Around a hundred troops, military trucks and a helicopter were deployed in a failed hostage rescue bid in Nigeria in which an Italian and Briton were killed, witnesses said on Friday.
As Italy seethed over how it had been kept in the dark about Thursday's deadly raid in the northwestern city of Sokoto, witnesses said the captors and the security forces waged a gun battle lasting seven hours.
At least two hostage-takers were killed in the operation along with British national Chris McManus and Italy's Franco Lamolinara, they added.
Nigerian President Goodluck Jonathan blamed the deaths of the hostages on members of the Islamist group Boko Haram, which has waged a violence campaign mainly in the northeast of the country. He said the killers had been arrested.
British Prime Minister David Cameron meanwhile took responsibility for authorising the operation to rescue the two expatriate engineers who were kidnapped in May.
His Italian counterpart Mario Monti convened a security committee meeting over Britain's failure to consult Rome before approving the rescue bid.
Italy's President Giorgio Napolitano was quoted as saying that the failure to inform Rome about the bid was 'inexplicable'.
While officials gave few details about the operation or those involved, newspapers in London said that it had included members of the British elite forces Special Boat Service (SBS) who had been in Nigeria for a fortnight.
A resident who lives directly opposite the house where the two Europeans were killed, said at least 100 soldiers were involved in the operation.
They came in three trucks and blocked the entrance to the house.
The kidnappers apparently tried to flee the troops by scaling a wall into a next-door house which was still under construction before then engaging them in an intense gun battle, the witness told AFP on condition of anonymity.
"After the shootout had been going on for about seven hours, the soldiers gained access into the house.
"Initially they brought out two dead bodies I believe to be white men, followed by two bodies of dark-skinned people I believe to be among the gunmen," said the witness.
The witness reported seeing three men taken out of the house in handcuffs.
British and Nigerian authorities had been concerned from the start that the kidnappers were Islamist extremists as they had ignored a large amount of cash that the men had stored in the apartment where they were abducted, according to British media.
Cameron said the bid to rescue the men had been authorised after "a window of opportunity arose to secure their release".
British media said that Nigerian intelligence officials had tracked the group to Sokoto. GCHQ, Britain's intelligence listening centre, identified and monitored the telephone calls of the gang.
Around a dozen members of the SBS had been helicoptered in to rescue the hostages on Thursday, British report said.
A resident of Sokoto told AFP that a helicopter had hovered over the middle class Mabera neighbourhood mid-morning on Thursday before the shootout broke out around 11:00am.
Cameron said the two hostages had been held by "terrorists" who had made "very clear threats to take their lives", and the captives had been in "imminent and growing danger".
AFP received a video showing McManus and Lamolinara in August. In the footage, both men said their kidnappers were from Al-Qaeda.
In a second video received by a Mauritanian news agency and seen by AFP in December, masked gunmen threatened to execute McManus if their demands were not met.
Diplomats have said some Boko Haram members have sought training abroad, but there had not been evidence of operational links with foreign groups.
Al-Qaeda in the Islamic Maghreb, has in recent years claimed kidnappings of foreign workers in countries including Niger, which borders Nigeria to the north, but never in Nigeria. Sokoto state borders Niger.
The two hostages were kidnapped by heavily armed men who stormed their apartment in neighbouring Kebbi state in May 2011. They had been helping build a central bank building in the city and worked for construction firm Stabilini Visinoni.
While scores of foreigners have been kidnapped for ransom in Nigeria's oil-producing Niger Delta region, abductions in the mainly Muslim north have been relatively rare.
A German citizen was kidnapped in January on the outskirts of the northern city of Kano. That kidnapping came in the wake of January 20 coordinated bombings and shootings in Kano claimed by Boko Haram which left 185 people dead.
Boko Haram has been blamed for increasingly deadly and sophisticated attacks in Nigeria, Africa's most populous nation and largest oil producer.
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