Basra, Iran... It all comes down to oil

Behind the recent fighting in Basra, which has halted the further withdrawal of British troops from Iraq, lies a three-letter word - oil. It is no coincidence that the day Iraq's prime minister Nouri al-Maliki ordered the Iraqi army into Basra to fight the militia of Moqtada al-Sadr, negotiations began in Jordan for contracts to repair and upgrade existing oil fields around Basra and exploit three huge new fields in the desert further west.

These deals with multinational companies could triple the output from the Basra oil region, already one of the richest in the world. Who controls Basra controls much of the future wealth of Iraq and the upper Gulf.

Al-Maliki belongs to the Dawa Party, the smallest of the three major Shia political movements in Iraq, whose influence across the oil-rich south has been steadily waning.

Last month he gambled that Iraqi army units, newly trained by the US and UK, could beat the Mahdi Army of Moqtada al-Sadr.

Under the pretext of "winning back the streets of Basra from the militias and criminal gangs," al-Maliki launched a force of some 30,000 to dislodge Moqtada's men from their strongholds in Basra, Amarah and Kut. After six days of heavy street-fighting, the Iraqi army made no headway. Moqtada's men have won an enormous psychological victory that they did not expect. The Mahdi Army now looks like the strongest Iraqi force in central and southern Iraq, more capable than the Iraqi army itself.

Al-Maliki, described recently by a British military adviser as having "almost no strategic judgment", was urged to action by American neo-con militants like retired General Jack Keane and Fred Kagan of the American Enterprise Institute. But American and British commanders urged caution, believing the Iraqi army wasn't yet up to the job. So al-Maliki told allied commanders of his plan to put troops into Basra only