by Hassan Abdulzahrah and Jean-Marc Mojon
NAJAF, Iraq, Aug 26 (AFP) - Rebel cleric Moqtada Sadr bowed Thursday to demands laid down by Iraq's Shiite spiritual leader to end the conflict in Najaf, as 74 people were killed in a mortar attack and shooting in nearby Kufa.
Grand Ayatollah Ali al-Sistani, accompanied by thousands of faithful, was granted a 24-hour truce by Baghdad and the US military to negotiate an end to 22 days of fighting against forces loyal to rebel cleric Moqtada Sadr.
"Sayed (honorific) Moqtada Sadr has agreed to Grand Ayatollah Sistani's conditions," Sistani spokesman Hamid Khaffaf told reporters outside the villa where the elderly ayatollah was staying in the holy city.
In Baghdad, State Minister Kassem Daoud said the government had accepted the initiative "presented to us by his eminence Grand Ayatollah Ali al-Sistani".
The elderly ayatollah, treated to a euphoric welcome after returning from medical treatment in London on Wednesday, has signalled that he wants all armed groups to disarm and leave in Najaf and Kufa, along with all foreign troops.
In his five-point plan, Iraqi police would also resume responsibility for security and law and order in the two cities and the interim government would compensate those who have suffered in the weeks of heavy fighting.
Najaf Governor Adnan al-Zorfi told Al-Arabiya television that Sadr's Mehdi Army were expected to evacuate their Imam Ali shrine stronghold at 10:00 am (0600 GMT) on Friday, where they have been holed up for four months.
But the hopes of peace came after a double mortar attack and shooting in Najaf's twin city of Kufa that left 74 people dead and more than 350 wounded.
Eight pipelines in southern Iraq were also sabotaged, hampering vital crude exports, officials said.
"We cannot distinguish between those who died in the bombing of the Kufa mosque and those who were killed in the demonstration," a health ministry spokesman said as doctors struggled to cope with the casualties.
Pain-wracked and bloodied patients, mostly men, were stretched out in the corridors and garden of the Middle Euphrates hospital despite the intense heat.
"There were hundreds of us. We came early this morning to the mosque. We were waiting for Sistani, inside and outside. Then at 8:00 am, two mortars exploded, one near the outer gate and the other inside the compound," said Hani Hashim.
Thousands of people chanting slogans in support of Sadr and denouncing Iraqi Prime Minister Iyad Allawi were heading from Kufa for Najaf when national guardsmen opened fire as they passed a military base, an AFP photographer said.
US marines and Zorfi denied any involvement in the incident and accused Sadr's Mehdi Army of being responsible.
National guards also fired on demonstrators from the city of Diwaniya, who tried to enter Najaf from the east. Bloodstains and shoes lay on the ground.
Meanwhile, a large crowd took advantage of the ceasefire in Najaf to force their way into the Imam Ali mausoleum, one of the holiest sites in Shia Islam, which has been held by the militia for four months.
"This is democracy, this is the new Iraq, this is the greatest defeat we could have inflicted on the Americans. It's the most beautiful day in my life," shouted Akir Hassan, 63, hurrying inside to pray.
Sistani called on the government to allow the "millions" who accompanied him on his journey to enter the Imam Ali before leaving by 10:00 am on Friday.
"This is part of the solution to the crisis. The atmosphere is positive... and the crisis is about to be resolved," Khaffaff said.
In Baghdad, a senior government official said Allawi would make a formal response in due course. "But providing that it is in keeping with our aims, I think the response will be favourable," he told AFP.
Announcing the ceasefire earlier, Allawi said it was a "last call for peace", vowing a "safe passage" for Sadr if he disarmed and quit the shrine.
Before the ceasefire, US tanks and helicopters pounded militia posts, pinning them back to the immediate area of the Imam Ali shrine.
A dozen bullet holes were visible in the golden dome of the mausoleum and some of its 7,777 golden tiles had come loose, said an AFP correspondent, one of three journalists inside the building with several hundred Iraqis.
Another US soldier was also killed late Wednesday in a mortar attack in Baghdad, military sources said.
An Islamic group, the Secret Islamic Army, meanwhile said it would release seven foreign hostages it has been holding for more than a month when their Kuwaiti firm pledged to no longer operate in Iraq.