US Marines backed by air strikes have battled through a rebel stronghold in Falluja and officials say kidnappers have seized three relatives of Iraq’s interim prime minister in Baghdad.

A previously unknown Islamic group took a first cousin of Iyad Allawi, the cousin's wife and another relative from their home on Tliesday morning, and said it would behead them in 48 hours if all prisoners in Iraq arc not released and the assault on Fallujah not halted.

Air strikes, artillery shelling and mortar fire shook the Sunni Muslim city during intense clashes interspersed with periods of relative calm, a Reuters reporter in Falluja said yesterday.

"We've reached the heart of Jolan," Major Clark Watson said of an area the Marines view as a bastion for die-hard Saddam Hussein loyalists. "It’s too early to say we are controlling it... because there will always be pockets of resistance.’’

Helicopters later fired missiles at targets in Jolan before Marine infantry and Iraqi troops moved back in.

"There arc still many snipers in buildings in Jolan," Alaa Abboud, an Iraqi soldier just back from the area, told Reuters.

A BBC correspondent with Marines who occupied the main police station and mayor’s office said they were still under heavy rifle and rocket fire, including from mosques overlooking the compound, and had fired at least one tank shell at a mosque.

An AFP correspondent embedded with the marines said 10 to 15 artillery and air strikes pounded the city yesterday, continuing the punishing rhythm of firepower that has destroyed one house in 10 in some areas.

The insurgents are outgunned but tenacious in fighting for their stronghold, which became a no-go area for US forces after a battle in April ended in stalemate and the military withdrew. They are lurking inside crumbling houses and apartment buildings, shooting at the soldiers during breaks in the US shelling.

"As for casualties on the insurgents' side I can tell you that they are dying. A lot of them are dying and this is a good thing," said marine spokesman Lieutenent Lyle Gilbert.

"We are downing them," said marine Major Todd Desgrosseilliers. "We arc using good old American firepower."

Marines said 20 guerillas had been killed on Tuesday in the northwestern Jolan area, about half of them by snipers. Bodies were buried under buildings that had been floored by artillery and ground fire.

At least 38 rebels died a day earlier in heavy clashes that broke out after US and Iraqi troops stonned the main hospital and two strategic bridges to the west before the main assault began.

KIDNAPPED RELATIVES THREATENED WITH DEATH Allawi's office confirmed that the premier’s cousin, Ghazi Allawi, 75, and Ghazi's unnamed daughter-in-law had been abducted, but would not confirm or deny a report that his wife had also been abducted.

The cousin, a businessman, had nothing to do with politics and worked in public administration, a statement said.

A source from the premier's Iraqi National Accord (INA) party had earlier said that Ghazi Allawi's wife was also abducted.

Asked why no reference was made to her, an official from the prime minister’s office said they were not denying anything.

In an Internet statement monitored in Dubai, the previously unknown Group of Partisans of Holy War (Jamaat /\nsar ai-Jihad) said "elements" of its organisation had "kidnapped three relatives" of Allawi.

"We proclaim our responsibility for this blessed operation in this blessed month (of Ramadan), and we give the vassal government, in particular the agent Allawi, a deadline of 48 hours to respond to our conditions," the statement said.

"We demand the liberation of all prisoners in Iraq, women and men, and the lifting of the siege and the halt to the assault against Fallujah," it said.

If the government "does not satisfy our -demands, they will be decapitated." (Reuters,AFP)