BASRA, Iraq, (Reuters) – Iraqi soldiers swooped on the Basra stronghold of Shi’ite cleric Moqtada al-Sadr on Saturday, saying they had seized control of his militia bastion where they suffered an embarrassing setback in late March.

The dawn raid by government troops on the Hayaniya district of the southern oil city was backed by a thunderous bombardment by U.S. warplanes and British artillery.

It came after more intense fighting in Baghdad between security forces and Sadr’s black-masked militiamen. Police said 12 people had been killed in the Shi’ite slum of Sadr City and hospitals said they received more than 130 wounded overnight.

Prime Minister Nuri al-Maliki’s crackdown against Sadr’s Mehdi Army militia in Basra last month was criticised by U.S. commanders as poorly planned and hasty.

It failed to drive the militia from the streets and sparked battles across the south and in the cleric’s Baghdad stronghold of Sadr City. The government dismissed 1,300 soldiers and police for refusing to fight.

On Saturday by contrast, Harith al-Idhari, head of the Sadr office in Basra, said the militia had not put up any resistance, in observance of a ceasefire declared by the cleric.

Major-General Abdul-Karim Khalaf, an interior ministry spokesman, described the operation as a major success. “Our troops deployed in all the parts of the (Hayaniya) district and controlled it without much resistance,” Khalaf told Reuters. “Now we are working on house-to-house checking. We have made many arrests.”

Maliki, himself a Shi’ite, has threatened to ban Sadr’s mass movement from political life if the cleric does not disband the Mehdi Army. In response, Sadr has threatened to formally scrap a ceasefire he imposed on his militia last August, a move that could trigger a full-scale uprising.

There is already concern that a steady decline in violence across Iraq in the second half of 2007 and first months of 2008 is coming to an end.

On Friday U.S. forces said they had intelligence suggesting al Qaeda, pushed out of Baghdad and western Iraq last year, was plotting a return to the capital to stage major bomb attacks.

British military spokesman Major Tom Holloway said Saturday’s offensive in Basra had been launched with a heavy bombardment by U.S. war planes and British artillery “to give a demonstration of the firepower available if required”.

The American and British forces pounded a deserted area west of Hayaniya before Iraqi troops entered the neighbourhood, he said. The bombardment was intended to be the biggest show of force since the crackdown began in late March, he added.

Reuters television pictures from Basra showed government troops in armoured vehicles in control of the neighbourhood’s streets, searching houses for weapons and fugitive suspects. One of the armoured vehicles was pocked with bullets.

Sadr’s spokesman in the holy city of Najaf, Salah al-Ubaidi, said the humanitarian situation in Hayaniya was “tragic”. “They have surrounded the district and are preventing the wounded from going to hospitals. Then they started a ground attack,” he told Reuters. “It is a very crowded area and they attacked it with rockets as if it were a military base.”

No information about casualties was immediately available.

In Baghdad, police described battles that began during sandstorms on Friday in Sadr City as among the heaviest in the capital since the crackdown began. U.S. forces said Iraqi troops held their ground as fighters assaulted in a blinding dust.

Lieutenant-Colonel Steven Stover, a U.S. military spokesman, said U.S. troops were involved in sporadic clashes that continued into Saturday. U.S. forces killed two fighters with a missile fired from an Apache helicopter overnight, he said.

The Americans are building a wall around the southern edge of Sadr City, angering residents who have been trapped in the crowded battle zone for weeks.

“If we want to repair the Jamila market we need to secure it and the best way to do that is to put up a wall,” Stover said, referring to a large market in Sadr City which caught fire earlier this month amid fighting.

In the weeks since last month’s botched crackdown in Basra, government forces have moved more slowly and deliberately into Sadr-controlled areas, arresting Mehdi Army figures while largely avoiding major street battles.