Basra took a step towards self-rule yesterday after British troops asked a local tribal leader to set up a body to lead the population. The local sheikh, who has not been named, has been enlisted to select committee members.
The development came as British troops in Iraq's second city began to distribute water to the local population, amid anarchic scenes of looting.
Col Chris Vernon, British military spokesman based in Kuwait, said: "We have been approached by a local tribal leader. He will form a presence of leadership in the Basra province and we have asked him to form from the local community a committee that he thinks is representative."
Young men cruised through the city in pick-up trucks and on bicycles yesterday, grabbing what they could from shops and buildings, according to reports.
British troops tried to maintain order at the Sheraton Hotel, the site of heavy looting on Monday. Two tanks guarded the hotel, but when one began to pull away, dozens of people who were waiting outside began to cheer and then tried to enter the gates of the hotel.
Looters raided the hotel yesterday, removing tables, chairs, carpets and even the grand piano that once stood in the lobby.
Maj Gen Peter Wall, chief-of-staff of the British forces at Central Command in Qatar, indicated troops would for now turn a blind eye to civilians looting shops and homes.
"Of course it's not a pleasant prospect, but it's very difficult to predict how people who have been liberated from 20 years of oppression are going to react when suddenly they have some freedom," he told the BBC Radio 4 Today programme.
"There isn't an effective police force. It's very difficult at this stage to contain that sort of activity. It's only 24 hours since the lid came off the regime control of Basra, and we hope things will settle down in the next few days." Troops would now be looking for people to form a civilian police force in the city, he added.
He said the battle for Basra was not completely over yet, because there was still the possibility for limited resistance.
"Our forces in proportion to the population are not large and there could be renegade elements that are in a position to make life difficult for us and we've yet to find that out," he added.
But many residents remained very concerned about security.
"If they want to liberate Iraq, they must do so by giving us electricity, law and order," said a young Iraqi man standing by one of the water tankers.