An Iraqi judge has issued an arrest warrant against leading politician and former Pentagon darling Ahmad Chalabi and his nephew Salem Chalabi, the head of the tribunal trying Saddam Hussein.

Zuhair al-Maliki, chief investigative judge of the Central Criminal Court of Iraq, said an arrest warrant had been issued against Ahmad Chalabi in connection with counterfeiting money and against his nephew on a murder charge.

Ahmad Chalabi, who helped lead the United States to war in Iraq, was once touted as a potential leader of the country after Saddam was ousted, but has since been spurned by Washington and many in Prime Minister Iyad Allawi’s interim government.

Allawi, trying to quell a Shi’ite Muslim uprising, travelled to the holy city of Najaf on Sunday and ordered Shi’ite fighters to lay down their weapons. But fighting raged on, with U.S. helicopter gunships pounding guerrilla positions.

Four days of intense fighting in the heart of Najaf, across southern Iraq and in several districts of Baghdad have killed or wounded hundreds of Shi’ite militants, the U.S. military says, and piled pressure on Allawi’s 40-day-old government.

In an effort to staunch Shi’ite radicalism lead by rebel cleric Moqtada al-Sadr and a 16-month Sunni Muslim insurgency, the government offered an amnesty for low-level guerrillas while reinstating the death penalty for hardline criminals.

<B>Out of favour</B>

Despite that carrot-and-stick approach, however, fighting shows little sign of abating. Kidnapping – a common currency of insurgents in recent months – continues apace.

“There is no negotiation with any militia that bears arms against Iraq and the Iraqi people,” Allawi told reporters in shell-scarred Najaf, 160 km (100 miles) south of Baghdad. “I believe gunmen should leave the holy sites ... quickly, lay down their weapons and return to the rule of order and law.”

In Kerbala, a Shi’ite city 60 km north of Najaf, an Iranian diplomat was kidnapped by militants, according to the Iranian embassy, becoming the second foreign diplomat seized in a wave of kidnappings since April.

The string of abductions, mostly targeting foreign truck drivers, appears aimed at forcing foreign governments to pull their troops out, and foreign companies to cease operations.

Ahmad Chalabi, who fell out with Washington over accusations he provided false information on weapons of mass destruction, said he would come home to fight the charges brought by the US-appointed judge which he said were politically motivated. “I do not know who is doing this and why. They are not patriots. I have done my duty and helped liberate Iraq,” he told Reuters from Iran, where he was on holiday.

“I will return in a few days. I can easily prove that these charges are untrue and I intend to defend myself and clear my name.”

Officials in Washington have said Chalabi is being investigated for leaking secrets to Iran. In 1992 he was convicted in absentia of bank fraud by a military court in Jordan. He says those charges too were politically motivated.

Salem Chalabi, a lawyer, is leading the work of the Iraqi Special Tribunal which will try Saddam, the deposed president captured last year by US troops.

He told CNN the charges appeared to be very strange.

“The warrant for me has to do with the fact that apparently I threatened somebody, I have no recollection of ever meeting that person, but apparently I threatened somebody who subsequently was killed,” he said, speaking from Britain.

<B>Gunships fire at militia positions</B>

A Reuters witness on Sunday saw two Apache gunships fire missiles at defences manned by Sadr’s militia near Najaf’s ancient cemetery. The militia, known as the Mehdi Army, dug in, laying mines around the burial ground’s crypts and mausoleums.

US soldiers advanced on the city’s Imam Ali shrine, the holiest site in Shi’ite Islam, tightening a noose around insurgent positions, while loudspeakers exhorted the militia to fight back, ordering: “Engage in Jihad”.

Clashes also erupted anew in the Baghdad slum district of Sadr City, and in other Baghdad areas, while across southern Iraq tensions remained high in several Shi’ite-dominant cities, including Nassiriya, Amara, Basra and Diwaniya.

After dark, insurgents fired several mortar bombs and rockets in central Baghdad, wounding at least four people.

Backing up Allawi’s threats to get tough with insurgents, the interim government reinstated the death penalty for crimes including murder, kidnapping and drug offences.

Capital punishment, used liberally during Saddam’s rule, was suspended by US occupying authorities last year. Since coming to power on June 28, the new government had repeatedly threatened to reintroduce it.

It was not clear if the law would be retroactive, casting doubt on whether Saddam and his henchmen could face death if found guilty of crimes.

The law came a day after Allawi announced a 30-day amnesty for insurgents who have committed minor crimes.

<B>Khaled Yacoub Oweis and Luke Baker</B>