The Iraqi government has launched an inquiry into the events that led the British Army to stage a dramatic rescue of two UK soldiers detained by police.
A wide array of weapons reportedly taken from the men was shown
Both men were members of the SAS elite special forces, sources told the BBC's Richard Galpin in Baghdad.
The soldiers were arrested by police and then handed over to a militia group, the British Army says.
Iraq's interior ministry ordered the police force in Basra to release the soldiers but that order was ignored.
Defence Secretary John Reid told reporters that a delegation of six British military personnel, including a legal officer, had been sent to the police station to ease the release of the men.
Mr Reid said surveillance had established the men were being moved to another location, while at the same time an angry crowd posed an obstacle to the departure of the six-strong team.
These wigs and clothing were said to be from the same cache
The British commander on the ground, Brigadier John Lorimer, ordered British forces to move into the police station to help the team.
Almost simultaneously, a separate operation was staged to rescue the men from the place where they had been moved to.
It is understood force was also used in this operation, although there were no casualties as the Shia militia holding the British soldiers fled.
The episode saw a wall flattened at the police station by a British armoured personnel carrier, but Mr Reid said the coalition was still going "in the right direction" in terms of its overall strategy in Iraq and said this incident was merely "local".
Basra governor Mohammed al-Waili said the men - possibly working undercover - were arrested for allegedly shooting dead a policeman and wounding another.
Richard Galpin said al-Jazeera news channel footage, purportedly of the equipment carried in the men's car, showed assault rifles, a light machine gun, an anti-tank weapon, radio gear and medical kit.
This is thought to be standard kit for the SAS operating in such a theatre of operations, he said.
The British rescue mission sparked angry protests from locals in which vehicles were attacked and set on fire.
Haydar al-Abadi, a spokesman for Iraqi Prime Minister Ibrahim al-Jaafari, said the British rescue had been "a very unfortunate development".
"My understanding is that, first, it happened very quickly. Second, there is lack of discipline in the whole area regarding this matter...
"It is a very unfortunate development that the British forces should try to release their soldiers the way it happened, it's very unfortunate."
Soon afterwards, the Iraqi prime minister's office released a statement insisting there was no crisis in relations with the British.
"In response to recent events in Basra, the Iraqi government wants to clarify that there is no 'crisis' - as some media have claimed - between it and the British government.
"Both governments are in close contact, and an inquiry will be conducted by the Iraqi Ministry of the Interior into the incident.
"We will await the outcome of that inquiry. In the meantime we urge all sides to remain calm."
Brigadier John Lorimer said it was of "deep concern" the men detained by police ended up held by Shia militia, something that put their lives in danger.
In a statement, Brig Lorimer said that under Iraqi law the soldiers should have been handed over to coalition authorities, but this failed to happen despite repeated requests.
The Conservatives' defence spokesman Michael Ancram has accused the government of "uncertainty" over its strategy in Iraq, while the Lib Dem leader Charles Kennedy said Iraq was drifting towards civil war.
Tensions were already high in Basra on Monday morning following the detention on Sunday of a senior figure in the Shia Mehdi Army, suspected of being behind a series of attacks on British troops.