DUBAI, July 23: A group in Iraq which has threatened to behead seven foreign hostages issued a new 48-hour deadline to their Kuwaiti employers on Friday and demanded Iraqi prisoners be freed from Kuwaiti and U.S. jails , Al Jazeera television said.

"They gave a Kuwaiti company 48 hours to answer demands for the hostages' release. They said the company must pay compensation to the families of the dead in Falluja and Iraqi prisoners in American and Kuwait jails should be released," Al Jazeera said, saying it had received a videotape from the group.

A masked man was seen reading a statement in front of the seven men, one Egyptian, three Kenyans and three Indians, who were sitting on the ground. The hostages' employer, the Kuwait and Gulf Link Transport Company, said earlier it would not meet the kidnappers' demand that the firm cease operations in Iraq. -AFP