FALLUJA, Iraq - A U.S. air strike aimed at foreign militants led by Abu Musab al-Zarqawi has killed 11 people in the Iraqi city of Falluja and insurgents later said a British hostage, held by Zarqawi's group, had been beheaded.

Mourners cry over the rubble of their relative's house, which was destroyed during an over night U.S. air raid in the western Sunni city of Falluja, October 8, 2004. A U.S. air strike aimed at foreign militants led by Abu Musab al-Zarqawi killed 11 people and wounded 17 after a wedding party in Falluja Friday. REUTERS/Omar Khodor

The U.S. military said a "precision strike" hit a house where Zarqawi associates were meeting in the north-west of the guerrilla-held city at 1:15 a.m. (11:15 p.m. British time on Thursday).

Residents and local doctors said 17 people were also wounded in the attack, among them nine women and children. They said a wedding party had been held in the house on Thursday night. The bridegroom was killed and the bride was wounded in the raid.

Reuters television footage showed four women lying bloodied and bandaged at the local hospital.

"We were celebrating my cousin's wedding and my relatives gathered in this house for the wedding," said one of them, Suad Mohammed, 26. "The wedding ended at 10 p.m., but some people gathered outside the house and the bombing began.

"I lost consciousness and this morning I knew I was in hospital," said Mohammed, wounded in the legs and chest.

Insurgent sources in Falluja later said militants had beheaded engineer Ken Bigley, three weeks after he was kidnapped with two Americans who suffered the same fate.

A video seen by Reuters showed the militants beheading Bigley, who made a statement as six militants stood behind him before one cut his head off with a knife.

The insurgent sources said the 62-year-old was killed on Thursday afternoon in the Sunni Muslim town of Latifiya, south-west of Baghdad.

There was no immediate confirmation from the British or Iraqi governments that Bigley was dead. Abu Dhabi television cited Iraqi sources as saying he had been killed.

Bigley and the Americans were kidnapped from their house in Baghdad on September 16 by Zarqawi's Tawhid and Jihad group.

The group has previously beheaded at least four foreign hostages, including Bigley's American companions, and posted videotapes of the killings on the Internet.

The group has also said it carried out some of Iraq's bloodiest suicide bombings since last year's U.S.-led invasion to oust Saddam Hussein. Since the former dictator's capture in December, Zarqawi has been the top U.S. target in Iraq.

PACIFYING IRAQ

Repeated U.S. air strikes on Falluja have coincided with efforts by Iraq's interim government to arrange the return of its security forces to the Sunni stronghold and other trouble spots ahead of a January deadline for nationwide elections.

The government welcomed an offer by a Shi'ite militia led by Moqtada al-Sadr to disarm, and indicated willingness to meet at least some of the fiery cleric's demands in any deal.

A statement by National Security Adviser Kassim Daoud also said the government would honour an amnesty offer for "those who have not committed crimes against the Iraqi people".

The government could also pay to repair damage caused by nightly clashes in recent weeks between Sadr's Mehdi Army militia and U.S. forces in Baghdad's Sadr City slum district.

Daoud's statement followed a disarmament offer made by Sadr's top aide in a televised address on Thursday.

Ali Smeism said on the Al Arabiya channel the Mehdi Army would disarm if the U.S. military freed Sadr aides, stopped "persecuting" the militia and paid reparations. Sadr's aides have also demanded financial assistance to rebuild Sadr City.

If a deal were struck with the Mehdi Army in Sadr City and other Shi'ite flashpoints around Iraq, it could go some way to restoring stability ahead of the elections, although a Sunni insurgency still grips some central and northern regions.

The U.S. military said on Friday soldiers had caught a suspected bomb maker in Baghdad and seized a truck carrying more than 1,500 155-mm artillery rounds, often used in car bombs.

Before the latest Falluja raid, the city's chief negotiator said talks with the government could bear fruit soon, adding that final details would be worked out on Saturday.

Interim Prime Minister Iyad Allawi denied the government was negotiating over Falluja, saying rebels should accept his terms, lay down their guns and join the political process.

"There are really no negotiations about this," he told Al Arabiya. "Those who conduct violence ... and who harm the Iraqi people should abide by these conditions."

© Copyright 2004 Reuters Ltd

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