(Updates death toll, adds background)
By Carlos Barria and Ross Colvin
BAGHDAD, Feb 18 Two car bombs tore through a packed shopping area of a mainly Shi'ite district of Baghdad on Sunday, killing 60 people in the worst attack since U.S. and Iraqi troops launched a crackdown in the city five days ago.
Prime Minister Nuri al-Maliki had on Friday trumpeted what he called the "brilliant success" of Operation Imposing Law in quelling the sectarian violence that has turned the capital's streets into killing fields.
U.S. generals, mindful of a similar crackdown last year that failed, have been more cautious and warned that any downturn in violence might be temporary as militants adapt their tactics to meet the new strategy.
The two car bombs exploded in quick succession near a busy, pedestrianised market area of New Baghdad, a mainly Shi'ite district in eastern Baghdad, killing 60 people and wounding 131, police said.
A Reuters photographer, Carlos Barria, who is embedded with a U.S. military unit that was in the area, reported seeing seven or eight bodies lying in the street after the two blasts, which he said were about 10 seconds and 100 metres (yards) apart.
"I saw a man about 50 years old. He was carrying a dead boy who looked about 10. He was holding him by one arm and one leg and screaming," he said.
A man wearing a business suit lay dead next to a black Mercedes, a piece of shrapnel sticking out of his head. One of the explosions partially demolished a two-storey building.
POSING FOR PICTURES
Fifteen minutes earlier, a joint patrol of U.S. and Iraqi police had stopped to pose for pictures with each other on the street corner where the second bomb exploded.
Baghdad's markets have been hit by a spate of particularly deadly carbombings since the start of the year. Some 71 people were killed a week ago in Shorja wholesale market, prompting U.S. generals to look at pedestrianising the bigger markets.
A third car bomb on Sunday killed two people when it exploded near a police checkpoint in Sadr City, a stronghold of radical Shi'ite cleric Moqtada al-Sadr's Mehdi Army militia, blamed by Sunni Arab leaders for many death squad killings.
Residents of areas like Sadr City and New Baghdad, however, view the Mehdi Army as their protectors against attacks such as Sunday's. The militia have been keeping a low profile since the offensive began, appearing on the streets without their guns.
The bombers may have aimed to take advantage of this.
The U.S. military says Sadr himself has fled to Iran, although Tehran again denied this on Sunday. The cleric's aides insist he is still in Iraq.
British forces clashed with gunmen armed with machineguns and rocket-propelled grenades in a Mehdi Army stronghold in the southern Iraqi city of Basra on Sunday, killing at least three gunmen, Iraqi police said.
The battle erupted during a crackdown by 3,000 Iraqi and British troops in the oil port on violence by criminal gangs and feuding Shi'ite militias. It is linked to the Baghdad offensive.
There had been a relative lull in sectarian attacks in the capital since the operation, seen as a last-ditch attempt to avert all-out civil war between majority Shi'ites and minority Sunni Arabs, was formally launched on Wednesday.
The U.S. military has said it will take several months to know whether the crackdown has been successful. But analysts say it will still be extremely difficult to prevent carbombs, the favoured weapon of Sunni insurgents.
Earlier on Sunday, police had reported finding just five bodies shot, tortured and dumped in Baghdad on Saturday, a dramatic drop from the 40-50 they typically report each day.
It was one of the lowest tolls since the bombing of a Shi'ite shrine in Samarra a year ago unleashed a wave of sectarian violence that has killed tens of thousands of people.
On Saturday, visiting U.S. Secretary of State Condoleezza Rice told Iraq's leaders to use the lull in violence to push ahead with national reconciliation.
The United States has repeatedly said there is no military solution to Iraq's violence and that any let-up in the bloodletting must be accompanied by political progress to reconcile Iraq's warring communities. (Additional reporting by Susan Cornwell and Donna Smith in Washington, Aref Mohammed in Basra, and Edmund Blair in Tehran)