Jordanian militant Abu Musab al-Zarqawi (search) set up "sleeper cells" in Baghdad before the Iraq war to attack American forces occupying the country, according to a British intelligence report.

The report, dated March 2003 and released as part of an overall review of British intelligence, forecast the string of Zarqawi's attacks against American targets during the past year "using car bombs and other weapons."

It said he was setting up groups of fighters to be activated at a later time, known in the intelligence field as "sleeper cells."

Prime Minister Tony Blair (search) claimed vindication Wednesday after a committee led by Lord Butler released its report that concluded British intelligence on Iraqi weapons of mass destruction was flawed, but said the government had not deliberately deceived anyone as it built a case for toppling Saddam Hussein.

While Butler's report faulted British intelligence for having few reliable sources and not properly analyzing information, it did credit the spies with foreseeing the al-Zarqawi strikes on coalition forces.

By the time of the U.S.-led invasion in March of last year, the report said, Britain's Joint Intelligence Committee indicated:

"Reporting since [February] suggests that senior Al Qaeda associate Abu Musab al-Zarqawi has established sleeper cells in Baghdad, to be activated during a U.S. occupation of the city."

The reported added: "These cells apparently intend to attack U.S. targets using car bombs and other weapons. (It is also possible that they have received CB materials from terrorists in the KAZ)," referring to chemical and biological materials and the Kurdish Autonomous Zone (search). "Al Qaeda-associated terrorists continued to arrive in Baghdad in early March."

Ousted President Saddam Hussein didn't have any control over the Kurdish zone in northern Iraq, and British analysts believed there was no active cooperation between Saddam and Al Qaeda, Butler's report said.

In October 2002, the a British intelligence report said: "Although Saddam's attitude to Al Qaeda has not always been consistent, he has generally rejected suggestions of cooperation. Intelligence nonetheless indicates that ... meetings have taken place between senior Iraqi representatives and senior Al Qaeda operatives.

The Butler report also said there was no evidence to back up suggestions Iraq may have trained some Al Qaeda terrorists since 1998.

"Al Qaeda has shown interest in gaining chemical and biological (CB) expertise from Iraq, but we do not know whether any such training was provided," the report said. "We have no intelligence of current cooperation between Iraq and Al Qaeda and do not believe that Al Qaeda plans to conduct terrorist attacks under Iraqi direction."

Much of Butler's report concentrated on a dossier published by Blair's government in September 2002, which laid out a case that Iraq had chemical and biological weapons, and plans to use them; and that Iraq was seeking to develop nuclear weapons.

On Wednesday, Blair acknowledged Butler's conclusion that Iraq did not have significant — if any — stocks of chemical or biological weapons ready for deployment, or plans for using them.

But he said the report confirmed his government had acted in good faith.

"No one lied. No one made up the intelligence," Blair told the House of Commons.

"Everyone genuinely tried to do their best in good faith for the country in circumstances of acute difficulty. That issue of good faith should now be at an end."

However, Conservative Party leader Michael Howard (search) accused Blair of taking patchy intelligence on Iraqi WMD and hardening it into fact.

"I hope we will not face in this country another war in the foreseeable future. But if we did and you identified the threat, would the country believe you?" Howard said.

Public faith in Blair and his governing Labour Party were being tested in two special elections Thursday prompted by the death of one Labour lawmaker and the resignation of another.

Both are normally considered "safe" seats for Labour, which won both by landslides in 2001 and holds 159 more seats than the combined opposition in the House of Commons. Labour and the Conservatives, who also backed the war, have campaigned on domestic issues such as crime, education and health care.

The Liberal Democrats, the only major party to oppose the Iraq invasion, have run on a strong anti-war platform in the Leicester South and Birmingham Hodge Hill districts, which both have large Muslim populations.

Liberal Democrat leader Charles Kennedy (search) said Wednesday he doubted the House of Commons would have backed the war if it had "known then what it knows today about the state of Saddam Hussein's weapons."

Former British foreign minister Robin Cook (search), who resigned from Blair's Cabinet in protest against the war, said the Butler report should rule out another "pre-emptive" war.

"The pre-emptive strike against a threat that may exist in the future requires very good intelligence and what we now know is that you never get intelligence that reliable," Cook said in a British Broadcasting Corp. radio interview Thursday.