IRAQ stood on the brink of anarchy last night as the US vowed to arrest a radical cleric after more than 60 people died in battles between his supporters and coalition forces.

Despite British attempts to find a peaceful settlement, the US appeared bent on confrontation with fighters loyal to Moqtada al-Sadr.

After a day of protests, US generals ordered Apache helicopter gunships to attack Al-Sadr's supporters holed up in a Baghdad suburb.

And they later confirmed an arrest warrant had been issued for the "outlaw" cleric on a murder charge - a decision sure to spark further civil unrest.

As officials called for calm, Middle Eastern experts warned that confrontation could plunge the country into a bloody civil war that would claim the lives of hundreds more coalition troops.

Al-Sadr fiercely opposes the US occupation of Iraq. He is backed by a militia known as the Al-Mahdi Army and some younger clerics and impoverished Shi'ite Muslims.

The US-led coalition's clash with al-Sadr risks opening a new vein of violence: a battle with Iraq's Shi'ite majority. Most of the attacks on coalition forces have been blamed on Sunni Muslims and their allies.

But President George Bush said last night: "This is one person that is deciding that rather than allowing democracy to flourish, he's going to exercise force. We just can't let it stand."

Al-Sadr is accused of the murder of Abdel-Majid al-Khoei, a rival Shi'ite cleric who was stabbed to death by a mob at a Shi'ite shrine in the holy city of Najaf a year ago.

Sadr's supporters rioted in cities across Iraq leaving at least 52 Iraqis, eight US troops and a Salvadoran soldier dead.

The fiercest battle yesterday took place in the streets of Sadr City, Baghdad's largest Shi'ite neighbourhood, where black-garbed Shi'ite militiamen fired from rooftops and behind buildings at US troops, killing the eight Americans.

At least 30 Iraqis were killed and more than 110 wounded in the fighting.

Hundreds were wounded in violence in Baghdad, Najaf, Nasiriyah and Amarah.

Paul Bremer, the top US administrator in Iraq, declared al-Sadr an "outlaw" who threatens Iraq's security.

"Effectively he is attempting to establish his authority in the place of the legitimate authority. We will not tolerate this," Mr Bremer told a security team meeting in Baghdad yesterday.

Many Shi'ites distrust al-Sadr - because of his youth and radicalism - and US officials are hoping his popularity remains limited.

The violence on Sunday, sparked by the arrest last week of an al-Sadr aide, was unexpectedly fierce and continued into the night.

Militiamen also clashed with British troops in two southern cities, sparking fights that left three Iraqis dead.

In Basra, Shi'ites who seized the governor's office traded fire with British troops. One Iraqi was killed.

In the nearby city of Amarah, militiamen marched in the streets, clashing with British troops near the governor's office. Two Iraqis were killed in the exchange of the fire, witnesses said.

The commander of the British troops in the southern city, Brigadier Nick Carter, said the situation was extremely volatile.

The armed protestors are demanding the release of al-Sadr's deputy, Mustafa Yacoubi.

Brigadier Carter said they would not leave without Yacoubi but he said he did not think there would be further violence.

"Tensions are very high at the moment," he said.

"While it will remain peaceful and stable while we are in control there is always the prospect that it could break.'

US troops sealed off Fallujah, one of the most violent cities in the Sunni Triangle, in a major operation codenamed Vigilant Resolve.

US commanders have been vowing a massive response after insurgents savagely killed four American security contractors in the city, west of Baghdad, hanging two of the bodies "like sheep".

About 1,200 marines and two battalions of Iraqi security forces were poised to enter the city in a raid to capture suspected insurgents.

The latest violence has pushed the US death toll in Iraq to at least 613.