Iraqi security forces fought fierce gunbattles with powerful Shi'ite militias in Basra on Tuesday in a major operation aimed at bringing the southern oil city under government control.

The operation targeted six districts in central and northern Basra where the Mehdi Army militia of Shi'ite cleric Moqtada al-Sadr has a strong presence.

Sadr, whose supporters have already ordered police and soldiers off the streets of his Sadr City stronghold in north-east Baghdad, threatened a countrywide "civil revolt" if attacks on the Mehdi Army continued.

A Reuters witness in Basra reported seeing columns of black smoke and hearing explosions and machinegun fire. Television pictures showed Iraqi troops running through empty streets and helicopters flying overhead.

"There are clashes in the streets. Bullets are coming from everywhere and we can hear the sound of rocket explosions. This has been going on since dawn," resident Jamil told Reuters by telephone as he cowered in his home.

The Mehdi Army, which has thousands of fighters, has kept a relatively low profile since Sadr called a ceasefire last August. But the militia has chafed at the truce and on Tuesday there were signs that the unrest was spreading.

Gunmen and police clashed in the southern city of Kut, where last week Mehdi Army fighters battled police. A Reuters witness said he could hear sounds of gunfire. Streets were empty and shops closed. Police said a curfew had been imposed.

In Sadr City, a sprawling slum of about 2 million people, residents said armed Mehdi Army fighters had appeared on the streets and ordered police and soldiers out of the district.

In several other districts, Mehdi Army militiamen continued what they called a "civil disobedience campaign", forcing shops to shut. Hundreds of protesters marched in two districts demanding the release of Sadrists in detention, witnesses said.

In a statement read out by a senior aide on Tuesday, Sadr called on Iraqis to stage sit-ins all over Iraq and said he would declare a "civil revolt" if attacks by US and Iraqi security forces continued. He also threatened a "third step", but said it was to early to announce what it would be.

An Iraqi army commander in Basra told Reuters "many outlaws" had been killed in the operation to reassert government control over the semi-lawless city, whose surrounding oilfields hold 80 percent of Iraq's oil wealth.

At Basra's al-Mawana hospital, police major Abbas Youssef said four bodies and 18 wounded had been received.

Major Tom Holloway, a spokesman for British forces in Basra, said Iraqi Prime Minister Nuri al-Maliki was in the city to oversee the operation.

"It will be very difficult for the central government to regain control," said Joost Hiltermann, an Istanbul-based analyst for the International Crisis Group think-tank.

"You have many armed groups that are looking to keep hold of their share of the oil wealth."    

Sadrists and the Supreme Islamic Iraqi Council, the two most powerful Shi'ite factions in Iraq, have been vying for control of Basra, Iraq's second city and gateway to the Gulf, along with a smaller Shi'ite party, Fadhila.

Basra's oil fields are the source of most government revenues. Iraqi oil industry sources said the fields, which exported 1.54 million barrels of oil per day in February, were operating normally on Tuesday.

Iraqi army Major-General Ali Zaidan, the commander of Iraqi ground forces in the operation, said the offensive would continue "until we achieve our target".

"The target is to wipe out all the outlaws. There were clashes and many outlaws have been killed," Zaidan said, adding that he had no death toll.

The operation was launched after Maliki, accompanied by his defence and interior ministers, arrived in the city on Monday vowing to reimpose his government's control over the city.

"We are ready to negotiate," said Harith al-Ithari, the head of Sadr's office in Basra, calling for calm and accusing Maliki's government of trying to crush the Sadrist movement.

The British military said no British ground forces were involved in the operation, but warplanes from the US-led coalition were carrying out aerial surveillance.

Iraqi security forces took control of Basra from British forces in December, although 4,100 British troops remain at an airbase outside the city to offer assistance if needed. - Reuters