INTERVIEW-Time for Iraq to solve problems on its own-US envoy

* "Rocky road must be Iraqi road"

* Iraq is ready to rise to occasion



By Michael Christie

BAGHDAD, June 29 (Reuters) - The U.S. government is confident the Iraq government and security forces can deal with a stubborn insurgency after U.S. troops pull out of cities, the U.S. ambassador said on Monday.

While much work was still needed to reconcile feuding Sunni and Shi'ite Muslims, and to stifle tensions between Arabs and Kurds, Iraq must resolve these issues on its own, Chris Hill, said in an interview on the eve of the partial U.S. withdrawal.

"It may be a rocky road, but it has to be an Iraqi road," Hill told Reuters in the sprawling U.S. embassy in Baghdad's heavily fortified Green Zone.

"We think Iraq is ready. Iraq thinks it's ready."

Hill arrived as the U.S. government's top diplomat in Baghdad not long before the June 30 deadline for U.S. combat troops to pull out of Iraqi cities, towns and villages ahead of a full withdrawal by 2012 from the country they invaded in 2003.

Labelled "National Sovereignty Day" and turned into a public holiday by the Iraqi government, the pullback has spurred jubilation among many Iraqis elated at the looming end of what many see as a foreign occupation.

It has also raised widespread fears that insurgents such as al Qaeda might try to take advantage of the withdrawal and challenge Iraq's relatively untested security forces. Bomb attacks have killed at least 200 people in the last 10 days.

The 130,000 U.S. troops remaining in Iraq will still be able to swoop into urban centres from their nearby bases to help their Iraqi counterparts if asked to do so.

But analysts say Shi'ite Prime Minister Nuri al-Maliki may have backed himself into a corner by declaring the pullback a great victory for Iraqi sovereignty, and summoning help may have become politically unpalatable, even if desperately needed. Hill said relying fully on Iraqi troops and police for security was "quite doable".



DIPLOMATIC PRESENCE

"I don't think this a question of (U.S. troops) being hamstrung because this is not our country, this country belongs to the Iraqi people. I think not unlike in the life of an individual, sometimes a country, a nation, needs to rise to the occasion and I have confidence that they'll be able to do that."

He said even though large numbers of U.S. soldiers would remain in the country through national elections in January and until the end of combat operations in August 2010, Tuesday's milestone marked a change from a military relationship between Washington and Baghdad to a civilian one.

"The United States is not looking for a long-term role with forces here, we're looking to have a long-term relationship with Iraq, we're looking at a long-term diplomatic presence here."

"But at the end of the day the Iraqis are going to have to work out the political problems themselves," he said.

Hill said it was important for Iraq to make peace between its fractious groups to stave off a return to the sectarian warfare between Sunnis and Shi'ites in which tens of thousands have died since 2003.

Tensions have also grown between Arabs and minority Kurds in their northern region over oil and disputed territories, and are seen as the next potential catalyst for broad conflict.

"We can certainly provide help, we can provide a lot of assistance ... but at the end of the day it's their country and we're going to have to be respectful of that. It's not going to be helpful if we try to step in and deal with these problems for them." (Editing by Missy Ryan and Ralph Boulton)