US and Iraqi forces killed 22 people yesterday in a raid on the Baghdad stronghold of al-Mahdi Army, the Shia militia that fought Iraqi government forces in Basra last week, while kidnappers captured 40 students on a university outing.

The violence flared as the US Ambassador to Iraq and the commander of American forces prepared to testify to Congress tomorrow on the security and political progress of the American surge of forces in the past year.

In the north, where Sunni insurgents are still holding out against an Iraqi government offensive, gunmen set up a fake checkpoint between Baghdad and the city of Mosul and kidnapped 40 students in a bus. While most such mass kidnappings have ended with the victims being butchered, Iraqi security forces said that they had freed the hostages within hours.

Their claim would bolster the case for Ryan Crocker, the US Ambassador, and General David Petraeus, when they report to Congress on the security gains made by the deployment of about 30,000 extra US soldiers last year.

The improvement in daily life in the capital after years of horrific bloodshed is largely seen as a result of the US surge, as well as by Sunni insurgents turning away from alQaeda to form US-backed militia groups in their own neighbourhoods.

A freeze on al-Mahdi Army militia called by its leader, the hardline Shia cleric Hojatoleslam Moqtada al-Sadr, has also helped. But a week-long battle between his militias and government forces commanded personally by Nouri al-Maliki, the Prime Minister, appeared to undermine the freeze, especially after Mr al-Maliki’s forces failed to crush the rogue militia fighters and had to agree to a peace deal.

However, Mr al-Maliki later swore to fight on against what he terms criminals and appears to be rallying many Iraqi politicians and ordinary civilians tired of the endless violence perpetrated by unaccountable militias.

Mr Crocker said that despite the poor result of the battles that spread across the Shia south during the Basra offensive — about 1,500 Iraqi soldiers and police refused to fight — Mr al-Maliki’s resolve had made a significant impression. “We have always said that gains here are fragile. But in this instance, when the fighting in Iraq came about because the Government was taking on militias, I think the net result was a positive step forward for the Government,” he said before leaving for Washington.

Parliament was also planning to isolate al-Mahdi Army by drafting a Bill banning parties that maintain militias from running for office. It was backed by a rare alliance of Shia, Sunni and Kurdish parties, although several of the parties involved run militias themselves.

Mr al-Maliki’s main backer in government, the Supreme Islamic Iraqi Council, has its own militia, the Badr Brigades, which has often fought a more powerful al-Mahdi Army.

“We want the Sadrists to disband al-Mahdi Army. Just freezing it is no longer acceptable,” an adviser to Mr al-Maliki said. “The new election law will prevent any party that has weapons or runs a militia from contesting elections.”

With the Sadr bloc politically isolated, the US and Iraqi military launched a fresh raid on Sadr City, its main Baghdad fiefdom, yesterday, triggering heavy fighting. A vast pall of smoke stretched across the capital from a market that was set ablaze by militia mortar fire, targeting a nearby US-Iraqi security base.

Yesterday three US soldiers were killed and 31 people injured in two separate mortar attacks in the capital.

Hojatoleslam al-Sadr has called upon his huge network of supporters to rally a million people in Sadr City on April 9, the fifth anniversary of the fall of Baghdad, to protest at the continued presence of US troops in Iraq. But in some areas of Baghdad support for Mr al-Maliki and even the American military has grown since the Prime Minister launched his struggle against militias.

“I think al-Maliki is the most brave and honest politician I’ve seen in my life,” said Sajar Abu Zeinab, the owner of a sweet shop in Mansour, a district of central Baghdad that was until recently under the control of Sunni militias who terrorised the population.

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