(Agencies)
Updated: 2007-09-19 06:39

BAGHDAD - The Iraqi Cabinet decided Tuesday to review the status of all foreign security companies amid mounting public outrage over the alleged killing of civilians by the US Embassy's security provider Blackwater USA.

A woman grieves at the scene of a car bomb attack in Baghdad September 18, 2007. A car bomb killed seven people and wounded 23 in a parking lot near the Health Ministry in central Baghdad, police said. [Reuters]

Exploiting that anger, anti-American cleric Muqtada al-Sadr demanded the government ban all 48,000 foreign security contractors, whom Iraqis have long viewed as mercenaries.

The Iraqi government appeared to back down from statements Monday that it had revoked Blackwater's license and would order its 1,000 personnel to leave the country -depriving American diplomats of security protection essential to operating in Baghdad.

"We are not intending to stop them and revoke their license indefinitely but we do need them to respect the law and the regulation here in Iraq," government spokesman Ali al-Dabbagh told CNN.

Still, it was unclear how the dispute would play out, given the government's need to appear resolute in defending national sovereignty while maintaining its relationship with Washington at a time when US public support for the mission is faltering.

Polls show Gen. David Petraeus' report to Congress and President Bush's nationally televised address have had little impact on Americans' distaste for the Iraq war and their desire to withdraw US troops.

Petraeus, America's top commander in Iraq, and Ryan Crocker, the top US diplomat here, briefed the British government Tuesday on their recommendations to keep troop levels high.

Also Tuesday, three US soldiers were killed following an explosion near their patrol northeast of Baghdad, the military said. Another soldier was killed in a vehicle accident in the northern province of Ninevah, the military said.

Al-Sadr's office in Najaf said the government should nullify contracts of all foreign security companies, branding them "criminal and intelligence firms."

"This aggression would not have happened had it not been for the presence of the occupiers who brought these companies, most of whose members are criminals and ex-convicts in American and Western prisons," the firebrand cleric said in a statement.

Al-Sadr insisted that the government of Prime Minister Nouri al-Maliki prosecute those involved and ensure that families of the victims receive compensation.

There was no threat by al-Sadr to unleash his Mahdi Army militia in retaliation for the killings.

However, his statement was significant because it signaled al-Sadr's intention to stir up anti-American sentiment in the wake of the weekend shootings and further undermine al-Maliki's U.S.-backed government.

Many Iraqis dismissed Blackwater's contention that its guards were attacked by armed insurgents and returned fire only to protect State Department personnel.

"We see the security firms ... doing whatever they want in the streets. They beat citizens and scorn them," Baghdad resident Halim Mashkoor told AP Television News. "If such a thing happened in America or Britain, would the American president or American citizens accept it?"

Blackwater is among three private security firms employed by the State Department to protect employees in Iraq, and expelling it would create huge problems for USgovernment operations in this country.

Private security officials said Blackwater had suspended all but essential movements in the capital, a move that would severely curtail travel by US diplomats outside the Green Zone. The officials spoke on condition of anonymity because they are not supposed to talk to media.

The two other firms, both of which are headquartered in the Washington, D.C., suburbs, are Dyncorp, based in Falls Church, Va., and Triple Canopy, based in Herndon, Va. Neither has the resources of Blackwater, which includes a fleet of helicopters that provide added security for State Department personnel traveling through Baghdad's dangerous streets.

In London, Crocker told reporters that "an investigation of that incident is under way and it would be premature to comment until the investigation is finished."

Interior Ministry spokesman Maj. Gen. Abdul-Karim Khalaf, who announced the Blackwater ban, said Tuesday the most important issue now is "to find the best ways to put new regulations and conditions by the Interior Ministry on the work of security companies."

A 2004 regulation issued by the USoccupation authority granted security contractors full immunity from prosecution under Iraqi law. Unlike American military personnel, the civilian contractors are also not subject to USmilitary law either.

Hassan al-Rubaie, a member of the parliament's Security and Defense Committee, said an investigative committee has been formed to consider lifting the contractors' immunity.

"There are reports that (Blackwater guards) were subjected to gunfire, but this does not give them the right to kill innocent civilians," he said.

Some private security officials have also blamed much of the confusion surrounding the work of the contractors on inefficiency and corruption within the Iraqi government - especially the Ministry of the Interior.

Many security companies have tried to obtain weapons permits from the ministry, only to find the rules constantly changing. That forces security guards to choose between venturing into the streets without protection or running the risk that their weapons might be confiscated at a checkpoint.

US officials arranged an extension of the deadline for weapons permits until the end of the year, although procedures for obtaining them remain unclear.

Blackwater and other foreign contractors accused of killing Iraqi citizens have gone without facing charges or prosecution in the past. But the latest incident drew a much stronger reaction by the Iraqi government.

Unlike many deaths blamed on foreign contractors, Sunday's shootings took place in a crowded area in downtown Baghdad with dozens of witnesses.

Details of the incident remain unclear.

Blackwater says State Department personnel came under attack from insurgents and that its guards returned fire. Iraqi police say a car bomb exploded near a State Department convoy and that Blackwater guards opened fire. Khalaf said 11 people were killed.

Yassin Majid, an adviser to al-Maliki, said the killings had deeply embarrassed the Iraqi government and forced it to act against Blackwater - even before a full investigation had been completed.

"They were not subjected to the kind of attack or shooting ... that required a response of this intensity that led to the death of civilians," Majid said. "This incident embarrassed the government and also embarrassed the American government."