March 26 (Bloomberg) -- Iraqi forces fought militants loyal to Shiite Muslim cleric Moqtada al-Sadr in the southern city of Basra and Baghdad for a second day in an operation that has killed more than 60 people and wounded hundreds.

Two U.S. soldiers were killed in separate incidents in Baghdad, Agence France-Presse reported.

At least 50 people were killed and more than 120 wounded, with civilians among the casualties, in fighting in Basra that began yesterday and raged early today, President Jalal Talabani's Patriotic Union of Kurdistan party said on its Web site. An additional 14 were killed and 140 injured as Iraqi and U.S. forces fought the Mahdi Army militiamen in Baghdad's Sadr City, the PUK said.

Prime Minister Nuri al-Maliki, who has been in Basra since March 24 to oversee operation Sulat al-Fursan, which means ``Knights' Charge'' in Arabic, today ordered the group to lay down arms within 72 hours, state television reported. There is a curfew on all routes into Basra province until March 28, and schools and universities are closed.

``The current fighting is as much a power struggle for control of the south and the Shiite parts of Baghdad'' as an attempt to establish government authority, Anthony H. Cordesman, a security analyst at the Washington-based Center for Strategic & International Studies policy group, said by e-mail.

Rival Shiite groups, including al-Sadr's followers, the Supreme Islamic Iraqi Council and the Fadhila party, have clashed in a struggle for supremacy in the southern oil hub. The U.K. military transferred responsibility for the city to Iraqi forces in December.

Positioning for Struggle

The SIIC, which dominates politics and some of the police force in southern Iraq, is ``clearly positioning itself for a power struggle with Sadr and for any elections to come,'' Cordesman said. The transfer of authority to Iraqi forces in the south may be used by al-Maliki's Shiite Dawa party and the SIIC ``to cement control over the Shiite regions at Sadr's expense,'' he said.

The deaths of two more American soldiers in Baghdad today brought the U.S. fatality toll since the conflict began to 4,003, AFP said.

Separately, three U.S. government employees were seriously injured in a mortar attack on the fortified Green Zone, the U.S. Embassy in Baghdad said in an e-mailed statement.

The fighting may be a key test for Iraqi forces as the U.S. plans to withdraw some of its 158,000 service members in the country, reducing the number to about 140,000 in July. President George W. Bush will meet with the Joint Chiefs of Staff today, days after the fifth anniversary of the conflict, to discuss future moves in Iraq.

Open to Negotiations

Al-Sadr, a rarely seen and popular leader among Iraq's majority Shiite population, has repeatedly urged fighters from the militia to obey a cease-fire declared in August. U.S. commanders have said the cease-fire was a key factor in a reduction in violence in Iraq that began last year. Some elements of the group continue to target other militias and U.S.-led coalition forces.

The group threatened to stage protests nationwide if the operation didn't cease yesterday. The U.S. military has said it is open to negotiations with al-Sadr's followers. Before the cease-fire, the U.S. viewed the Mahdi Army as ``the most dangerous accelerant of potentially self-sustaining sectarian violence in Iraq,'' the Defense Department said in a 2006 report.

``No one wants to see a return to the violence of a year ago,'' U.S. military spokesman Major General Kevin Bergner said today in a televised news conference from Baghdad. ``This has been a difficult and challenging few days, it's also been a period of significant effort for the Iraqi security forces,'' Bergner said.

Battle with `Criminals'

Enforcing the law in Basra isn't a battle against the Mahdi Army, nor is it a proxy war against Iran, Bergner said. It's a battle ``to deal with criminals in the streets with weapons,'' Bergner said. ``We shall continue to show restraint on those who have undertaken Moqtada al-Sadr's pledge,'' Bergner said.

Bush will announce his decision on future troop levels after General David Petraeus, the top U.S. commander in Iraq, and Ambassador Ryan Crocker, testify before Congress April 8-9, according to the White House.

To contact the reporter on this story: Robin Stringer in London at rstringer@bloomberg.net.

Last Updated: March 26, 2008 15:52 EDT