Basra returning to normal after Sadr truce

* Basra residents bury their dead

* Basra quiet after Sadr ordered followers off streets

* Clashes in Baghdad, Green Zone hit by mortars



(Adds defence operations chief)

By Aref Mohammed

BASRA, Iraq, March 31 (Reuters) - Residents buried their dead after quiet returned to the southern Iraqi city of Basra on Monday, but clashes continued in Baghdad despite a truce to end a week of violence.

Shi'ite cleric Moqtada al-Sadr called his fighters off the streets on Sunday, nearly a week after Prime Minister Nuri al-Maliki launched a crackdown on them, sparking fighting that spread through the south and the capital.

Life slowly returned to normal in Basra where Sadr's masked Mehdi Army militia fighters were no longer to be seen openly brandishing weapons in the street as they had for days.

Shops began to reopen. Authorites said schools would reopen on Tuesday. Residents hosed down the hulks of burnt-out cars and drove with coffins in their trunks carrying the unburied dead.

"We have control of the towns around Basra and also inside the city. There are no clashes anywhere in Basra. Now we are dismantling roadside bombs," said Major-General Mohammed Jawan Huweidi, commander of the Iraqi Army's 14th division.

The government portrayed the crackdown as an attempt to assert state authority in a lawless city. Militia have fought for control of Basra, which controls 80 percent of Iraq's oil revenues but Sadr's followers saw the offensive as an attempt to sideline them ahead of provincial elections in October.

The truce may have eased the fighting, but it did little to resolve the underlying rift splitting Iraq's Shi'ite majority.

"I don't think any party can claim victory," said Mustafa Alani, analyst at the Dubai-based Gulf Research Centre. "Sadr asked his followers to move away from the streets but he is not asking them to disarm. It came out of an agreement, not defeat."

Violence could return before local elections this year, he said: "It will be a short honeymoon especially with election time coming up.... Things will escalate before they decline."

Grocer Numan Taha, 40, reopening his shop in Basra's Hayaniya neighbourhood, said: "The battle is over, but Maliki did not achieve what he wanted. He ruined Basra."



ROCKETS HIT GREEN ZONE

In Baghdad, where a three-day curfew was mostly lifted, the truce seemed tenuous at best. Rockets and mortar bombs struck the "Green Zone" government and diplomatic compound. Sirens wailed and a recorded voice ordered people to take cover.

U.S. military spokesman Major Mark Cheadle said there were clashes in several Baghdad neighbourhoods early on Monday.

U.S. forces called in at least three helicopter strikes in Baghdad late on Sunday after Sadr's ceasefire, including one in which they said they killed 25 fighters who attacked a convoy struck by a roadside bomb. U.S. helicopter strikes, lately rare in the capital, became common over the past week.

"The attacks haven't stopped. There's still a lot of enemy out there, we're not going to quit protecting the populace," Cheadle said. But he said fighting in the capital had eased over the past two days and U.S. forces expected it to ease further.

"They were looking for an excuse to stop fighting," he said. "They don't like facing us because they get killed."

Sadr City, the east Baghdad slum that is Sadr's main stronghold and was scene of some of the week's worst fighting, remained sealed off by U.S. and Iraqi troops but appeared quiet, said resident Mohammed Hashin.

"The last days were a tragedy: no water no food, garbage heaped in the streets," he said.

Reuters correspondents said southern towns that have seen fighting such as Kut, Hilla and Nassiriya, also seemed quieter.

A Reuters photographer in Mahumidya, south of Baghdad, said dead bodies were being kept on blocks of ice in a Shi'ite mosque because it was not yet safe enough to bury them.

The week was the biggest test yet for government troops, but saw them have little success driving fighters from the streets.

Sadr announced the surprise ceasefire after talks behind the scenes with parties in Maliki's government. As part of the deal, Sadr's aides say, authorities are to end roundups of his followers and implement an amnesty to free prisoners.

The government still says it wants militants to hand over heavy and medium weapons. Sadr's followers say they will keep weapons to defend themselves against the U.S. "occupation".

Major-General Adul-Aziz Mohammed, operations chief at the Ministry of Defence, said the campaign would to continue, "to cleanse remaining districts of Basra of criminals, outlaws and those who carry weapons... God willing this will not take long."

The Interior Ministry said 210 people had been killed and 600 wounded in Basra during the week. In Sadr City, 109 dead bodies and 634 wounded were brought to just two hospitals, said Ali Bustan, head of the health directorate for eastern Baghdad.

Scores more died elsewhere in the capital and the south.

Jabbar Sabhan, a civil servant in Basra, said he was glad the violence had died down but was doubtful the calm would hold.

"I didn't go to work today. It is true that there are no clashes, gunmen or explosions, but the situation is still dangerous. I don't trust the words of politicians." (Additional reporting by Peter Graff, Aseel Kami, Aws Qusay and Randy Fabi in Baghdad; Writing by Peter Graff; Editing by Samia Nakhoul)