Revealed: why UK hostages were killed

Kidnappers believed their own men had been tortured to death in prison

A militant Iraqi group killed two British hostages because they believed one of their men had been tortured to death in jail and that the British embassy had ignored their demand for the release of prisoners, Iraqi sources say.

Meanwhile, hopes for the release of three remaining hostages were raised when the US released five Iranian officials seized in a helicopter raid on the Kurdish capital of Arbil in 2007.

The kidnapping of the five Britons by the Asa'ib al-Haq (Leagues of Righteousness) later that year appears to have been one episode in a complex tit-for-tat covert war between the US and Iran that was fought out in Iraq and reached its peak two years ago.

Jason Creswell, from Lancashire, and Jason Swindlehurst, from Glasgow, were killed by members of the Asa'ib al-Haq, a splinter group of the Mehdi Army, a militia of the Shia anti-American cleric Muqtada al-Sadr. The hostages, who were working as security guards in Baghdad, died from gunshot wounds, a coroner's court in Salisbury was told yesterday.

A source close to the Sadrist movement in Baghdad said that anger fuelled by a report that one of their men had died under torture, as well as the non-release of Asa'ib al-Haq members, had prompted their killings.

The Iranian-backed Asa'ib al-Haq kidnapped the five Britons to obtain the release of their leader, Qais al-Khazali, his brother Laith, and a senior member of the Lebanese Hizbollah, who had been captured in Basra on 20 March 2007. Two months later, on 29 May, a group of men dressed as police and driving police vehicles seized computer expert Peter Moore, the two Jasons and two other Britons working for Gardaworld security company at the Iraqi Finance Ministry in Baghdad.

Efforts to free the hostages have been complicated by the fact that the US is holding Qais al-Khazali and accuses him of masterminding a professional raid on a US military base in Kerbala during which five US soldiers died.

The US military claims the Asa'ib al-Haq is financed and armed by Iran and is controlled by the al Quds force, part of the Iranian Revolutionary Guard.

A sign that the deadlock over the British hostages might be breaking came on 9 June when the Americans handed Laith al-Khazali to the Iraqi government, who promptly freed him. The bodies of the two Britons were later handed to an Iraqi police station.

The US and Iraqi governments are eager to see Asa'ib al-Haq abandon its armed struggle and join the political process. It has refused to do so while Qais al-Khazali is held captive .

The seizure of five Iranian officials in Arbil in 2007 caused fury in Tehran. Iran, supported by the Iraqi Foreign Ministry, has demanded their release but this was opposed by the office of the former vice president Dick Cheney.

The release of American-held prisoners comes under the terms of last year's Status of Forces Agreement (Sofa) between the US and Iraq, which spells out the timetable for a US withdrawal from Iraq. An Iraqi source said last month that he expected the release of "the Arbil Five" to come soon under the terms of the Sofa and the release of Qais al-Khazali to occur thereafter.

The continuing violence in Iraq was underlined yesterday when bombs in Baghdad and in the north killed at least 41 people and wounded more than 80.