The rescuers, from the same squad as the captives, blew out the doors and windows of the smart suburban villa with plastic explosive and hurled stun grenades at the militiamen guarding the two undercover soldiers.

A short, intense burst of automatic gunfire was heard before the men were freed and their captors were seen being dragged away, hoods over their heads and their hands tied behind their backs.

Neighbours said the entire operation took only a couple of minutes while attention was focused a hundred yards away on the army’s invasion of the main Jamiat police compound.

Army commanders denied being heavy-handed, insisting that they had no option but to stage a rescue mission once they had learnt that the soldiers had been handed over to extremists.

Brigadier John Lorimer, who commanded the operation, said: “I had good reason to believe the lives of the two soldiers were at risk.”

The soldiers had been beaten and rogue policemen had been touring the area with loudhailers urging demonstrators on to the streets to protest that the “British saboteurs” had been planning explosions in the city which would be blamed on followers of Moqtada al-Sadr, the Shia cleric.

The Iraqis displayed photographs of the explosives, weaponry and several bags of equipment allegedly found in the boot of the men’s unmarked car when they had been stopped at a checkpoint. There were also wigs, Arab headdress and sophisticated communications equipment.

The two soldiers are believed to have been investigating a corrupt police unit in Basra who were colluding with Shia militia leaders. Some of the men who later interrogated them are believed to be part of this same unit.

The mob which quickly gathered outside the detention centre were shouting for the Britons to be hanged as spies.

Hours of negotiations between army officers and local dignitaries were getting nowhere, and after armoured vehicles were firebombed by a mob and three soldiers injured the order was given at 9pm for Warrior armoured personnel carriers to smash their way into the compound.

A policemen said that he saw two walls knocked down as the Warriors crushed parked cars and demolished a line of prefabricated huts used as offices and sleeping quarters. Abbas Hassan, another officer, said: “Four tanks invaded the area. A tank cannon struck a room where a policeman was praying.”

The British search parties had to pick their way over splintered furniture, metal-bed frames and air-conditioning units.

Brigadier Lorimer would later call it “minor damage”. Muhammad al-Waili, the Governor of Basra province, claimed it was “barbaric, savage and irresponsible”.

Troops burst into every room as senior officers explained they had to ensure the missing Britons were not being hidden among the sprawl of buildings. If not, then they had to force the police to reveal where they had been taken. A military source said: “We knew they couldn’t have gone far because of our cordon but we were sure time was running out.”

One of the Iraqi prisoners who took advantage of the chaos to escape said that he had briefly shared a cell with the Britons. The man described how he watched as the pair were hauled away by guards who ordered inmates to strip off their Arab robes so they could disguise the men.

The suspicion was that the militiamen would try to smuggle their captives out of the protective cordon and use them as hostages in exchange for two of their leaders arrested by British troops on Sunday. The turning point came just before 7.30pm with the report that the Britons had been moved and officers manning the protective cordon thrown around the Hay al-Khalij district spotting a number of known agitators.

These were the same men who had orchestrated the earlier petrol bomb attacks on troops as they tried to pull back to neighbouring streets of Hayaniyah, a stronghold of the outlawed al-Mahdi Army. They were seen leading a gang of protestors converging for a second attack on troops from 12 Mechanised Brigade who were guarding the police compound.

Brigadier Lorimer later demanded that the Iraqis explain why the soldiers were not immediately handed over to coalition forces as required by the agreement regulating the British presence in Iraq. “This is unacceptable and we won’t hesitate to take action against those involved in planning and conducting attacks against coalition forces,” he said.

John Reid, the Defence Secretary, insisted that the attack was justified. “When it is necessary to protect British servicemen, we will take that action. And by God it was effective.”

There remained major differences last night in the rival accounts of the raid. Brigadier Lorimer says no Iraqis were injured. Local officials claim one prison guard was killed and another injured. The Iraqi Government also appeared split. Haider al-Ebadi, an advisor to Ibrahim Jaafari, the Prime Minister, decsribed the raid as a “very unfortunate development”.

But last night the Iraqi Government issued a statement denying that there was a “crisis” in relations between Baghdad and London.

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