U.S. and British forces battle Mehdi Army

BAGHDAD (Reuters) - American and British forces battled Mehdi Army fighters in Baghdad and Basra on Saturday as the monthly U.S. casualty toll headed towards a record high for the year.

The renewed fighting came after the Mehdi Army leader, Shi'ite cleric Moqtada al-Sadr, used a rare public appearance to call on U.S. troops to get out of Iraq.

Five gunmen were killed in an air strike during a pre-dawn raid on Saturday in the cleric's Sadr City stronghold in Baghdad, the U.S. military said. A militant leader suspected of ties to Iran's Revolutionary Guards was captured.

In the southern oil hub of Basra, the British military said "a number" of militia fighters were killed in an air strike overnight after they attacked British troops with rocket-propelled grenades, mortars and machineguns.

Separately, eight more U.S. troops were reported killed in five separate attacks stretching back to Wednesday, setting May on course to be the bloodiest month this year for the U.S. military. A total of 104 were killed in April.

White House spokeswoman Dana Perino said President George W. Bush "takes to heart every death every of every soldier, as well as the lives of the innocent civilians those soldiers are trying to protect".

Bush had already made clear U.S. forces would face "additional sacrifices while we work to train Iraqi soldiers, calm the violence in the city, and beat back al Qaeda and other foreign fighters", Perino said.

The U.S. military is pouring thousands of extra troops into Baghdad and other areas in a security crackdown aimed at dragging Iraq back from the brink of sectarian civil between majority Shi'ites and Sunnis.

A total of 3,452 U.S. soldiers have been killed in Iraq since the U.S.-led invasion to topple Saddam Hussein in 2003.

MEHDI ARMY

The Basra attacks were believed to be in retaliation for the killing of the top Mehdi Army commander in the city on Friday by British-backed Iraqi special forces, the British military said.

A Reuters reporter saw eight coffins at a funeral for those killed in Basra. A hospital official said 22 others had been wounded. Residents said a helicopter had attacked a group of civilians protesting against the death of the Mehdi Army leader.

The fighting came a day after Sadr appeared in public for the first time in months and repeated his demand for a timetable for U.S. troop withdrawal.

In Washington, the White House played down a New York Times report that the Bush administration was considering sharp cuts in troop levels to around 100,000 by mid-2008 from close to 150,000 now.

U.S. officials have said Sadr was hiding in Iran, but his aides say he never left Iraq. Analysts have speculated he had come back to reassert his authority over his militia, which the U.S. military says has begun fragmenting into splinter groups.

Sadr led two uprisings against U.S. forces in 2004. His political movement holds 30 seats in parliament and is part of the ruling Shi'ite Alliance.

Sadr's return comes ahead of rare talks between the U.S. and Iranian ambassadors to Iraq on Monday on how to stabilize the country. The United States accuses Iran of fuelling sectarian violence with its support for Shi'ite militias such as Sadr's Mehdi Army. Tehran denies the charge.

The U.S. military said the militant leader detained in the Sadr City raid was "suspected of ... acting as a proxy for an Iranian Revolutionary Guards Corps officer" and was part of a network that organized training for militants in Iran.

The five suspected gunmen were killed when an air strike hit a column of nine vehicles that were positioning themselves to ambush U.S. and Iraqi troops, the military said in a statement.

But Sadr City residents and police said the cars had been queuing at a petrol station. A Reuters reporter counted at least 11 burnt-out vehicles about 1 km (half a mile) from the station. Lengthy petrol queues are common in Iraq.

"A plane came and started bombing the cars queuing for petrol and the hospital," said a guard at Habibiya maternity hospital, which was also hit in the attack.

Police said two people were killed and five wounded.

(Additional reporting by Mussab Al-Khairalla and Aref Mohammed in Basra)

((Baghdad newsroom; editing by Giles Elgood)