Near Basra, Iraq:
British military interrogators claim captured Iraqi soldiers have told them that al-Qaeda terrorists are fighting on the side of Saddam Hussein's forces against allied troops near Basra.
At least a dozen members of Osama bin Laden's network are in the town of Az Zubayr where they are coordinating grenade and gun attacks on coalition positions, according to the Iraqi prisoners of war.
It was believed that last night (Thursday) British forces were preparing a military strike on the base where the al-Qaeda unit was understood to be holed up.
A senior British military source inside Iraq said: "The information we have received from PoWs today is that an al-Qaeda cell may be operating in Az Zubayr. There are possibly around a dozen of them and that is obviously a matter of concern to us."
If terrorists are found, it would be the first proof of a direct link between Saddam's regime and Osama bin Laden, the mastermind of the 11 September attacks on New York and Washington.
The connection would give credibility to the argument that Tony Blair used to justify war against Saddam - a "nightmare scenario" in which he might eventually pass weapons of mass destruction to terrorists.
On Wednesday Donald Rumsfeld, the US defence secretary, said the coalition had solid evidence that senior al-Qaeda operatives have visited Baghdad in the past.
Rumsfeld said Saddam had an "evolving" relationship with the terror network.
The presence of fanatical al-Qaeda terrorists would go some way to explaining the continued resistance to US and British forces in southern Iraq, an area dominated by Shi'ite Muslims traditionally hostile to Saddam's regime.
Heavy fighting continued around the besieged city of Basra yesterday after British forces destroyed 14 Iraqi tanks which had struck out towards the Al Faw peninsula.
Military commanders have decided against launching an attack on Basra because of fears the operation would result in a Stalingrad-style street battle.
It is estimated the Iraqi military forces in the area have been reduced to 30 per cent fighting strength but have now embedded themselves within civilian buildings in the city.
Armed raids have destroyed transmitters and taken state radio and television off the air in Basra and effectively cutting off its communications with Baghdad.
British tanks from the 7th Armoured Brigade, the Desert Rats, could be sent into Basra if there is a sudden civilian uprising against Saddam's forces.
Last night, forces around the city heard loud explosions as coalition helicopter gunships were sent into the area.
This is a pooled despatch from Gethin Chamberlain of The Scotsman.
