BRITISH forces smashed their way into Basra jail last night to free two soldiers seized by Iraqi police earlier in the day. After the doors to the jail were breached, troops stormed inside to find and rescue their colleagues. The Ministry of Defence confirmed that the men had been freed, but would not comment on reports that they were undercover commandos.

Army commanders are believed to have taken the decision to use force after deciding that they could not leave the pair in the prison overnight. Agitators reportedly had been driving through the city using loudspeakers to demand that the soldiers be kept in detention.

The dramatic show of strength, also allowed about 150 Iraqi prisoners to escape, an Iraqi defence ministry source said.

The move ended a stand-off that began after a gunfight with police in which two Iraqis were allegedly killed. In a challenge to British authority in Iraq, the special forces soldiers, who were in plain clothes, were taken prisoner.

The British military sent a small force to rescue the soldiers, but it was beaten off by an angry mob which set fire to two Warrior armoured fighting vehicles. One soldier was seen tumbling from the vehicle in flames, another being pelted with rocks.

The second attempt last night was more organised. Before the prison was attacked nearby roads were sealed and reinforcements surrounded the police station. “We are not leaving without our men," said a British commander. The former Iraq commander, Tim Collins, said it was “not a good turn of events”, but added that he believed the events did not represent a breakdown of law and order in Basra.

British diplomats had demanded the release of the men, reminding the Iraqi authorities that British troops in Iraq were answerable only to British military justice. But the Government in Baghdad had appeared unable to impose its will on the authorities in Basra.

The incident presents an acute problem for Tony Blair. More than 8,000 British troops are deployed to maintain order and to train the very police that were holding the two soldiers prisoner. The coalition’s entire exit strategy depends on Iraqi security forces being able to take over.

There is a wider fear that yesterday’s developments could herald an unravelling of the fragile peace that has prevailed to date in southern Iraq. In the past two months six British soldiers and two British security guards have been killed as Islamic fundamentalists, backed by Iran, have tightened their grip on the region. There was a strong suspicion that the police in Basra were acting in collusion with followers of the populist Shia cleric Moqtada al-Sadr, who wants British and American troops out of Iraq and has been increasingly fomenting unrest in the south.

Last Saturday British soldiers detained a commander of al-Sadr’s militia over the recent bomb attacks on British troops. Shia demonstrators and militiamen have subsequently been been staging shows of force in Basra, orchestrating demonstrations and roadblocks.

That heightened tension may have triggered yesterday’s gunfight. It appears that the two soldiers, who were dressed in Arab clothing and driving a civilian car, refused to stop at an Iraqi police checkpoint, fearing that it might be manned by disguised insurgents.

Shots were exchanged as the police moved to arrest the soldiers. Iraqi authorities later released photographs of the men sitting handcuffed, with bandaged heads, in a police cell. The incident will be a big embarrassment for Mr Blair, who had hoped to use next week’s Labour Party conference to direct attention to Labour’s third term agenda, not Iraq.

Times Recommends

• Rio Tinto four held as China prepares case
• Diplomats must keep heads down and trousers up
• When in Rome should one make like Berlusconi?