(Recasts with fresh quotes, markets, opposition leaders)
By Paul Majendie
LONDON, March 21 (Reuters) - Britain suffered its first losses of the Second Gulf War on Friday but took several hundred Iraqi prisoners and secured southern oil fields.
"I am very encouraged by the start we have made," said Britain's defence chief Michael Boyce. "It is very early days but I have to say the coalition progress so far has been promising."
But Boyce and Defence Secretary Geoff Hoon were in sombre mood as they paid tribute to eight British soldiers and four U.S airmen killed in a helicopter crash on the Iraqi border.
Admiral Boyce, briefing reporters on the fast-moving campaign, said forces had secured the strategic Faw peninsula, captured the port of Umm Qasr and were on the outskirts of the southern Iraqi city of Basra.
He said troops on the way to Basra "have seen a lot of evidence of large-scale capitulation, evidenced by abandoned positions and items of equipment".
"One of the key aims tonight is to get hold of Basra," a military source told Reuters.
The source also said British troops were preparing to take humanitarian aid into Iraq within 48 hours.
Buoyed like U.S. markets banking on a quick victory in Iraq, London's stock exchange closed the week at a two-month high.
Sterling gained more than half a percent on the weakening euro but eased slightly on the dollar as markets hoped British troops would not get bogged down in combat for long.
At the London briefing, Boyce warned that Iraq's President Saddam Hussein could still use chemical weapons.
"If I was in his shoes, I would be wisely keeping my chemical weapons back because using them would prove what we all know -- that he has got them," he said.
Amid a swirl of rumours about Saddam's survival after air raids on Baghdad, Boyce said: "No I can't confirm that...I'm certainly unaware of Saddam Hussein's status at the moment."
OIL FIELD NEWS NOT SO GRIM
News from Iraq's southern oilfields was not as grim as originally feared.
"All the key components of the southern oil fields are now safe," Boyce said. He reported that only seven oil wells had been set on fire by the Iraqis -- not the 30 earlier reported.
"We are absolutely determined not to allow Saddam Hussein to do more damage to the lives of his people through some scorched earth policy," he said.
The chief of the defence staff said several hundred Iraqis had surrendered so far and forces had seized Iraqi vessels ready to lay mines.
Royal Air Force Tornados joined the aerial bombardment of Baghdad and British submarines in the Gulf fired Tomahawk Cruise missiles at Command and Control targets.
Bringing the conflict nearer to home, American B-52 bombers, took off from a western England air base during the day, apparently to join the "shock and awe" air assault.
For Prime Minister Tony Blair, the military campaign is one of the biggest risks of his political career as it provoked rebellion in his own Labour Party, ministerial resignations and widespread opposition among Britons.
At a European Union summit in Brussels, he looked haggard and exhausted as he paid tribute to the eight British soldiers. "It underlines the dangers facing our forces," he said.
But opinion polls show that his compatriots are now rallying around the beleaguered Blair. Even anti-war demonstrators said support for their cause was waning. Both opposition party leaders went on television to back British troops.
(Additional reporting by Andrew Cawthorne, Lyndsay Griffiths and Sinead O'Hanlon)
((Reporting by Paul Majendie, editing by Ian MacKenzie; Reuters Messaging: paul.majendie.reuters.com@reuters.net +44 207 542 7947))
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Friday, 21 March 2003 16:31:44
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