NAJAF, Iraq, Aug. 22 -- Loyalists of Shiite Muslim cleric Moqtada Sadr remained in control of the gold-domed Imam Ali shrine on Saturday after failing to reach an agreement with representatives of Iraq's most senior Shiite leader on how to hand over the holy site.
Sadr and his lieutenants have promised to vacate the shrine as ordered by Iraq's interim government, but there was no indication Saturday that they were moving to comply with that provision or with another, equally important government demand: that Sadr disband his armed militia, known as the Mahdi Army.

In the Valley of Peace cemetery north of the Imam Ali shrine in Najaf, a U.S. Army soldier fires on insurgents loyal to Shiite Muslim cleric Moqtada Sadr.
(Jim Macmillan -- AP)
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Although public areas of the shrine were empty of militiamen and weapons on Saturday afternoon -- the crowd inside appeared to be composed of unarmed Sadr loyalists -- hundreds of the cleric's militiamen, many carrying assault rifles and rocket-propelled grenade launchers, remained quartered in the network of narrow alleys that lead to the shine. As an announcement from the shrine's crackly loudspeakers urged militiamen to keep fighting, several of them insisted they would stay in their positions to resist the encroachment of U.S. military and Iraqi security forces.
"We will continue to fight," vowed Ali Smeisim, Sadr's chief deputy. He said the militia would use the labyrinthine urban landscape "to take cover and to fight the Americans."
The challenge facing U.S. and Iraqi forces, should they mount a full offensive against Mahdi Army militiamen near the shrine, was starkly evident on one road leading toward the holy site. Militiamen had set up sniper nests atop buildings. On the road, a thin wire led to a wooden cart stacked with bricks. Concealed amid the bricks was a homemade pipe bomb.
"Be careful! Be careful!" an old woman shouted. "Those wires are for bombs."
At the shrine, a top Mahdi Army commander, Akram Kaabi, said his men would "continue defending the city and our holy places."
The crisis had appeared on the verge of resolution Friday, when Sadr's aides announced they would remove weapons from the shrine and turn over the brick-walled compound to representatives of the country's most senior Shiite cleric, Grand Ayatollah Ali Sistani.
But aides to Sadr and Sistani were unable to agree Saturday on how to turn over keys to the shrine's gates, doors and safes, which are believed to contain millions of dollars deposited by religious pilgrims. Sadr's aides said they tried to hand over the keys to Sistani's representatives, who refused to accept them, demanding that the shrine first be evacuated. Smeisim said he wanted a delegation from Sistani's office to inspect the shrine and make sure its treasures were intact before a turnover.
Representatives of Sistani, who is undergoing medical treatment near London, refused. They said they would not travel to the shrine because it was unsafe.
Clashes around the shrine resumed Saturday evening after a relatively quiet day. Militiamen fired mortars toward U.S. Marine positions north of the shrine, prompting the Marines to respond with 155mm artillery. Loud bursts of small-arms fire echoed though the warrens around the shrine as militiamen skirmished with Iraqi police patrols on the outskirts of Najaf's old city area, which is home to the shrine.
Shortly after midnight Sunday, a line of tanks from the 5th Cavalry cascaded down from the cemetery and approached a split-level parking garage at the west side of the mosque complex.
As Bradley Fighting Vehicles fired tracers toward defensive machine-gun positions and an AC-130 Spectre gunship circled overhead, the Abrams tanks punched round after round into the concrete garage and the building above it, collapsing much of the westernmost end of the structure in a series of deafening roars.
Commanders declined to discuss the purpose of the raid, which lasted less than three hours and brought U.S. armor closer to the militants' refuge around the mosque -- and for the first time, from the rear. But major combat missions proceed only with the approval of the interim prime minister, Ayad Allawi, who has apparently sought to demonstrate to Sadr the urgency with which the government seeks a solution -- and the potency of the U.S. forces at its disposal if negotiations fail yet again. Sadr took the only visible step toward a solution, moving his militia's arms out of the shrine building Friday.