Guerrillas struck back and kidnapped three relatives of Prime Minister Ayad Allawi, threatening to behead them unless Allawi orders a withdrawal from the besieged Fallujah, some 50 km west ofBaghdad.

US Marines backed by Iraqi troops started an all-out offensive late Monday in a bid to regain control of Fallujah as part of government efforts to pacify security situation ahead of the January elections.

According to the military, at least 71 militants had been killed by early Wednesday, the third day of intense urban combat.

The military also confirmed that 11 US soldiers and two Iraqis had been killed since the military offensive against Fallujah, bringing the US death toll to over 1,140 since the US-led invasionin March last year.

"The fighting, as you all know, in an urban area is very close and very violent," US Marines commander at Fallujah Lieutenant-General John Sattler told reporters.

"They are now in small pockets, blind, moving throughout the city. We will continue to hunt them down and destroy them."

Meanwhile, troops found abandoned "hostage slaughterhouses" where hostages' documents, CDs showing captive being killed, and banners used as backdrops and black clothing worn by militants in videos were found, according to Iraqi commander Maj. Gen. Abdul Qader Mohammed Jassem Mohan.

Jassem did not link the finds to Zarqawi, whose group has claimed several hostage beheadings, nor could he say if the records listed any of at least nine foreign hostages still missing.

Insurgents staged a series of attacks around Iraq on Wednesday,killing more than two dozen people in bombings and shootings from Baghdad to the far north.

A car bomb exploded near a police checkpoint in an eastern district of the Iraqi capital late Wednesday, killing several people.

Fierce clashes broke out in the western part of Mosul as gunfire resonated throughout the third largest city of Iraq and columns of black smoke were seen rising above the area, residents said. They added that masked gunmen controlled the streets, blocking roads in some parts of the city.

The governor's office in Mosul imposed a curfew in the city Wednesday and the governor has ordered to block the bridges in Mosul to all civilian traffic after a series of fierce street battles between insurgents and US forces, according to a US military spokesman.

A foreign contractor working for a private company was killed in one of the two attacks against US military convoys in the city,some 400 km north of Baghdad, the spokesman added.

Meanwhile, Thaer al-Naqib, spokesman of Iraqi Prime Minister Iyad Allawi, said on Wednesday the government would extend amnestyto surrendering fighters in Fallujah if they committed no major crimes.

He also said that Allawi ordered to extend the closure of Baghdad's international airport for another 24 hours as part of a series of emergency measures amid escalating violence.

In another development, a military group claimed that it captured 20 Iraqi guards in Fallujah, according to Sky News reports Wednesday.

Iraqi rebels released a video Wednesday, showing masked guerrillas pointing assault rifles at a group of men with their backs turned and dressed in National Guard uniforms.

REBELS THREATEN TO KILL PM COUSIN UNLESS ALLAWI CALLS OFF ATTACKS

Allawi's 75-year-old cousin, Ghazi Allawi, his cousin's wife and their daughter-in-law were seized near their home in Baghdad on Tuesday, one day after the start of a joint US-Iraqi all-out offensive in Fallujah.

The previously unknown group, Ansar al-Jihad (Partisans of HolyWar), claimed responsibility for the abduction and threatened to behead the three if Allawi failed to meet its demands in 48 hours.

"We demand the agent government free all the prisoners in Iraq,women and men, and lift the siege over Fallujah and stop the military action against the city," the group said in a statement posted on an Islamic website.

The authenticity of the statement could not be verified independently.

There has been no report of suspension in the ongoing military action so far. Allawi's office said the policy would not change. "This is yet another criminal act by terrorists and will not thwartthe determination of the government to combat terrorism."

SUNNI POLITICIAN CALLS FOR INTENSIFIED DIALOGUE

Iraqi society, plagued by violence and disputes over an all-outoffensive in Fallujah, is in great need of intensified dialogue, Hussein Abdul Hamid, head of the Iraqi Islamic Party, said Wednesday.

"Dialogue would bring opinions closer, and there should be somedeep dialogues between the government and the Iraqi people," said the prominent Sunni politician in an interview with Xinhua.

Allawi, who authorized the joint forces to clear the city of insurgents, has stressed that his government had exhausted peace efforts and military action was the last choice, defying warnings by UN Secretary General Kofi Annan that using force would alienatepart of Iraqi population.

Hamid's party, a mainly Sunni political body, declared a withdrawal from Allawi's alliance Tuesday, becoming the first pro-government party to openly denounce the military action against Fallujah.

The dialogue should start by specifying a timetable for the US-led foreign forces to leave Iraq, which would greatly lessen the crisis, he added.

Allawi and US commanders have said it is vital to recapture Fallujah from foreign militants and Saddam Hussein loyalists so that national elections can go ahead in January.

Hamid admitted that former regime loyalists were intimidating potential candidates and voters, but said the ongoing offensive would only push the Sunni Muslims farther from taking part in the elections scheduled for January.

"Innocent civilians, children, women and old men, would become victims in addition to the destruction, anger and revenge that thebattle would leave behind," Hamid said.