US pulls out of Iraqi cities

American troops pull out of Iraq's cities as its oil ministry holds auctions and bombers target a marketplace.

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US troops pulled out of Iraq's cities yesterday as its oil ministry held auctions for six of the country's biggest oilfields - disparate events yet united in the goal of allowing Iraq to control its own destiny. About 130,000 US soldiers will now be stationed outside urban areas as part of an accord between Baghdad and Washington that calls for the United States to quit Iraq completely by the end of 2011.

There were street celebrations in the Iraqi capital as part of a national holiday decreed by the prime minister, Nouri al Maliki. Although most of the day passed without noticeable violence, a car bomb in a market area of the mixed-population city of Kirkuk - near northern Iraq's biggest oilfield - killed 26 people and wounded 70. The reduced US presence did not calm fears that violence would begin again, especially in key trouble areas of the war-torn country.

"I do not know why people are celebrating this day," said Sheikh Mohammad Saleh al Khafaji, a leader in a US-allied Sahwa council in Diyala province. "We are not celebrating here. We are very concerned about the situation." Sahwa, or "awakening" councils have been key to weakening supporters of al Qa'eda-style groups in Iraq. Sunni tribes who had been allied with insurgents have instead worked with the US military to fight against Islamic militants. In return, they were put on US payrolls.

Some fear that, with the gradual reduction of the US presence in Iraq, those payments might stop and disgruntled Sahwa fighters may rejoin the insurgency. In the oilfield auction, Government officials managed to award only one contract by the day's end, albeit for Iraq's biggest field. Contracts for five other oilfields and two gasfields were not auctioned off, largely because the international energy companies bidding for them ignored government requests for lower bids.

"The bidding round in Iraq went differently than we had expected, especially due to the fact that there was a large gap between Iraqi expectations and the companies' willingness to bid at a low cost of production per barrel," said Mari Dotterud, a spokeswoman for the Norwegian state-controlled StatoilHydro, which had bid unsuccessfully on one of the fields. A venture headed by BP, the British oil group, and its partner, the state-owned Chinese National Petroleum Corp, won the giant Rumaila oilfield contract after agreeing to lower its bid by nearly half.

The companies agreed to drop their asking price to US$2 per barrel from $3.99 after the Iraqis said the lower figure was the most it would pay. A rival bid by an alliance led by the American firm Exxon Mobil was withdrawn. Rumaila, with about 17 billion barrels of proved reserves, is one of the world's largest oilfields. Left on the table were Kirkuk, which has 8.6bn barrels of proved reserves, and the West Qurna oilfield in the south, with reserves of 8.7bn barrels.

One consortium bid on the Akkaz gasfield - which Baghdad had reserved for exports to Europe - but it walked away from the auction.