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NEAR BAGHDAD, Friday (Reuters) U.S. forces seized control of Baghdad's international airport yesterday their biggest prize so far in a 16-day-old war to overthrow President Saddam Hussein.

"We control the airport. It's a big area with a lot of buildings that need to be cleared, but it's ours," Colonel John Peabody, commander of the Engineer Brigade of the 3rd Infantry Division, told Reuters.

Military analysts say Saddam International Airport is a key objective for U.S. forces, who can use it as a forward operating base in any battle for the ancient, sprawling city of five million people. Peabody said the runway was in good condition.

The advance puts the capital within range of ground-based rockets and guns brought by U.S. troops from Kuwait, but it was unclear how soon an offensive on the city would be launched.

The U.S. military said 320 Iraqi foot soldiers had been killed in fighting for control of the airport, just 20 km (12 miles) southwest of the centre of Baghdad. They said dozens of Iraqi anti-aircraft artillery, troop carriers and trucks had been captured or destroyed.

U.S. troops later fought off an Iraqi counterattack, with Bradley fighting vehicles opening up with heavy machineguns and TOW missiles, knocking out four Iraqi Soviet-era T-72 tanks, a T-62 and a number of other vehicles. Meanwhile residents were fleeing suburbs near Baghdad airport into the city centre on Friday, running from what one called a "night of hell" as U.S. forces moved in.

"Some people I stopped said that all day since dawn people had been streaming out of the airport area," said Reuters correspondent Samia Nakhoul in the city centre, where residents were staying indoors.

"There was banging all night. It was a night of hell. We saw that they have entered Baghdad, there were planes all night dropping bombs and there was shelling all night," said one woman, trembling after her drive into the centre. Droves of cars headed into Baghdad along the airport road.

"There is a feeling that the war has arrived in Baghdad, everything is deserted," Nakhoul said.

Tanks smouldered and several bodies lay on the ground.

In Baghdad, Reuters reporter Nadim Ladki heard up to 100 explosions through the night from the direction of the airport which, since the 1991 Gulf war and international sanctions, has seen little commercial use.

More loud blasts rocked the city centre early on Friday, the Muslim holy day. U.S. Central Command in Qatar said on Friday that U.S. and British planes also hit Iraq's Air Force headquarters in central Baghdad with satellite-guided "smart bombs". "The strike degraded Iraqi Air Force capabilities to command and control Iraqi air assets," the U.S. statement said.

For the first time since the conflict began on March 20, the power went off late on Thursday, plunging Baghdad into darkness and silencing the loudspeakers that call Muslims to prayers.

There was no sound except the barking of dogs and warplanes overhead. U.S. officials denied they targeted power supplies.

Dozens of Iraqis, mostly soldiers, were killed in the village of Furat near the airport, in what residents said was a barrage of U.S. artillery and rocket attacks.

Iraqi officials said the death toll in and around the village was 83 but this could not be independently confirmed.

Iraq said it captured five U.S. tanks and one helicopter in the battle. The United States issued no casualty report.

In Washington, the U.S. House of Representatives approved nearly $80 billion to finance the Iraq war, reward allies, bolster anti-terrorism efforts and help struggling airlines.

U.S. and British leaders have said the hardest part of the campaign may be to win Baghdad, where the invaders could be sucked into bloody street-by-street fighting where the advantage of hi-tech weaponry would be blunted.

In Asian financial markets on Friday, both stocks and the dollar moved higher on news of U.S. military successes.

U.S. Defense Secretary Donald Rumsfeld said Saddam's fate was sealed. "For the senior leadership, there is no way out. Their fate has been sealed by their actions," he said.

In a sign that Saddam's authority throughout Iraq may be crumbling, a senior Shi'ite Muslim cleric, Grand Ayatollah Ali al-Sistani, urged believers not to oppose invasion troops.

U.S. military sources said their forces found a network of tunnels beneath Baghdad airport, apparently stretching back to the Tigris river.

At Central Command in Qatar, a U.S. commander said special forces had also raided a residence of Saddam northwest of the capital and blocked the road to his hometown of Tikrit.

In northern Iraq, Kurdish fighters, backed by small groups of U.S. soldiers, advanced towards the northern oil town of Mosul, but were met by heavy machine-gun and rifle fire, Reuters correspondent Sebastian Alison said. Further south, U.S. troops moved into the centre of the Shi'ite Muslim holy city of Najaf, searching for paramilitary fighters, and tightened their grip on Nassiriya, where they appeared to be in full control of bridges over the Euphrates.

In the far south, British forces edged into the outskirts of Iraq's second city of Basra, capturing an industrial complex where Iraqi militia had spearheaded fierce resistance. The United States lists 54 dead and 12 missing since the war began. Britain says it has suffered 27 dead.

Iraq has not given figures for military deaths, but Foreign Minister Naji Sabri has said more than 1,250 civilians have been killed, a figure that could not be independently checked.

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Iraq warns of "non-conventional" attack on troops

Baghdad, Friday (AFP) Iraq warned it will carry out a "non-conventional" attack later Friday against US troops it said were "isolated" at Saddam International Airport on the outskirts of the capital.

"Tonight we will carry out something that is non-conventional against them, not military. It will be a great example to them," Information Minister Mohammed Said al-Sahhaf told a press conference.

"Unless they surrender quickly, I don't think there's any chance that they will survive," he said, referring to the US forces outside Baghdad. "We consider it an isolated island ... They are completely surrounded." 

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