including that US troops withdraw from all Iraqi cities. An Iranian envoy was also getting involved in the mediation with al-Sadr, an aide to the cleric said.

Still, al-Sadr militiamen appeared to be preparing for a fight, moving into buildings and onto rooftops on Najaf’s outskirts, said Colonel Dana Pittard, head of the 2,500 US troops amassed outside the city, ready to move in against al-Sadr.

“Najaf is a holy place,” said Kaysal Hazali, spokesman for al-Sadr. “If they attack it, God knows the results: It is not going to be good for the occupation.”

The UN envoy, Lakhdar Brahimi, said respected Iraqis should lead a caretaker government – with a prime minister, president and two vice presidents to run the country after the handover of power on June 30 and until national elections in January. He did not say who would select them.

Under the Brahimi plan, the US-picked Iraqi Governing Council would be dissolved on June 30, rather than expanded to form an assembly as called for in an earlier proposal US administrators promoted.

But the formula would also give Washington a way to dissolve the fractious and unpopular 25-member council.

The White House thanked Mr Brahimi for his plan, but it was not clear whether US officials would embrace it.

“We appreciated the United Nations’ help in moving forward on our strategy to transfer sovereignty to the Iraqi people by June 30,” said White House press secretary Scott McClellan.

Mr Brahimi also criticised the US military operation in Fallujah.

“Collective punishment is certainly unacceptable and the siege of the city is absolutely unacceptable,” he said.

In Fallujah, US Marines and insurgents were fortifying their positions in preparation for more fighting.

A four-day-old truce was crumbling amid nightly battles in which gunmen in larger groups have been attacking US troops with increasing sophistication. Last night the fighting began again, with American gunships over the city battering targets below.

The top US Marines commander in the Fallujah area suggested time for negotiations was running out before his forces call off their halt in offensive operations.

“I don’t forecast that this stalemate will go on for long,” said Major General James Mattis, commander of the 1st Marine Division. “It’s hard to have a cease-fire when they manoeuvre against us, they fire at us.”

To help combat the surge in bloodshed, about 21,000 American soldiers in Iraq who were to return this month to their home bases in Louisiana and Germany will have their tours extended at least three months, US defence officials said yesterday.

Meanwhile, US officials and the top US contractor in Iraq, Halliburton, were trying to determine whether four bodies found belonged to seven Americans missing since gunmen attacked their convoy outside Baghdad on Friday. One, a truck driver, is known to be held captive.

A kidnapped French journalist was freed in Iraq, but there were reports that two Japanese were abducted – in addition to three Japanese already held captive by gunmen threatening to kill them.

The four Italian security guards, who worked for a US company in Iraq, were abducted on Monday.

Al-Jazeera reported it had video of the killing but did not broadcast it because it is too graphic. The station did show footage of the four hostages sitting on the ground, holding up their passports and surrounded by armed men.

The militants’ videotape was accompanied by a statement from a previously unknown group calling itself the Green Battalion, which threatened to “kill the three remaining Italian hostages one after the other, if their demands are not met”, Al-Jazeera said.

The group also demanded an apology from Italian Prime Minister Silvio Berlusconi and the release of religious clerics held in Iraq. Italy is the third-largest coalition partner in the occupation force.