By Michael Georgy
NAJAF, Iraq (Reuters) - Fighters loyal to Iraqi cleric Moqtada al-Sadr have clashed with U.S. troops in Najaf after talks with religious authorities to end a siege at the city's holiest shrine ran into difficulties.
Explosions from mortar bombs and rocket propelled-grenades echoed through the alleyways of the old city in Najaf, wrecking a day of relative calm in a two-week Shi'ite Muslim uprising that has helped drive world oil prices to record highs.
Militiamen had earlier brandished weapons around the Imam Ali mosque, dampening hopes that an offer by Sadr to hand the shrine over to the clerical establishment would end the siege, the biggest challenge yet faced by Iraq's interim government.
"Bring those Americans here to fight hand to hand," one of Sadr's followers said before the latest outbreak of fighting.
"They are cowards. They stay thousands of feet away in their airplanes. They are scared, they know we will slaughter them," he said, biting his finger for emphasis.
In near by Kufa, where Sadr has in the past led prayers at the mosque, witnesses said U.S. forces had also clashed with militiamen on Saturday.
A top Sadr aide said talks between the firebrand cleric's representatives and Iraq's top Shi'ite religious authorities were continuing with a view to handing the shrine over to the control of Ayatollah Ali al-Sistani.
Sistani, the most influential cleric in the majority Shi'ite country, is in London recovering from surgery.
But the aide, Ali Smeisim, said the talks had hit a snag over a request by Sadr's side that Sistani send a delegation to perform an inventory of precious items in the mosque -- thought to include jewellery, relics and carpets -- to head off any claim that Sadr's men had stolen anything from the shrine.
The Imam Ali Mosque is the holiest Shi'ite shrine in Iraq.
"We were told by people in Sayyed Sistani's office that they cannot form the committee in the current circumstances. We told them that Sayyed Sistani has representatives in Najaf ... and we believe a committee can be formed," Smeisim told reporters.
Sadr's aides had earlier said that his militia would continue to guard the mosque after any handover, precisely the outcome that the two-month-old government wants to prevent.
In the shrine, a teenager hacked with a pick at a block of ice to help cool Sadr's fighters, who yelled slogans vilifying Prime Minister Iyad Allawi, who has called on them to lay down their weapons and leave.
"We are winning, we will win over Iyad Allawi and the traitors collaborating with the Americans," they chanted.
Some held banners that said: "Where is the bullet that will grant me martyrdom?"
Sadr's uprising has fuelled fears of disruption to Iraqi oil production and has helped push crude prices to new highs.
Saboteurs detonated an explosive near an oil pumping station in southern Iraq on Saturday but caused only minor damage, witnesses said.
Confusion over control of the mosque swirled on Friday as the revolt, in which hundreds have died, ent ered its third week. The Interior Ministry said police had entered the shrine without firing a shot, a claim quickly denied by Sadr's aides.
A bloodless seizure of the mosque would have been a big political victory for Allawi. Since taking over from U.S. occupiers on June 28 he has struggled to end an insurgency and the Sadr-inspired Shi'ite rebellion in eight cities.
Iraq's Health Ministry said on Saturday morning that at least 21 Iraqis had been killed and five wounded in Najaf over the past 24 hours. Three people were killed in Baghdad, where U.S. troops have fought Shi'ite gunmen in the Sadr City slum.
The U.S. military said insurgents fired a rocket-propelled grenade at a U.S. military vehicle in southern Baghdad on Saturday, killing one soldier and wounding two others.
In a separate attack, two U.S. soldiers were killed and three wounded on Friday by a roadside bomb near Samarra.
The attacks brought to 711 the number of U.S. troops killed in action in Iraq since the U.S.-led invasion last year . One Polish soldier was killed and six wounded on Saturday when a car bomb exploded next to their convoy near the town of Hilla, an army spokesman said.
The soldier's death brings the number of Polish fatalities in Iraq to 14 since Poland took charge of the 8,000-strong multinational force in south-central Iraq last September.
In the western town of Ramadi, police said the head of the criminal investigation unit, Saad Samir, was shot dead on Saturday, although the reason for the attack was not immediately clear. Insurgents have often targeted Iraqi security forces.