BASRA, Iraq (Reuters) - Iraq's U.S.-backed Prime Minister Nuri al-Maliki vowed on Thursday that security forces would battle Shi'ite militia in Basra "to the end", despite huge demonstrations to demand his resignation.
Mehdi Army fighters loyal to cleric Moqtada al-Sadr remained in control of much of Basra, Iraq's second biggest city and main oil hub, defying a three-day government offensive that has led to violence spreading across the south and Baghdad.
Authorities imposed a three-day curfew in the capital to contain the clashes.
Saboteurs blew up one of Iraq's two main oil export pipelines from Basra, cutting at least a third of the exports from the southern oilfields, a Southern Oil Company official said. U.S. oil prices briefly rose more than $1 a barrel.
Maliki, who has traveled to Basra to oversee the crackdown, told tribal leaders it was sending "a message to all gangs that the state is in charge of the country".
"We entered this battle with determination and we will continue to the end. No retreat. No talks. No negotiations."
Sadr has called for talks. Late on Thursday he issued a statement saying: "We ask everyone to adopt the political resolution and peaceful protest. Do not shed Iraqi blood."
More than 130 people have been killed and hundreds wounded since the government began its offensive on Tuesday, exposing deep divisions between powerful factions within Iraq's majority Shi'ite community.
The clashes have all but wrecked a truce declared last August by Sadr, which Washington had said helped curb violence.
The government says it is fighting "outlaws", but Sadr's followers say political parties in Maliki's government are using military force to marginalize their rivals ahead of local elections due by October.
U.S. President George W. Bush praised Maliki's "boldness" in launching the operation and said it showed the Iraqi leader's commitment to "enforce the law in an even-handed manner".
Tens of thousands of Sadr supporters marched in Baghdad in a massive show of force for the cleric, demanding Maliki's removal. In the vast Sadr City slum, named after the cleric's slain father, crowds of angry men chanted slogans.
"We demand the downfall of the Maliki government. It does not represent the people. It represents Bush and Cheney," marcher Hussein Abu Ali said.
The slum of 2 million people is in a virtual state of siege.
"We are trapped in our homes with no water or electricity since yesterday. We can't bathe our children or wash our clothes," said a resident who gave his name as Mohammed.
Demonstrations were also held in the Kadhimiya and Shula districts, among the largest anti-government protests Maliki's government has faced. An Interior Ministry source said hundreds of thousands took part.
A Reuters correspondent in Basra said Iraqi forces had cordoned off seven districts but were being repelled by Mehdi Army fighters inside them. Helicopters swooped overhead.
Reuters television pictures showed masked Mehdi fighters firing mortars, waving rocket launchers in the air and dancing with children in the streets. Some showed off captured government vehicles sprayed with Mehdi Army slogans.
Authorities imposed curfews in other Shi'ite towns to halt the spread of the violence. Many shops in Baghdad were shut and the streets largely empty as people stayed at home.
An Interior Ministry source said 51 people had been killed and more than 200 wounded so far in Basra alone. Basra's police chief survived a roadside bomb which killed three bodyguards.
Clashes have spread in the past two days to the southern cities of Kut, Hilla, Nassiriya, Diwaniya, Amara and Kerbala, as well as 13 predominantly Shi'ite neighborhoods of Baghdad that have a Mehdi Army presence.
The "Green Zone" in central Baghdad came under repeated rocket attack during the day in some of the worst barrages aimed at the government and diplomatic compound in recent months. One rocket landed inside the grounds of the U.S. embassy complex.
Many of the rockets fell short and landed in surrounding neighborhoods. The U.S. military blamed rogue elements of the Mehdi Army for the attacks, which it said killed one Iraqi and wounded 14 others.
Forty-four people have been killed and 75 wounded in Wasit province, police chief Abdul Hanin al-Imara said. U.S. planes flew over the provincial capital Kut and gunfire rang out as troops entered the streets, a Reuters witness said.
Ali Bustan, head of the health directorate for eastern Baghdad, said 30 bodies and more than 200 wounded had been brought to two hospitals in Sadr City.
Reuters television pictures showed fighters in T-shirts and jeans firing rocket-propelled grenades and rifles on the streets of the northern Shaab district. Police said Sadr followers had set ablaze a building of Maliki's Dawa party.
U.S. and Iraqi checkpoints near Sadr City came under fire, said U.S. military spokesman Lieutenant-Colonel Steven Stover.
Gunmen also burst into the home of a government security spokesman, set it on fire and kidnapped him, police said.
Sadr's aides say his ceasefire is still formally in place. But his followers have staged a "civil disobedience" campaign, forcing schools and shops to shut, and Sadr has threatened to declare a "civil revolt" if the crackdown is not halted.