"First Cavalry Division Soldiers recently uncovered a vehicle-borne improvised explosive device (VBIED) production site as well as a large weapons cache in southern Baghdad," the military said, using its lexicon for car bomb.

"Soldiers from the 1st Battalion 8th Cavalry Regiment discovered four potential VBIED vehicles in various stages of completion and three safes containing more than 12 million Iraqi dinar and various documents and ledgers."

Eighteen more people were detained in raids on eight other locations.

"The detainees are allegedly part of a cell responsible for placing IEDs that have killed two soldiers in the area. The soldiers believe they have captured the financier, the explosive device manufacturer, the spotter, and the triggerman."

Meanwhile, an oil pipeline has been "breached" in southern Iraq causing a fresh fall in exports, the British military and Iraqi oil officials said in Basra yesterday.

"I can confirm the pipeline was breached. The cause was unknown," a British military spokesman said.

An official at the terminal serving the southern oilfields said exports had fallen to 40,000 barrels per hour from 84,000 barrels per hour.

However, the military spokesman played down the impact of the breach, describing it as "not significant".

Emergency powers to deal with trouble-spots in Iraq are being prepared and will be announced "very shortly", the caretaker government's deputy prime minister for national security has said.

"The national safety law will be announced very shortly," Barham Saleh said in an interview with Al-Iraqiya television broadcast on Friday night.

"This law will give the government the capability of imposing emergency laws in specific areas and for set periods to deal with terrorist threats," he said.