Moving from bombed shops to burning markets, I saw Sadr's soldiers dig in for the final assault

Along the 200-yard alleyway leading from Medan Square to the shrine of Imam Ali, the Mehdi Army gunmen were clustered, many of them smiling or waving. They stood in groups of three or four every 10 yards or so, with their Kalashnikovs and their rocket launchers.

Along the 200-yard alleyway leading from Medan Square to the shrine of Imam Ali, the Mehdi Army gunmen were clustered, many of them smiling or waving. They stood in groups of three or four every 10 yards or so, with their Kalashnikovs and their rocket launchers.

Even as shells and mortars exploded elsewhere in the old city, many of the insurgents were half chanting, half singing: "Muqtada [Sadr] we are your soldiers... Muqtada never hid his head." If they were nervous at the imminent prospect of Iraqi and US forces carrying out the Iraqi interim government's latest threat, issued three hours earlier, to storm the shrine if Sadr did not agree "in a few hours" to its terms, they gave no sign.

In this narrow street ­ once walked by Shia pilgrims from Iraq and Iran but now populated only by the Sadr militia ­ the damage to the shops that line it was notably less than on the approach to the square itself. Much of the commercial district was ravaged, the walls of shops and offices punched through by shelling, the stalls flattened or burnt out. Through the jagged holes made in the southern walls of the Wadi al-Salam cemetery you could see the damage to the tombstones inflicted by two weeks of fighting.

At Medan Square there were two brief claps of fire, probably from a Sadr gunman, although a Mehdi militiaman had warned of firing by US snipers. Certainly, the US forces appeared to have moved steadily closer to the insurgents' old city redoubt. Moving from Revolution of 1920 Square, where half a dozen US Humvees with their crews were camped outside a hall being used as a rear base, down the street of the same name and about half a kilometre from the holy sites, you could see at least five Abrams tanks down one of the empty boarded-up side-streets of what, outside the innermost area controlled by Sadr's men, is now a ghost city.

In the courtyard of the 11th-century, gold-domed Imam Ali shrine were Sadr's "human shields". The numbers have reduced from the 2,000 present at the beginning of the week, but they sang and chanted, deriding the Prime Minister, Iyad Allawi, who hours later was repeating the threat that troops will move in unless Sadr moves out ­ quickly.

Chorus leaders were carried on their comrades' shoulders and they began: "How can you attack Haider [Imam Ali]. Blacken your face, Allawi."

No, said Mwaidal Dejele from Diwalla, as the explosions continued outside the compound, he was not frightened of dying in the threatened final assault on the shrine. "This is a very religious place. Here I will be safe."

On the way back from the shrine to Medan Square, a thick plume of black smoke a mere 300 metres or so away rose over the city. Earlier that afternoon, much further from the old city, a mortar attack on the police station close to our hotel had killed seven policemen and wounded many more. It was the latest trial for the driven police chief, Ghalab al-Jazaari.

The carnage came less than two hours after Kassim Daoud, the Iraqi Defence Minister, announced what sounded like the latest surrender terms for Sadr. He, and no one else, had to announce that the Mehdi Army was being disbanded. And he had to give a list of hostages the Sadr kidnappers had taken as part of a promise to give them back unharmed.

This may be the last time that a visit in such circumstances is possible. For last night and early this morning, the deadline clearly expired, US forces, including Bradley armoured vehicles and AC-130 gunships, launched the heaviest and most sustained bombardment of Mehdi positions since the fighting started two weeks ago.

Orange flashes lit up the sky, several fires burned, and a long horizontal pall of grey smoke hung over much of the city. The distinctive thumping of the repeated explosions was audible at least two miles away. US aircraft flew half a dozen bombing sorties over the old city, in what appeared to be the build-up to the final, all-out assault which both the Iraqi government and the US have several times threatened.

Back in Baghdad two Americans were wounded in an office close to the US embassy and elsewhere in the capital, five insurgents and five Iraqi civilains were reported dead as US forces pentrated Sadr City.

As for Najaf, now the focal point for the insurgency across Iraq, the ultimatum Mr Allawi issued earlier in the evening was uncompromising. It is not of course the first. And even as the bombing reached a peak of intensity there was an unconfirmed report that Muqtada Sadr was now ready to turn the keys of the shrine over to mainstream clerics. At first sight this hardly looked enough to bring a peaceful solution. For now it looked as if the interim government's patience, not to mention that of the Americans, was finally running out. At what cost in human life, it is impossible yet to tell.