<B>ITALY</B > vowed yesterday to keep its troops in Iraq even as the killing of an Italian hostage sent a chilling signal of the new risks foreigners face from insurgents battling the US-led occupation.

About 20 buses carrying Russian workers headed for the airport in an evacuation organised after the kidnapping and swift release of three Russians and five Ukrainians in Baghdad.

Sunni rebels fought US Marines overnight in the battered town of Falluja, where residents said air strikes had hit several districts. There was no word on casualties.

A tense standoff remained unresolved in the holy city of Najaf, where US forces are poised for action against a rebel Shi?ite cleric they have sworn to capture or kill.

?They have destroyed a life. They have not cracked our values and our efforts for peace,? Italian Prime Minister Silvio Berlusconi said after the killing of Fabrizio Quattrocchi.

Al Jazeera television received a videotape of the private security guard?s murder, which it said was too bloody to screen.

<B>No to ?blakmail?</B>

The killing by a previously unheard of Iraqi group followed a kidnap spree that has snared foreigners from a dozen countries this month, Iraq?s bloodiest period since Saddam Hussein was ousted a year ago. It was the first such publicised killing.

Al Jazeera said the captors had threatened to kill three other Italian hostages, colleagues of Quattrocchi in a US security firm, if Italian troops were not withdrawn. Italy?s ambassador in Qatar identified Quattrocchi in the footage.

Italy said earlier it would not give in to ?blackmail? to save the hostages but was working with Iran and others for their release. After news of Quattrocchi?s murder, Berlusconi sent a senior official to Iraq to coordinate the effort.

Berlusconi, a loyal ally of US President George W. Bush, sent almost 3,000 troops to Iraq, where bloodshed and kidnapping have rattled nerves among other countries with troops there.

Japan said it was checking reports that two more Japanese had been abducted. The captors of three seized last week say they will be killed unless Japanese troops leave Iraq.

Kidnappers freed French journalist Alexandre Jourdanov on Wednesday, but more than a dozen foreigners remained captive.

Saraya al-Mujahideen, the group holding the three Japanese, said in a statement broadcast on Al Arabiya television on Thursday that it was targeting Americans and nationals of other countries that have troops in Iraq or support the occupation.

Saraya al-Mujahideen delivered the message in a handwritten letter given to Jourdanov, saying it had freed him after making sure he did ?not represent the American occupation?.

French diplomats in Baghdad had no immediate comment.

Saraya al-Mujahideen also distributed leaflets in Baghdad warning civilians to stay off the streets for the next eight days. The leaflets said fighters from the Sunni towns of Ramadi, Falluja and Khaldiya would be taking the battle to Baghdad.

A US army spokesman said two US soldiers were killed in separate attacks in northern Iraq in the last 24 hours. It was not immediately clear whether the deaths had already been included in the Pentagon?s toll, which rose by eight on Wednesday.

According to that toll, the US military, embroiled in a two-front battle against Sunni guerrillas and radical Shi?ite cleric Moqtada al-Sadr?s militia, has lost 93 troops in combat in April ? four more than the total killed in the three-week war that toppled Saddam.

There have been intense efforts by Shi?ite clerics, now involving Iranian government mediators, to broker a deal between Sadr and the Americans that would spare Najaf a bloodbath.

A negotiator for Sadr said on Wednesday the cleric had offered unconditional talks. ?I expect a solution within the next 24 hours. I met US officials today and the talks were extremely positive,? said Abdelkarim al-Anzi.

No comment was available from US-led authorities.

US troops said earlier they had seen no sign of Sadr?s Mehdi Army militia backing down. ?The indication I?m getting is that they are not retreating,? said Colonel Dana Pittard, commander of the 3rd Brigade Task Force poised outside Najaf.

<B>Civilians killed</B>

In Baquba, north of Baghdad, two rockets hit houses at dawn, killing a mother and her two teenage sons, and badly wounding her two daughters on Thursday, neighbours and hospital officials said. It was not clear who had fired the rockets.

The bloody chaos in Iraq has shown how hard Washington is finding the task of stabilising the country it invaded to destroy Saddam?s still unfound weapons of mass destruction.

Bush, seeking re-election in November with opponents accusing him of leading the United States into a Vietnam-style quagmire, vowed on Tuesday to stay the course in Iraq and stick to a June 30 handover of power to Iraqis.

The US military is beefing up its forces in Iraq by keeping more 20,000 troops there beyond their year-long tours of duty, US defence officials said.

One senior official said the number of US troops in Iraq would probably remain at more than 130,000 for another three months, instead of a previously planned reduction to 110,000.

?There has been a decision that seasoned troops are needed as we move toward and through the turnover of power to the interim Iraqi government,? another official said.

Fiona O?Brien