Iraq sees 'security vacuum' without Blackwater

(Adds Iraqi government spokesman quotes)

By Dominic Evans and Paul Tait

BAGHDAD, Sept 23 (Reuters) - Iraq will not rush to expel U.S. firm Blackwater, under investigation over a shooting which killed 11 Iraqis, because it would leave a "security vacuum" in Baghdad, a government official said on Sunday.

The shooting in western Baghdad a week ago incensed Iraqis and Prime Minister Nuri al-Maliki vowed to freeze the work of Blackwater, which employs about 1,000 people and guards the U.S. Embassy. But five days later it was back at work.

Instead, the Iraqi government and U.S. officials have agreed to set up a joint inquiry into the work of private security companies like U.S.-based Blackwater, which many Iraqis see as private armies acting with impunity.

A senior Iraqi police source close to the investigation said the Interior Ministry and special forces police were examining a videotape of victims taken in the aftermath of the shooting.

U.S. Secretary of State Condoleezza Rice has said she had ordered a full "review of how we are conducting our security details" but added that dangerous diplomatic missions in Iraq had to go on because they were critical to U.S. goals there.

Iraqi government spokesman Ali al-Dabbagh said the joint committee investigating the incident had held its first meeting on Sunday and the government would decide on further action based on the results of the committee's probe.

"It should not take long because there is an anger in the streets in Iraq," Dabbagh told Reuters in New York, where Maliki was visiting for the U.N. General Assembly.

In what appeared to be a softening of Iraq's response to the shooting, a government spokesman for Baghdad security said Blackwater and other private security companies were doing important work guarding foreign diplomats.

'SECURITY VACUUM'

"If we drive out or expel this company immediately there will be a security vacuum that will demand pulling some troops that work in the field so that we can protect these institutes," spokesman Tahseen al-Sheikhly told a news conference.

"This will create a security imbalance," he said, speaking through an interpreter.

Maliki's government has called the shooting a "flagrant assault" and a crime that angered the Iraqi people. Suggesting the U.S. Embassy stop using Blackwater, Maliki has said he would not allow Iraqis to be killed in cold blood.

Blackwater, one of the biggest private security contractors in Iraq, has said its guards reacted "lawfully and appropriately" to an attack against a convoy it was guarding.

Its guards were back on Baghdad streets on Friday, after the embassy eased a three-day ban on road travel by U.S. officials outside the heavily fortified Green Zone.

Dabbagh said companies such as Blackwater did a good job in Iraq, but "this will not entitle them to operate and get immunity and not be subject to accountability."

Iraq has said it would review the status of all private security firms, which employ between 25,000 and 48,000 guards, while the Interior Ministry has said it is drawing up legislation giving it wider powers over security contractors.

U.S. military spokesman Rear Admiral Mark Fox said it was too early to speculate on what the joint inquiry might find, or when it would it would present its findings.

"I wouldn't characterize a specific timeline until there is more information available," Fox said.

The U.S. Embassy is conducting a separate investigation.

IMMUNITY UNDER REVIEW

Foreign security firms operate in Iraq under a law, issued by U.S. administrators after the 2003 invasion to topple Saddam Hussein, which granted them immunity from prosecution and has not been formally revoked. Many do not have valid licenses .

Asked whether the contractors could face Iraqi prosecution, Dabbagh said: "We have to look at the legality of this issue ... but definitely we do need to review the decree."

Asked about the whereabouts of the contractors involved, Dabbagh said: "As far as we know, the American Embassy should not allow them to leave until the final report."

Sheikhly said the apparent contradiction over the question of immunity was one to be addressed by the joint inquiry.

"The Iraqi side believes that the Iraqi criminal law should be activated on Iraqi soil against any kind of activity that could be classified as a crime," Sheikhly said.

Separately, the U.S. military said it had killed a suspected insurgent during a raid in Baghdad on Friday. Rafid Sabah, also known as Abu Taghrid, is described as a leader of an al Qaeda in Iraq car-bombing network.

On Sunday, U.S. forces killed eight suspected militants in an operation southwest of the northern city of Kirkuk targeting al Qaeda in Iraq, the U.S. military said. It quoted Iraqis at the scene as saying six of the dead men were foreign.

An oil pipeline carrying crude from northern Baiji to Baghdad's Doura refinery was cut in a bomb attack, police said.

(Additional reporting by Claudia Parsons in New York)