The Afghan village devastated by Nato strike on Taliban

The two fuel tankers would have looked out of place, stuck by a river bank outside a small Afghan village. Local people came out to take a look and help carry makeshift containers with siphoned fuel inside from the stricken vehicles.

That is when the Nato missiles struck, wiping out much of the village of Omar Kheil, and doing critical damage to US and Nato hopes of making a fresh start in Afghanistan.

Taliban militants had hijacked the two tankers on the main road out of Kunduz, in northern Afghanistan, and driven them to Omar Kheil, which is under their control, about 12 miles from the city. The hijacking, on Thursday night, was reported to the German Nato soldiers garrisoned nearby, who spotted the lorries this morning. At some point the German commander called in an air strike to deal with the problem. Estimates differ as to how many people were killed in the fireball, but they range from a few score to more than a hundred.

Moeen Marastial, a member of parliament from Kunduz, said: "Local people are telling me 130 people have been killed despite all the promises of Nato to do fewer bombardments and reduce civilian casualties. There will be a reaction to this. It is a very bad day for international forces in Afghanistan."

Muhammad Omar, the governor of Kunduz province, told the BBC 90 people were dead, but that number included senior Taliban militants.

Hamid Karzai, the Afghan president, currently in the midst of an election controversy, said targeting civilians in any form was unacceptable and emphasised that innocent civilians must not be killed or wounded during military operations.

Nato's International Security and Assistance Force (Isaf) initially discounted reports that civilians were among the dead. "After assessing that only insurgents were in the area, the local Isaf commander ordered an air strike, which destroyed the fuel trucks, and a large number of insurgents were reportedly killed and injured," the first Isaf statement said.

That line was amended when the badly burned survivors started turning up at the local hospital.

Brigadier General Eric Tremblay told Reuters news agency: "It would appear that many civilian casualties are being evacuated and treated in the local hospitals. There is perhaps a direct link with the incident that has occurred around the two fuel trucks."

An investigation was launched into the incident which will focus on the decision by the German commander to call in the air strike. It happened in the same week the American commander in Afghanistan, General Stanley McChrystal delivered a strategic assessment on the state of the war to Rasmussen and to Washington. It is known that one of its main thrusts was a change of emphasis from killing the Taliban to protecting civilians. Nato officers have been told that if they have Taliban fighters in their sights but there is a risk of civilian casualties they are to hold fire.

McChrystal believes Nato has alienated the Afghan people by excessive reliance on air strikes that have caused high civilian casualties. But Isaf functions as a patchwork of different national troop contingents, working in different circumstances and under different rules of engagement.

"It calls into question whether all the allies are taking on board the same strategy on civilian casualties," said Tomas Valasek, the director of foreign policy and defence at the Centre for European Reform.

German troops function under restrictions imposed by Berlin, which are aimed at limiting their own casualties and have resulted in them being more operationally cautious. The restrictions, known as caveats, have infuriated other Nato contingents operating alongside them. If the investigation suggests that an air strike was called in because the German force was reluctant to commit troops on the ground to recover the tankers, it will escalate a long-running row over caveats in Afghanistan that is endangering Nato unity.

The site of the incident is also likely to be a cause for concern. Until recently, Kunduz province was considered relatively tranquil. events have demonstrated there are Taliban-controlled zones on the outskirts of the main city.

Alongside a Taliban resurgence, there have also been reports of Uzbek groups operating in affiliation with al-Qaida. Security on the roads connecting Afghanistan to Tajikistan and Uzbekistan is crucial to the Nato war effort after the route through the Khyber pass was crippled last year.

General David Petraeus led US efforts to open a new "northern route" to central Asia by striking deals with Russia the former Soviet colonies to the north.

Marastial, the MP from Kunduz, said the hijacking of the trucks was part of a concerted Taliban effort to disrupt trucks taking fuel down from the US built bridge at the border crossing from Tajikistan.