Reports that militants holding two French journalists have increased their ransom demands has led to new strains between France and the US over Iraq. The tensions were underlined by allegations in the French news media that an American-backed offensive by Iraqi security forces had derailed talks aimed at releasing the hostages at a critical moment. In a front-page story, Le Monde, a leading French newspaper, reported that a weekend attack by United States and Iraqi forces on the town of Latifiya, just south of Baghdad, was obstructing negotiations for the release of the Frenchmen. 'I do not know if the Americans chose this day on purpose to intervene, but this has created a climate of general panic at a time when the hostage-takers are seeking guarantees for their safety,' Sheikh Hisham al-Dulaimi told the newspaper. Sheikh Dulaimi, head of an organisation of 16,000 sheikh and clan leaders, has been involved in several hostage negotiations. He said talks for the freedom of the journalists had proceeded smoothly throughout last Friday evening but that contact with the hostage-takers had now broken off. The journalists - Georges Malbrunot, 41, of the newspaper Le Figaro and Christian Chesnot, 37, of Radio France Internationale - were kidnapped on August 19 on the highway between Baghdad and Najaf. Nine days later, a group calling itself the Islamic Army in Iraq announced that it had the pair and demanded that France rescind a ban on the wearing of Islamic headscarves. On Monday, a fresh set of demands from the group appeared on a previously unknown Islamic website. The kidnappers now said they wanted a US$5 million ransom and a statement from the French government accepting Osama bin Laden's offer in April of a 'truce' with Europe. They also insisted France sever all military and commercial links with Iraq. The group gave France 48 hours to comply. Meanwhile, an Italian aid organisation said yesterday that two Italian women were kidnapped from its Baghdad office. Simona Pari and Simona Torretta, both 29, were abducted by gunmen. Two Iraqi men were also taken.