Power in Iraq has been handed over to the interim government, AFP reports.
The US overseer in Iraq, Paul Bremer, would leave Iraq today, a coalition official said, after the US diplomat handed sovereignty back to Iraq in an official ceremony.
Earlier Sky News in the UK said the handover was imminent.
It was possible it would happen within the next 12 hours, according to reports.
A formal announcement would be made later today, British Prime Minister Tony Blair said.
The informal announcement was made by Iraq's foreign minister Hoshyar Zebari.
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" We will challenge these elements in Iraq, the anti-democratic elements, by even bringing the handover of sovereignty before June 30 as a sign we are ready for it ," he said.
In a low-key ceremony in Baghdad, US administrator Paul Bremer gave legal documents to an Iraqi judge at 1026 local time (0626 GMT )."
An American passenger fatally wounded aboard an Australian RAAF C -130 Hercules in Baghdad was hit by the only bullet to penetrate the aircraft, the Australian Defence Force said today."
Defence spokesman Brigadier Mike Hannan said the aircraft was struck by ground fire soon after it took off from Baghdad airport yesterday.
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" The information we have at the moment is that the person was in the cargo area. There were only three passengers on board the aircraft at the time so the probability of this individual being hit was extremely remote, " Brigadier Hannan said.
" Only one fragment or projectile came through the hull and hit the individual ".
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Brigadier Hannan said the aircraft had transported personnel from the north of Iraq and was heading south. He said it was the first time an Australian aircraft had been hit.
Two Iraqi children have been killed and eight wounded in a mortar strike on the Tigris river bank near Baghdad's Sheraton Hotel, popular with Western media and businessmen, a local hospital said."
Earlier, a policeman at the site of the attack had said five people were killed by two mortars as they had just finished wading in the Tigris.
A doctor at Al-Kindi hospital corrected the officer's toll and his account of the incident.
The group of boys and young men had been playing football when two mortars burst, sending shrapnel flying, and killed two of them, said Dr Walid Hamid.
" Two children were killed and eight wounded, three of them seriously ," Dr Hamid told AFP.
" They were playing football along the river and Abu Nawas street. We don't know who fired the two mortars ," a witness said.
Blood stained the eastern bank of the Tigris river. The projectiles had gouged a hole in the dirt.
The mortar strike was the source of two loud blasts that shook central Baghdad at 7:05pm local time.
Radical cleric Moqtada al-Sadr's Mehdi Army has declared a truce by loud speaker in the Baghdad slum of Sadr City, saying it is ready to help protect important sites from terror attacks.
" Considering the exceptional circumstances that our people face, we have decided to stop from tonight the military operations in Sadr City until we receive new orders ," the militia's central committee said.
" All the Mehdi Army will respect this decision or face expulsion ."
The Mehdi Army is offering to protect Government buildings, hospitals, power stations, water stations, service stations and oil refineries.
Fighting has rocked the Shiite Muslim slum of Sadr City almost nightly since Sadr rose up against US forces in the first week of April.
The statement says the Mehdi Army is ready to protect " all those who might be targeted by terrorists notably in the coming two weeks ," referring to the June 30 handover of power in Iraq.
" The Mehdi Army proves day after day it cares for the greater interests of the oppressed people of Iraq ," it said.
A leading sheikh, Abdallah Janabi, condemns the attacks as launched " under the pretext that Zarqawi is based in Fallujah ".
" There are no foreign fighters here ", he said.
The names of the (so called)"mujahdin" (i call them killers)Arab nationalities died in the last American attack on Fallujah on 19-06-2004
1.Muhamed bin Salem Al-asmari Saudi
2.Abdullah bin Baz Al-utaibi Saudi
3.Muhamed Al-zahrani Saudi
4.Sa'ad bin Khaled Al-shahri Saudi
5.Abu Muhamed Al-Kusaimi Saudi
6.Muftaah saed Abu-dajana Emirates
7.Sultaan Mutaseem Al-ashmuri Yemen
8.Zakaria Abu-alabaas Morroco
9.Saed Muhamed Abu-zaaker Algeria
10.Mahmud uthman Al-shaikh Syria
11.Abu-attah Lybia
12.Abu Abdullah Somalia
13.Kaari Handalh Somalia
14.Omaar Hamid Khlil Iraq (Kurdistan)
15.Saif Al-Turkstani China
16.Abu Al-waleed Mauritania
Iraq's interim Government is planning a security crackdown in the lead-up to the official handover of power on June 30."
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The head of public affairs for Prime Minister Iyad Allawi has told the ABC the Government plans to make a noticeable difference to Iraq's security before the end of the month.
Meanwhile, the fledgling Iraqi security forces continue to come under attack.
Five Kurdish recruits in the new Iraqi Army have been killed near the town of Samara, north of Baghdad.
They were ambushed when their car broke down and their bodies were burned. They were heading home after completing military training.
British Prime Minister Tony Blair says he expects any further NATO role in Iraq to be limited to training security forces."
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" I don't believe we will see further troops come through NATO ," Mr Blair told Parliament.
" But I hope, and if the new Iraq government wishes it, we will see assistance with training provided for the Iraqi security forces ."
US President George W Bush and French President Jacques Chirac clashed over NATO 's role in Iraq at a Group of Eight (G8) summit last week.
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Mr Chirac remained reticent about NATO involvement even when Mr Bush sought to clarify his earlier remarks by saying he expected NATO to train Iraqi forces rather than offer more troops.
Mr Blair said the idea had always been that NATO soldiers would help with training.
He said he did not think NATO members would oppose that role provided the request came from the Iraqi Government.
Four British soldiers will be court-martialled on charges of abusing Iraqi detainees."
The four Royal Fusiliers members are accused of assault, indecent assault and prejudicing good order.
They are the first British officers to be charged over the alleged abuse.
British Attorney-General Lord Goldsmith says the charge of indecent assault involves making the victims engage in sexual activity between themselves.
In a statement, he says the abuse allegedly took place while the civilians were temporarily held, but not in a prison or detention centre.
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A date for the military trial is yet to be set but the proceedings will be public.
The Attorney-General says at least four other cases are likely to be referred to the Army prosecutor in the near future.
Another case concerning an alleged killing of an Iraqi during his arrest has been referred to Crown prosecutors and the metropolitan police are investigating.
Iraqi Interior Minister Falah al-Nakib says the people who carried out a suicide car bombing in Baghdad that has killed at least 13 people were foreigners from outside Iraq's immediate region.
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Mr Nakib has told the Dubai-based Al-Arabiya television station that " according to initial information, those who carried out the blast were not Iraqis ".
" They came from abroad They are not from a country neighbouring " Iraq, he said.
But Mr Nakib did not specify the attackers' nationality.
Two of the foreign contractors killed were British, one French and one American.
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Major Mohammed Saleh, the senior policeman at the scene, said a suicide car bomber drove between vehicles in the convoy and blew himself up.
Mr Nakib says the nature of the terrorist attacks in Iraq and the people involved suggest that the same mastermind is responsible.
Washington has fingered Jordanian militant Abu Mussab al-Zarqawi, with known ties to Al Qaeda, as the chief suspect behind a long list of bloody attacks in the country.
A large car bomb killed at least 16 people, including five foreign contractors, and injured more than 60 after it tore through a main commercial boulevard in the Iraqi capital, officials said today."
The US military said two British, one French and one American contractor had died in the attack yesterday. A diplomatic source identified the fifth foreign victim as a Filipino.
The bomber targeted a convoy of four-wheel drive vehicles in the city's second car bombing in 24 hours.
The earlier strike killed seven people and wounded more than 20, some two weeks before Iraq's sovereignty is due to be returned to an interim government.
Following the blast, another civilian contractor was killed in an ambush on a coalition convoy in east Baghdad, while the Turkish embassy said it was searching for two Turks feared taken hostage.
David Gompert, US overseer Paul Bremer's senior adviser on Iraq's national security, warned the violence would continue.
" It's going to be a while. The terrorists are hardened. They are professionals ," he said.
In Mosul, northern Iraq, insurgents attacked an Iraqi police station killing one police officer, while a Kurdish official said a funeral had been held for five Kurdish recruits to the new Iraqi army killed near Samarra, north of Baghdad.
Two Turkish nationals have been taken hostage in Iraq, local television station CNN Turk has reported, but there were no immediate details on their identities or who seized them."
A spokesman for the Turkish Foreign Ministry said officials had not yet received any information about a fresh abduction.
A contingent of Tongan soldiers is heading to the Middle East to join American forces in Iraq."
The 44 Tongan troops will travel to Kuwait first, and after acclimatising will then join the First US Marine Division.
Their exact role hasn't been determined, but at first it is likely they will be confined to camp duties and training.
The Tongan Government says the Kingdom's contribution to the effort to bring peace and stability to Iraq is relative to what the country can afford.