British troops are now patrolling the Shatt al-Arab waterway
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British troops have staged more raids in Basra overnight, searching houses of suspected Baath party members and making several arrests.
They have also dropped thousands of leaflets over the eastern part of Iraq's second city, said the BBC's Hilary Andersson, who is travelling with the troops.
She said the UK troops did not currently have a presence on the eastern side of the city although the north, west and south are "firmly held".
As US tanks were reportedly entering the edges of Baghdad, UK troops around Basra appeared to be going through a period of consolidation and reassessment.
"They're resupplying, they're moving troops around so if they wanted to storm the city they could," said our correspondent.
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HUMANITARIAN WORRIES IN SOUTHERN IRAQ
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She said: "They're trying to decide whether they should storm the city or whether it might be possible that they can take it by stealth, by continuing these probes and continuing to move in inch-by-inch."
On Saturday a pan-Arab newspaper reported that Baath party leaders in Basra wanted to surrender to the British if Baghdad fell.
They had passed a message to a Shia cleric, Mohammed al-Bosslimi, saying they were afraid of reprisals from citizens and would want to arrange a surrender, according to newspaper Asharq al-Aswat.
Water fears
British forces have crossed the Shatt al-Basra waterway near the southern city limits for the first time, and are now patrolling the waterway to ensure the Iraqi regime does not use it to move troops or equipment.
British troops have been encroaching on Basra "inch-by-inch"
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There are still concerns that southern towns and villages under British control have inadequate water and medical supplies.
But coalition troops said on Friday they had made "significant progress" in getting water into the region, with aid convoys flowing more easily through the port of Umm Qasr.
Defence Secretary Geoff Hoon said on Friday the troops' priority once inside Basra would be to fully restore the water supply.
Military sources revealed that British special forces were operating undercover in Basra, unearthing Baath party figures and ordering air strikes.
Blair letter
The elite troops, believed to be SAS, are posing as locals to locate key targets. At the weekend they identified the Baath party building which was then destroyed by air strikes.
Prime Minister Tony Blair has written a letter to Iraqis to be delivered by British troops to try to portray the coalition as "liberators".
The UK troops believe about 1,000 or so Iraqi fighters are holed up in Basra.
On Friday Downing Street said 60,000 copies of Mr Blair's letter to Iraqis, which will include a photo of the prime minister, will be printed each day and delivered by troops.
The letter promises a prompt return to Iraqi civilian control of the country once the war is over.