Mortar shells and car bombs devastated several streets in the Shia neighbourhood of Sadr City in Baghdad today, killing nearly 150 people in what Iraqi officials said was an al-Qaeda attack.

Witnesses said that mortar fire and at least three car bombs, each packed with as much as half a tonne of explosives, blew up one after the other in markets and shopping streets, starting just after 3pm local time. More than 230 people were injured in the explosions

The bombs detonated 15 minutes apart, hitting Jamila market, al-Hay market and al-Shahidein Square in Sadr City. Whole streets were destroyed, leaving bloodied remains and fierce fires burning amid the ruined shells of cars.

Officials said the death toll was expected to rise because many bodies still lay in pieces in the street. "Many of the dead have been reduced to scattered body parts and are not counted yet," Ali al-Shemari, Iraq's Health Minister, told Reuters.

The attack, one of the deadliest since the US-led invasion of Iraq in 2003, was quickly blamed on Sunni extremists intent on causing the maximum loss of life in the neighbourhood that is home to the Mahdi Army militia, the Shia militia loyal to Iraq's leading radical Shia cleric, Hojatoleslam Moqtada al-Sadr.

The bombs provoked instant retaliation. Shia militias fired 10 mortar rounds at the Abu Hanifa mosque in Azamiya, the holiest Sunni shrine in Baghdad, killing one person and wounding seven people.

In an attempt to contain the violence, a curfew was declared for the entire city, beginning at 8pm tonight.

In Sadr City, police and doctors said 145 people had been killed and 238 had been injured in the blasts. Hospitals were overwhelmed by the arrival of the dead and wounded. "Of those killed, 88 bodies are in the Imam Ali hospital and 55 in Sadr City hospital," a medic told AFP.

Major General Abdel Karim Khalaf, an Interior Ministry spokesman, blamed al-Qaeda for the massive attack, telling The Times: "It is clear al-Qaeda did this. It is their way to attack innocent people. There are no governmental buildings, no army bases, no security forces attacked.

"The victims were only innocent ordinary civilians."

General Khalaf said police managed to arrest a man before he detonated another car bomb, but would not say whether he was Iraqi or a foreigner.

In a separate interview with Iraqi state television, he said that police believed that ten mortar rounds had been fired and eight car bombs set, of which four went off.

Sadr City, a suburb of three million people, nearly all of them Shia, has been bombed with an increasing frequency during Iraq's slide towards civil war this year, with its militias, mosques and markets a target for Sunni militants seeking to deepen the country's sectarian divide.

More than 3,700 people were killed in Baghdad last month, the UN reported yesterday, many of them caught in tit-for-tat murders, kidnappings and bombings motivated by nothing more than tribal and religious differences.

The most serious bomb attacks in the capital this year followed an audacious attack by Sunni militants on the Iraqi Health Ministry, which is also controlled by Hojatoleslam al-Sadr, earlier today. Five people were wounded in a three-hour gun battle in broad daylight that only ended when American soldiers and helicopters drove off the gunmen.

During the assault, the Deputy Health Minister, Hakim al-Zamily, spoke by telephone to Reuters, saying: "Terrorists are attacking the building with mortars, machineguns and we can even see snipers. Any employee who leaves the building will be killed."

The Interior Ministry said that gunmen surrounded the ministry, which is in the northern part of central Baghdad, in a predominantly Shia neighbourhood. The gun battle was unusually prolonged, and only broken up when US forces, with helicopter gunships in support, arrived on the scene.

"The gunmen fled as American helicopters and Iraqi armoured vehicles arrived. Employees were able to leave starting about 3:15 pm," said Qassim Yehyah, a Health Ministry spokesman.

The ministries of Iraq's Government have done as much to catalyse as to prevent the country's sectarian breakdown, with many departments becoming the personal fiefs of Shia and Sunni factions.

Today's attack on the Shia-run Health Ministry comes just a week after a similar, broad-daylight raid on the Ministry of Higher Education, which is controlled by the largest group of Sunni MPs.

Around 60 employees of the Higher Education Ministry were kidnapped last week by gunmen wearing the uniforms and driving the vehicles of Iraqi police commandos, themselves thought to be connected to Iraq's Interior Ministry, which has been long-suspected of harbouring and sustaining Shia militias and death squads.

Today's attack, blamed on Sunni militants, raised questions over whether the Iraqi army, one of the few large institutions where Sunnis still retain powerful influence, was complicit. Mr al-Zamily, the Deputy Health Minister, accused the army of not stepping in to quell the assault.

"We called the army commanders to intervene and stop the gunmen from attacking us but we got no reply. There is a big conspiracy by terrorists to separate east and west Baghdad."

The British Foreign Secretary, Margaret Beckett, condemned today's violence, saying: "I am saddened to hear of further barbaric acts of terrorism in Baghdad. My deepest sympathies go to the families and friends of those who lost their lives in these awful attacks.

"Such attacks only serve to show how little the terrorists have to offer the Iraqi people and the importance of building national reconciliation."

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