Iraq govt may have limited sovereignty

Powell said Washington intended to work out agreements for US troops now fighting against Shia and Sunni rebels to remain in the country after the handover and for Iraq's armed forces to remain under US command.

Who will take over sovereignty is unclear, but Powell said the leading option was to expand the US-picked 25-member Iraqi Governing Council.

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He also predicted the new authority will continue to face the kind of attacks now bedeviling the US-led Coalition Provisional Authority that has ruled Iraq since the US-led invasion toppled Saddam Hussein a year ago.

Heavy fighting has erupted over the last several days, with US-led forces locked in open urban warfare in the central Sunni town of Falluja, the Shia shrine city of Kerbala and Abu Ghraib on Baghdad's western outskirts, witnesses said.

Forty-one American and allied soldiers and Marines and hundreds of Iraqis have been killed in this week's new two-front fighting, which has marked the bloodiest and most chaotic period of the US occupation.

Fourteen foreigners were reported kidnapped around the country, although seven were later freed unharmed.

The United States last year agreed to hand over sovereignty Iraq by July 1, but its plan to select an interim government through caucuses collapsed, partly because of objections from leading Iraqi Shia cleric Ayatollah Ali al-Sistani.