by Sammy Ketz
NAJAF, Iraq, Aug 13 (AFP) - Shiite rebel leader Moqtada Sadr set conditions Friday for his militia to quit Najaf following nine days of clashes with US and Iraqi troops, as oil prices smashed all-time highs on world markets amid fears over supplies from the war-torn country.
As a tentative lull in fighting held in Najaf, one of Shiite Islam's holiest cities, kidnappers released a British journalist after an appeal by Sadr aides.
Amid nationwide protests slamming a massive US-Iraqi offensive seeking to crush Sadr's militiamen in the central city of Najaf, a government spokesman said efforts were underway to defuse the deadly standoff.
Chief among Sadr's conditions were the withdrawal of the US-led forces and handover of Najaf to the Marjayia, the Shiite religious authority, announced spokesman Sheikh Ali Sumeisim.
If all multinational forces, Iraqi police and soldiers leave Najaf and the Marjayia agrees to take responsibility for the city, "the Mehdi Army would pull out from Najaf", Sumeisim said, while stressing they refused to disarm.
Resistance fighters must no longer be persecuted and Sadr's organisation should be allowed to decide for itself whether it becomes a political movement, under Sadr's conditions.
Basic services must be restored in the city, those jailed for supporting the resistance, and all imprisoned clerics and women must also be released, Sumeisim added.
Around 2,000 demonstrators marched under the blazing sun to Najaf from the twin city of Kufa, straight through the US and Iraqi lines to the holy Imam Ali shrine, a Mehdi Army bastion since its spring uprising against US-led troops.
Showered with sweets and water, they embraced militiamen.
"All of us are soldiers of Moqtada Sadr. With our blood and our soul, we serve you Ali," chanted the demonstrators, none of whom were carrying weapons.
Militiamen refused 5,000 dinar notes being handed out by one man, waving him off. "We are mujahedeen," or holy fighters, one of them said, as the man desperately tried to shove the money into their pockets.
In Baghdad, a spokesman urged thousands more to march the 180 kilometres (110 miles) to Najaf. Another 1,000 began a similar walk from the holy city of Karbala, where the faithful were told to "break the siege on our brothers".
"We are a group of 500 women, many of whom are young students, and we plan to go tonight to Najaf and be part of a large human chain that we will form surrounding the shrine and also Sadr," 20-year-old Rajaa Khayum said.
Mass protests were also held in northern and western Iraq, where 1,500 people called for holy war in the Sunni Muslim flashpoint town of Fallujah.
Stepped up talks of a truce followed reports from aides that Sadr had been wounded before dawn, while inspecting fighting units, "in his chest, legs and arms". His health was later described as satisfactory by a Mehdi commander.
In pain but still pressing his partisans to continue the jihad (holy war) even if he died, Sadr also said he wanted talks to defuse the standoff to continue, according to Sheikh Ahmed al-Shaibani.
But further north in the Shiite city of Hilla, fierce gunfights lasted for several hours between Sadr militiamen and Polish-backed Iraqi police, leaving up to 40 rebels dead, the city's police chief said.
Fighters attacked police stations and the provincial government building, General Qais Hamzeh Aboud told AFP by telephone.
"I am in the middle of the battle now," he said late Friday, putting the number of militiamen in the hundreds. Three policemen were killed and another three wounded.
Despite a brief flurry of intense fighting early Friday, a relative lull descended over Najaf as the US military said "clearing operations" were continuing to further isolate the militia and restore control of the city.
"Many, many groups are coming to Najaf to make it end peacefully. We are the last people to want to kill anyone ... There are ministers down there," government spokesman Gurgis Sada said.
UN chief Kofi Annan's special envoy to Iraq, Ashraf Jehangir Qazi, also reiterated UN calls for a peaceful settlement to the Najaf showdown.
The crisis helped Friday to force light sweet crude for delivery in September to a record high settlement of 46.58 dollars a barrel in New York, while London's Brent North Sea crude for September soared to a record finish of 43.88 dollars.
In the main southern city of Basra, a kidnapped Briton was released less than 24 hours after he was abducted at gunpoint from a hotel, after Sadr aides apparently came to his rescue.
Freelance Sunday Telegraph reporter James Brandon, 23, was paraded at Sadr's offices, where representatives of the militia leader said he had been freed, before shaking his hand and handing him over to Iraqi police.
A timid and bruised Brandon, who had been threatened with death, told reporters he was treated harshly until, he believed, his captors heard a formal appeal from Sadr's office.
An Islamist website, meanwhile, broadcast a video which it said showed an Egyptian hostage being beheaded by the terror group of alleged Al-Qaeda operative Abu Mussab al-Zarqawi.