Chalabi, who heads the Iraqi National Congress exile group and has close ties to President George Bush's administration, says the CIA should have done a better job analysing information received from defectors he steered their way.

"This is a ridiculous situation," he told the CBS 60 Minutes programme. Chalabi still maintains that weapons of mass destruction will be found in Iraq.

He said the CIA knew defectors could be biased and that even the press was warning that they had their own agenda.

"Now you're telling me that despite all this public evidence, the United States government took our word without checking out the people?" Chalabi said incredulously.

"Intelligence people who are supposed to do a better job for their country and their government did not do such a good job."

Chalabi, who was born into a prominent Iraqi family, but spent 45 years outside Iraq before returning in April, denies coaching defectors, something the CIA believes he has done for years, according to a former CIA analyst interviewed on the show.

Manipulated information

The analyst, Ken Pollack, who now works for the Saban Centre for Middle East Policy and for CNN, said the Bush administration used the information to label Iraq an imminent threat.

"Now you're telling me that despite all this public evidence, the United States government took our word without checking out the people?"

Ahmad Chalabi,
Iraqi National Congress

Pollack said they were looking "to simply confirm a preconceived notion of an extremely threatening Iraq ... on the cusp of acquiring the most advanced ... dangerous weapons."

Pollack blames senior US officials, not Chalabi.

"This is one of those ... 'fool me once shame on you, fool me twice shame on me'," said Pollack. "Chalabi has a track record. We knew this guy wasn't telling us the truth."

A defiant Chalabi said he was eager to further defend himself.

"I want to be asked to testify in the United States Senate in the intelligence committee. I want to do this in an open session," he says.

Gun battle

In other developments, two Iraqis and four British soldiers were wounded in a gun battle in Basra, the US military said on Saturday.

The incident occurred on Friday evening in Qalah Salih, about 40km south of Amarah, after a crowd of residents gathered around a convoy of occupation vehicles and troops who had arrested a man thought to have fired on them earlier in the day with an RPG.

"The patrol returned fire after receiving fire from heavy machine guns and a rocket-propelled grenade," a British Ministry of Defence spokeswoman said.

"They were extracted by a quick-reaction force and while the incident was happening, four of the patrol members received non-life threatening injuries."

The south of Iraq has seen fewer
anti-occupation attacks

The British spokeswoman, speaking on customary condition of anonymity, said the four were taken to the Shaibah military hospital near Basra. She declined to identify the regiment involved in the attack.

Southern Iraq, dominated by Muslims of the Shia sect, has not seen the anti-occupation attacks witnessed in Baghdad and central Iraq.

But Basra and other southern towns have seen killings and violence blamed on local rivalries and revenge attacks on former Saddam backers.

Bomb found

In the capital a suspected bomb was found in a bag on a street next to the Palestine Hotel on Saturday, where many foreigners are based. US soldiers blocked off the area while a disposal unit was called in.

"It's a bag, a dog hit on a bag down here," said a US soldier on a check point at the scene, adding that the bag contained explosives.

"We are waiting for a team to come down," he told the AFP news agency.

The suspect package was found in a street about 50m from the Palestine Hotel, where many US contractors are based including Kellogg, Brown and Root, which handles pipeline reconstruction in Iraq and support services for the US army in Iraq.

US troops were preventing people from walking down the street where a number of shops are located.