The negotiator for the militant Shiite stronghold of Fallujah was freed from US custody today but refused to resume peace talks.
Sheik Khaled al-Jumeili said they will remain suspended as a protest against his detention by American troops, who had accused him of representing the militants.
"The fact is that I'm negotiating on behalf of Fallujah people - civilians, kids, women - who have no power but through being represented by somebody. Since the situation has got up to this, each can go wherever they want and we don't need to talk about negotiations," he said.
Al-Jumeili was arrested on Friday after talks broke down over the city's rejection of a demand by Prime Minister Ayad Allawi to turn over terrorist leader Abu Musab al-Zarqawi.
Al-Zarqawi's group Tawhid and Jihad, designated a terrorist organisation by the US State Department, has claimed responsibility in numerous beheadings - including Briton Ken Bigley - and suicide bombings.
Allawi told the National Council that an "olive branch" is still being extended towards Fallujah in order to find a peaceful resolution, but he maintained that "we shall not be lenient in regard to the question of maintaining security and granting security to every Iraqi."
He also said a cash-for-weapons program for Shiite fighters in Baghdad's Sadr City and other locations would be extended until Thursday, with plans for a nationwide arms-for-cash programme to be implemented.
"The government is determined to disarm cities and neighbourhoods because our forces are now ready to fight terrorists and there's no justification for people to keep weapons at home," he said.
Iraqi officials hope that Fallujah leaders can be persuaded to negotiate a weapons buyback deal similar to one struck with Shiite radical cleric Muqtada al-Sadr to end clashes in Sadr City.
US forces have been waging days of air and ground assaults in the insurgent bastion of Fallujah, targeting key sites purportedly used by associates of al-Zarqawi.
Washington wants British forces to take over positions south of Baghdad to enable to US army to boost its troops strength in Fallujah.
The latest assault began after Fallujah clerics rejected the "impossible" demand to turn over the terrorist leader, insisting that al-Zarqawi was not in the city.
Abu Musab al-Zarqawi's terror group has declared its allegiance to Osama bin Laden, citing the need for unity against "the enemies of Islam".
The declaration, which appeared on a website used as a clearing house for statements by militant groups, said al-Zarqawi's Tawhid and Jihad group and al-Qaida had been in communication eight months ago and "viewpoints were exchanged" before the dialogue was interrupted.
"God soon blessed us with a resumption in communication, and the dignified brothers in al Qaida understood the strategy of Tawhid and Jihad," said the statement,.
The American death toll in the Iraq war reached a grim milestone at the weekend: 1,100. The Associated Press count includes accidental and non-combat deaths.
Car bombers struck Baghdad and Mosul, raising the two-day death toll from the lethal weapons to 12 today.
Two bombs in Mosul, on Sunday and today, killed six Iraqi and injured 19.
In Baghdad, a car bomb exploded on Sunday night near a police patrol, killing six people, including three policemen, and wounding 26 others.