US marines and militiamen loyal to Moqtada al-Sadr, the rebel Shia cleric, traded fire on Monday in Najaf where prospects receded for a resolution to the near three-week confrontation over control of the Imam Ali shrine.
Although US warplanes were again in action over a massive graveyard, US tanks and other armoured vehicles pulled back from positions on the edge of the old city.
Mr Sadr's militiamen also adopted a lower profile in the streets of Najaf on Monday compared with previous days, after heavy fighting overnight on Sunday and early on Monday. Mr Sadr's spokesmen claimed this was because the fighters were adopting more professional tactics but it was unclear whether exhaustion was setting in or whether heavy losses were taking their toll.
American snipers are believed to be at work in the old city.
The shrine itself, the most revered in the Shia world, was slightly damaged in the overnight clashes. A one-metre square hole was blasted in one of the walls.
Mr Sadr's spokesmen said that a US Apache attack helicopter caused the damage when it fired on a nearby hotel. Several hotels in Najaf have been destroyed because they are used by commanders from Mr Sadr's Jaysh al-Mahdi militia, according to witnesses.
Negotiations to return the keys of the Imam Ali mausoleum to Grand Ayatollah Ali al-Sistani, the most influential Shia cleric in Iraq, stalled over demands by Mr Sadr that a committee be formed to audit treasures held underneath the tomb that is at the centrepiece of the complex.
Mr Sadr's spokesmen said on Monday that the debate was now about who would take part in the committee, claiming that they do not want to be accused of looting the goods held in the shrine. These are believed to include ancient carpets and precious jewellery.
?There is contact between them and us, but there are differences on forming the committee due to the security situation,? said Ahmed al-Shaibani, a spokesman. Others say that it may be a tactic on the part of Mr Sistani, who is in London receiving medical treatment, to reveal what Mr Sadr's militiamen have been doing inside the mausoleum during their occupation.