Fighter jets and helicopters pounded Fallujah all night after radical militants attacked American positions near the city. The US military said up to 100 militants were killed, but medical sources there reported only six dead and 23 wounded.

The deputy governor of the surrounding Al Anbar province was later kidnapped from his home by gunmen who shot his son in the chest, the interior ministry said. The ever-worsening security situation saw the number of American deaths since US forces invaded in March last year cross the 1,000 mark this week, keeping Iraq firmly on the presidential election campaign agenda in the United States.

Two US soldiers were killed when roadside bombs exploded near Balad, north of the capital, and in Baghdad's Sadr City district, bringing the total number killed since the start of the war to 1,003.

Democratic White House contender John Kerry slammed President George Bush's handling of Iraq, which has cost the United States more than 200 billion dollars, accusing the president of plotting a "catastrophic course" that has brought chaos to the country.

Mr Bush paid tribute to the dead: "We appreciate the sacrifice of the men and women who wear the uniform. They're serving in a great cause. We mourn every loss of life. We'll honour their memories by completing the mission."

NGOs PLAN TO QUIT: The coordinator for charitable activities in Iraq, Jean-Dominique Bunel, said on Wednesday most of the 50 aid organizations who count foreigners in their staff were planning to leave the country after two Italian women charity workers were kidnapped.

Unlike the more than 100 foreigners estimated to have been abducted since the spring, Simona Pari and Simona Torretta were snatched in broad daylight on Tuesday from their office in a quiet residential neighbourhood of Baghdad.

An Iraqi woman colleague and a man working for a different Italian aid group were also seized. "Following the discussions I had this morning, it seems that most foreign NGOs are preparing to leave, and some expatriates already left this morning," the coordinator said.

Italian Prime Minister Silvio Berlusconi rushed to Rome for an emergency cabinet meeting following the kidnapping - less than two weeks after reporter Enzo Baldoni was killed by his abductors after Rome refused to withdraw its troops.

Observers had criticized Italy's efforts to secure his release, compared with the French government's frantic lobbying for the release of two of its journalists held hostage by the same group.

The kidnappers of Christian Chesnot and Georges Malbrunot - whose fate is still unknown - have denied they demanded a five-million-dollar ransom for their release, as claimed earlier this week.

"The Islamic Army assures that the statement lifted from the Internet by the media and listing three demands on the issue of the French hostages, including a financial one, is false," a statement said.

The denounced ransom statement, posted on the Internet on Monday, told France it had 48 hours in which to agree to a recent truce offer by Osama bin Laden, pay up and pledge not to get involved in Iraq.

In addition to foreign aid groups, the wave of kidnappings is also threatening to slash the presence of foreign contractors, who remain crucial to rebuilding Iraq. -AFP/Reuters