He said that possible immunity from Iraqi law for foreign private guards was a sticking point in the deal between Washington and Baghdad.

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"The issue of contractors including [foreign] security contractors is a sensitive one, is a significant one," Satterfield said.

"There are outstanding issues, obviously, including issues focused on the security side."

The presence of tens of thousands of foreign private security contractors in Iraq has been heavily criticised, especially after the killing last year of 17 Iraqis in Baghdad by Blackwater, a company which protects US officials in the country.

Strong criticism

Washington has previously expressed no doubt that the security deal would be completed by its July deadline but negotiations for a long-term military presence come amid strong criticism from Baghdad over the details of the deal.

Satterfield admitted foreign private
contractors were an issue [AFP]
Iraqi media reports have suggested the United States is seeking to keep as many as 50 military bases in Iraq indefinitely, control the nation's air space, and grant troops and foreign private contractors continuing immunity from prosecution under Iraqi law.

A senior Bush administration official close to the talks reportedly told the Associated Press news agency on Monday that it was "very possible" the US may have to extend the existing United Nations mandate.

Iran has also opposed the agreement, suggesting that if permanent US military bases are established on Iraqi soil, the country could be used as a launching pad for attacks on neighbouring Tehran.

Satterfield denied such allegations saying that the US "does not think Iraq should be an arena, a platform for attacks on other states".

"We want to see Iraqi sovereignty strengthened, not weakened." American diplomats and military officials have denied that Washington wants to create "permanent" bases.

Tribal leader killed

Elsewhere in Iraq on Tuesday, the head of former Iraqi leader Saddam Hussein's tribal clan was killed by a bomb that had been planted on his car, Iraqi police said.

Sheikh Ali al-Neda was the 65-year-old chief of Iraq's al-Bu Nasir tribe, a large Sunni Arab clan of about 20,000 members, including Saddam's family.

Al-Neda and one of his guards died when a bomb that had been attached to the underneath of his car exploded as they drove through the Wadi Shishain area of Tikrit, about 130km north of Baghdad.

Three other guards were seriously wounded, the officer said.

As the head of the clan, al-Neda took charge of Saddam's body after his execution in 2006 and arranged his funeral.

In 2007, he founded a so-called Awakening Council in Saddam's home village of Ouja, working with US forces to fight armed Sunni groups in the area.

Members of Saddam's tribe have been targeted before, but it was unclear whether it was because of their ties to the former Iraqi dictator or because of long-standing tribal rivalries.