NAJAF, Iraq - An Iraqi leader said he saw "flexibility" on the side of an anti-American cleric amid diplomatic efforts to end a standoff with U.S. troops in one of the holiest Shiite cities.

Meanwhile, an U.S. businessman was abducted from his hotel in the southern city of Basra by kidnappers disguised as policemen, Basra police chief said today.

Col. Khalaf al-Maleki said the abduction of the American, who was of Jordanian origin, took place Thursday night. He had no further details.

U.S. commanders said they expect to soon rotate some of the troops surrounding Najaf, 100 miles south of Baghdad, a sign that imminent combat was not expected.

Iranian envoy Hossein Sadeghi was in Najaf today, but representatives of Muqtada al-Sadr said the envoy had no meetings with the anti-American cleric. Sadeghi's visit was arranged by Britain and appeared to have the approval of the United States, reflecting an eagerness to find a solution that would avert a U.S. assault on the city.

U.S. AC-130 Spectre gunships were in action before dawn today over Fallujah, the site of fierce fighting that has left hundreds of Iraqis dead, raking militant hideouts with machine gun fire. The converted cargo aircraft have multi-barrel machine guns that fire out of its side and concentrate huge amounts of gunfire on a small target area. The gunships have been used repeatedly over Fallujah at night.

Militants also fired mortar shells at U.S. positions overnight in Fallujah, 35 miles west of Baghdad. One shell hit the roof of a building that Marines control, but no casualties were reported.

Including the Basra abduction Thursday, at least 21 foreigners have been abducted over the past week in a wave of kidnappings coinciding with intense violence around the country.

The abduction in Basra appeared to be the furthest south that a kidnapping has taken place. The vast majority of the abducted foreigners were snatched on roads west and south of Baghdad, where gunmen have run rampant the past week, attacking convoys and battling U.S. troops.

Denmark's Foreign Ministry said a Danish businessman, reportedly in Iraq to work on a sewage project, was abducted as he was traveling from the southern Iraqi city of Basra to Baghdad, according to the Danish public television channel DR-1. The foreign ministry did not give more details.

A leading Sunni cleric, meanwhile, said today that kidnappers have released a Chinese citizen abducted in Iraq and that the man is safely in the Chinese Embassy.

The Chinese man was kidnapped on Wednesday, said Muthanna Harith, a member of the Islamic Clerics Committee, the highest Sunni organization in Iraq. The committee earlier had worked for the release of three Japanese hostages, who were freed Thursday.

The Chinese Foreign Ministry in Beijing had no immediate comment.

The spate of kidnappings has tested U.S. allies resolve to stick with the coalition amid escalating violence ahead of U.S. plans to hand over power to Iraqis on June 30.

Shiite Governing Council member Ibrahim al-Jaafari said he saw "flexibility from al-Sadr's side" and called on the Americans to show "similar flexibility."

Iraq's top U.S. administrator, L. Paul Bremer, was involved in "multiple channels" to try to negotiate an end to the standoff in the south and in Fallujah, said U.S. Gen. Richard B. Myers, chairman of the Joint Chiefs of Staff.

But Myers warned there was a limit as to how long the U.S. Marines can wait. "At some point somebody has to make a decision on what we're going to do, and we certainly can't rule out the use of force there again," he told a news conference.

A U.S. soldier was killed Wednesday in the central city of Samarra, north of Fallujah - raising to 88 the number of U.S. soldiers killed in April, the deadliest month so far for the Americans in Iraq.