Negotiations to end the fighting in Najaf broke down Sunday, threatening to spark a resurgence of the fierce clashes between Shiite militants and a combined U.S.-Iraqi force that have plagued this holy city for more than a week.
The collapse of talks will likely cast a pall of Iraq's National Conference, which starts Sunday, gathering 1,300 delegates from all over Iraq in what is considered a vital step toward establishing democracy.
The chief government negotiator said he decided to quit the talks in Najaf after three fruitless days, but representatives of militant cleric Muqtada al-Sadr said a deal had been all but reached before interim Prime Minister Ayad Allawi personally intervened to quash it.
"It is a conspiracy to commit a big massacre," al-Sadr's top negotiator, Sheik Ali Smeisim, told the pan-Arab Al-Jazeera television station.
U.S. forces called a halt to a major offensive in the city on Friday to give negotiations a chance. The fighting in Najaf has angered many in Iraq's Shiite majority, complicating a difficult situation for Allawi's U.S.-backed government, which has been keen to show it is in control.
The chairman of the National Conference, Fuad Masoum, insisted the violence would not affect the three-day gathering. "This is a perfect time for the conference to discuss the current problems and find solutions," he said.
About 10,000 demonstrators from as far away as Baghdad arrived in Najaf on Saturday to show their solidarity with the militants and act as human shields to protect the city and the holy Imam Ali shrine, where fighters from al-Sadr's Mahdi Army have taken refuge since the fighting started Aug. 5.
For Iraq's interim government, says CBS News Correspondent Barry Petersen, the Najaf powderkeg is a clear challenge to power. Lose this one and, as one observer put it, "They will rule little more than Baghdad."
In other developments:
Amid worries that fighting would resume in Najaf, Coalition officials reiterated Saturday they would not enter the holy Imam Ali shrine.
"It is not out intention to go anywhere near the holy sites. We understand their significance to the Shia and we respect the Shia," Maj. Gen. Andrew Graham, deputy commanding general of the Multination Corps, told The Associated Press. "The irreverence ... is (al-Sadr's) and not ours."
During the negotiations, al-Sadr demanded a U.S. withdrawal from Najaf, the freeing of all Mahdi Army fighters in detention and amnesty for all the fighters in exchange for disarming his followers and pulling them out of the shrine and Najaf's old city, where they have taken refuge, aides said.
After days of discussion - and just hours after Najaf's governor said he believed a breakthrough was imminent - Iraq's National Security Adviser Mouwaffaq al-Rubaie announced the talks were over.
"Our goal was to spare blood, preserve security and for the militias to put down their weapons," he said.
"We have been talking and discussing these matters for three days, but reached no positive conclusion," he said. "After three days, my government thought there was no use in continuing."
Al-Rubaie said he was leaving Najaf but would return for any new talks.
However, Qais al-Khazali, al-Sadr's spokesman in Najaf, said a deal had been reached and al-Sadr - who was not in the talks himself - had signed it when "we were surprised that they got instructions from Dr. Allawi to leave."
After nearly two days of quiet during the negotiations, al-Khazali predicted an impending government offensive and appealed to "Arab and Islamic countries to firmly stand up against this massacre."
Ahmed al-Shaibany, another al-Sadr spokesman, blamed the talks' failure on the Americans - who were not participating - saying they had refused a demand to pay compensation for the families of those killed in the fighting.
The U.S. military estimates hundreds of insurgents have been killed since the clashes broke out Aug. 5, but the militants dispute the figure. Six Americans have been killed, along with about 20 Iraqi officers, it said.
On Saturday, Interior Minister Falah Hassan al-Naqib blamed the violence on foreign fighters seeking to destabilize Iraq, although a clear majority of Mahdi Army militants are Iraqi.
The violence "is not being carried out by Iraqis and we are trying to restore Iraq. We are not ready to hand over Iraq to any other country," he said without elaborating.
Al-Naqib also announced a daytime curfew for the center of Baghdad to start Sunday as part of efforts to protect the National Conference, a major target for insurgents waging an unrelenting campaign of car bombings, mortar attacks, kidnappings and other violence.
The conference, which will be held in the fortified enclave that houses government buildings and the U.S. Embassy, will help elect a 100-member national assembly that is to shepherd the country to its first democratic elections scheduled to be held by the end of January.
It has been beset by problems even before its start. It was to have been held by the end of July by law, but was delayed more than two weeks in an effort to garner wider participation.
Al-Sadr's followers and the Association of Muslim Scholars, a Sunni religious group with links to insurgents, have said they would boycott the unprecedented gathering.
Still, 70 groups groups have agreed to participate, Masoum said.
"The movements that boycott this conference are free to do that, but that doesn't cause the conference to lose its legitimacy," he said.
In an interview with Al-Jazeera Saturday, al-Sadr said the violence broke out because he wanted municipal services restored and because he refused to join the conference.
"Had I agreed to participate with them and not ask for the rights of the people, they wouldn't have done this to me and they wouldn't have targeted me in particular and targeted Shiism," he said. He also demanded the government resign.
The violence in Najaf, 100 miles south of the Iraqi capital, has spread to other Shiite communities here and drawn angry protests throughout the Middle East.
Intense clashes between al-Sadr's militia and Iraqi police in the city of Hillah, about 60 miles south of Baghdad, killed about 40 militants and three police, Capt. Hadi Hassan, a police spokesman, said Saturday.
U.S. warplanes bombed the largely Sunni city of Samarra, about 60 miles north of Baghdad, after a series of clashes there.
The U.S. military said about 50 militants were killed, but police Maj. Saadoun al-Dulaimi put the death toll at 12, including three policeman. The fighting in Samarra started Friday night when insurgents attacked U.S. troops with a mortar barrage.
In the volatile city of Fallujah, U.S. warplanes bombed several houses Saturday, killing five civilians and wounding eight others, said Dr. Tha'ir Ahmad of Fallujah General Hospital. The military had no immediate comment.