McClatchy reports:

A cease-fire critical to the improved security situation in Iraq appeared to unravel Monday when a militia loyal to radical Shiite Muslim cleric Muqtada al Sadr began shutting down neighborhoods in west Baghdad and issuing demands of the central government.

Simultaneously, in the strategic southern port city of Basra, where Sadr’s Mahdi militia is in control, the Iraqi government launched a crackdown in the face of warnings by Sadr’s followers that they’ll fight government forces if any Sadrists are detained. By 1 a.m. Arab satellite news channels reported clashes between the Mahdi Army and police in Basra.

The freeze on offensive activity by Sadr’s Mahdi Army has been a major factor behind the recent drop in violence in Iraq, and there were fears that the confrontation that’s erupted in Baghdad and Basra could end the lull in attacks, assassinations, kidnappings and bombings.

As the U.S. military recorded its 4,000th death in Iraq, U.S. officials in Baghdad warned again Monday that drawing down troops too quickly could collapse Iraq’s fragile security situation.

Pentagon officials said that military leaders are watching for any signs of backsliding as they consider whether to keep drawing down troops below pre-surge levels.

President Bush spoke about the death toll, saying, “One day, people will look back at this moment in history and say, ‘Thank God there were courageous people willing to serve, because they laid the foundations for peace for generations to come.’ “

Even as he spoke, the situation on the ground was rapidly worsening.

On Sunday, a barrage of at least 17 rockets hit the heavily fortified Green Zone and surrounding neighborhoods, where both the U.S. and Iraqi government headquarters are housed, according to police. Most of them were launched from the outskirts of Sadr City and Bayaa, both Mahdi Army-controlled neighborhoods.

On Monday, the Sadrists all but shut down the neighborhoods they control on the west bank of Baghdad. Gunmen went to stores and ordered them to close as militiamen stood in the streets. Mosques used their loudspeakers to urge people to come forward and join the protest.

Fliers were distributed with the Sadrists’ three demands of the Iraqi government: to release detainees, stop targeting Sadrist members and apologize to the families and the tribal sheiks of the men.

The Iraqi security forces issued a statement promising to deal with those who terrorized shopkeepers and students.

“It’s an open sit-in until the government responds to our demands. If the government doesn’t respond, we will have our own procedures,” said Hamdallah al Rikabi, the head of the Sadr offices in Karkh, in western Baghdad.

In the southern port city of Basra, where Shiite groups are battling for power, the Mahdi Army is the most feared force. The British military pulled out of the city late last year, leaving the city in the militia’s hands.

More at the link, including an informative graph.