The U.S. military is to release all detainees linked to a Shia extremist group that kidnapped five British men two years ago. Four of the hostages are thought to be dead.

General Ray Odierno, the top US commander in Iraq, plans to release all members of Asaib al-Haq — League of the Righteous — as part of what he called a wider reconciliation process in the divided country. The number of detained group members is believed to be between 300 and 400.

The bodies of two of the British hostages have been recovered but Peter Moore, a computer consultant, is the only captive who might still be alive.

The main demand of the kidnap group has been the release of ten people held in U.S. detention. The latest move by the U.S. could lead to the release of Moore, if he is still alive, and the handing over of the missing bodies.

Six months ago a video of an apparently healthy Moore was released. In February 2008 another video featuring him was aired by the al-Arabiya television channel, which is based in Dubai. In it he called on Gordon Brown to free the Iraqis in return for the hostages’ freedom.

“This is about reconciliation,” General Odierno said. “We believe Asaib al-Haq has taken initial steps to reconcile with the government of Iraq.”

He said that active group members were observing a ceasefire and “they have begun to turn in heavy weapons or at least to consolidate heavy weapons that they have”.

The U.S. military is committed to handing over all those in its custody to the Iraqi authorities for prosecution or release by next year as part of a security agreement. Thousands have been released but the main obstacle to releasing members of Asaib al-Haq has been their alleged involvement in attacks on U.S. troops.

The U.S. military had hoped to prosecute anyone who attacked its troops through the Iraqi judicial system but in many cases officials were unable to do so.

“We have to have evidence,” General Odierno told The New York Times. “There’s intelligence there’s evidence. Those are two completely different things.” He insisted that “anybody who has blood on their hands will be tried in Iraqi courts” but had to concede that no such moves were currently under way.

Click here to read the full report from the London Times.