Friday, Aug 27, 2004
US forces suspended military operations against Moqtada al-Sadr in Najaf yesterday as Grand Ayatollah Ali al-Sistani, the highest-ranking Shia cleric, said he had reached an agreement with the rebel cleric to end the three-week siege.
Mr Sistani, who travelled to Najaf from Basra, held talks with Mr Sadr's representatives and, according to aides, clinched a deal allowing the rebel cleric's forces to make an honourable retreat after surrendering the Imam Ali shrine - the focus of fighting in Najaf - to Iraqi police. This has been a central demand of Iraq's interim government.
The growing possibility of a negotiated solution appeared to help calm oil markets. Despite 20 attacks on oil pipelines in Iraq, cutting exports by half, oil prices have fallen by 13 per cent in the past five trading days.
Under the Sistani proposals, US marines would withdraw from the holy city and Najaf and nearby Kufa would become weapons-free areas. Mr Sadr has failed in the past to follow through on agreements. However, both he and the interim government of Iyad Allawi have been looking for a way out of the present crisis.
Although the conflict between the US and Mr Sadr's forces ended yesterday for the time being, the bloodshed did not. Attacks of unknown origin targeted followers of both Mr Sistani and Mr Sadr who were marching on Najaf, killing at least 74 and wounding 315.
Mortar bombs exploded in the main mosque in Kufa, the site of one of the first Muslim encampments in Iraq and a famous early Islamic law school. Later, Iraqi police fired on Mr Sadr's supporters, who were gathering outside the Kufa mosque and preparing to March to Najaf, according to reports. Police said they had been fired on from the crowd.
In Najaf, thousands of Shia faithful whom Mr Sistani had summoned from all over Iraq converged on the shrine. Last night, Mr Sistani called on the Iraqi government to allow his followers to enter the shrine this morning, in what was perceived as an attempt to calm the situation and enable Mr Sadr's militants to save face and withdraw.
In oil markets yesterday, US Nymex WTI in New York stood at Dollars 43.28 a barrel by midday, and Brent crude in London fell briefly below Dollars 40 before climbing again.
Some oil strategists saw recent falls from the record high of Dollars 49.40 on Friday for oil futures traded on the New York Mercantile Exchange as the beginning of a long slide after a period dominated by speculation and fears over security of supply.
Doug Leggate at Citigroup Smith Barney said: "We continue to point to fundamental support no higher than Dollars 30 a barrel."
But others thought this week's fall was a brief correction. Kevin Norrish at Barclays Capital said: "Nothing has really changed and we still think Dollars 50 a barrel will be reached as the market tightens in the fourth quarter." Oil strategists divided, Page 8 Show of strength, Page 9 Short View, Page 19 Commodities, Page 41 www.ft.com/lex www.ft.com/iraq
By NEIL DENNIS, JAMES DRUMMOND and STEVE NEGUS
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