Coalition officially handed over power to interim Iraqi government 28 June, marking legal transfer of sovereignty and symbolic step forward for Iraq. Handover followed unanimous 8 June passing of UN Security Council resolution 1546 endorsing plan to hold elections by January 2005 and authorising Coalition forces to remain beyond 30 June. New PM Iyad Allawi assumed control after nomination - with American backing - by Interim Governing Council, circumventing selection process run by UN envoy Lakhdar Brahimi. Top Shiite cleric Ayatollah Ali al-Sistani gave new government cautious endorsement. Violence surged in run-up to handover, with coordinated attacks in 5 cities 24 June killing over 100. Security situation across Iraq remained unstable, with daily bombings, kidnappings and assassination attempts on Iraqi officials, along with strikes on oil infrastructure. U.S. continued hunt for top terrorist Abu Musab al-Zarqawi. NATO Istanbul summit 28 June resulted in vague pledge to help train Iraqi troops. 591 Coalition soldiers, including 526 Americans, and thousands of Iraqis killed by hostile fire since declared end of combat operations on 1 May 2003.

U.S. and Britain tabled draft UN Security Council resolution calling for transfer of full sovereignty to Iraq on 30 June and authorising U.S.-led force to remain for initial 1-year period. Some countries, including France and Germany, concerned by absence of date for Coalition's withdrawal and lack of detail on status and powers of U.S.-led forces vis-a-vis Iraqi government. Similar concerns raised by members of Interim Governing Council (IGC). Resolution unlikely to be finalised before report of UN special envoy Lakhdar Brahimi, expected early June. Process of selecting new interim government proceeding; IGC candidates Ayad Allawi and Ghazi al-Yawer designated PM and president, respectively. Situation on ground remains grim, with violence continuing in several areas. Izzadine Saleem, head of IGC, killed in Baghdad suicide attack 17 May. Fighting continued between Coalition forces and followers of radical Shiite cleric Moqtada al-Sadr, leaving dozens of insurgents dead and damaging Imam Ali Mosque, Shiites' holiest shrine. Sporadic fighting followed 27 May ceasefire. U.S. and Iraqi troops raided offices of IGC member Ahmed Chalabi 20 May, suggesting he passed secrets to Iran. Raid marked sea- change in Washington's support for Chalabi, who had been Pentagon's favourite to lead country. Support for Coalition continued to fall with publication of new photos depicting abuse in Abu Ghraib prison. 544 Coalition soldiers, including 487 Americans, and thousands of Iraqis killed by hostile fire since declared end of combat operations on 1 May 2003.

Deadliest month for U.S. troops since war began (138 killed, compared with 82 in November 2003, 2nd deadliest month) as heavy fighting raged across several parts of Iraq. Associated Press reported at least 1,361 Iraqis killed in April. Hundreds of Iraqis killed in Fallujah following U.S. invasion of city. End to siege appeared likely 30 April as Marines began withdrawing; replaced by Iraqi force led by former Saddam general Jassim Mohammed Saleh. U.S. forces also encircled holy city of Najaf, where radical Shiite cleric Moqtada al-Sadr holed up with heavily armed followers - reports suggest mosques being used to stockpile weapons. Battles around Najaf and Kufa killed dozens of insurgents. Rocket attacks and bombings on markets, buses, and other civilian targets have outraged Iraqis, but anger increasingly directed at Coalition for failure to provide security - exacerbated by new photos of U.S. forces humiliating Iraqi prisoners. Insurgents made headlines around world with hostage-taking spree: nationals of several countries remain in captivity. U.S. reportedly agreed to proposal by UN special envoy Lakhdar Brahimi to create non-political caretaker government - replacing Interim Governing Council - to oversee transition period between 30 June sovereignty handover and holding of elections in January 2005. 483 Coalition soldiers, including 429 Americans, and thousands of Iraqis killed by hostile fire since declared end of combat operations on 1 May 2003.

Interim Governing Council signed provisional constitution after series of delays caused by objections from Shiite members and by bloody attacks on Shiite pilgrims, which left over 100 dead 2 March. Constitution to take effect upon U.S. handover of power to transitional administration 30 June. Influential Shiite cleric Ayatollah Ali al-Sistani voiced opposition to document, saying it enshrines ethnic and religious differences, while other Shiites expressed concern over power given to Kurdish minority. Violence continued unabated, with attackers targeting Iraqis seen cooperating with Coalition. Blast at Mount Lebanon hotel 17 March killed 7; several other hotels targeted by rocket attacks. Four U.S. contractors killed in Fallujah 31 March; bodies hung from bridge by angry mob. Unease among U.S. allies as incoming Spanish PM Zapatero, in wake of deadly Madrid bombings, declared would withdraw troops unless they are given UN mandate by 30 June; and Polish president Kwasniewski said country was “misled” over WMD in Iraq. 350 Coalition soldiers, including 301 Americans, killed by hostile fire since declared end of combat operations on 1 May 2003.

Following fact-finding mission led by UN Special Envoy Lakhdar Brahimi, UN Secretary-General Kofi Annan said Iraqi elections not feasible before end of 2004 or early 2005. Grand Ayatollah Ali al-Sistani, country’s most powerful Shiite cleric, called for guarantee – possibly in form of UN Security Council resolution – that elections would be held by year end. U.S. acknowledged plan to select transitional assembly through local caucuses requires modification, but handover of power will go on as scheduled 30 June. Governing Council agreed on interim constitution; composition of transitional assembly yet to be decided. Violence continued with series of large-scale attacks mainly targeting Iraqis: On 1 February suicide bombers struck offices of Kurdish political parties PUK and KDP, killing 101, including several senior Kurdish officials. Two apparent suicide car bombs 10 and 11 February killed around 100 Iraqi men waiting in line for police and army jobs. Twin suicide attacks on Coalition base in al-Hillah 18 February left 11 Iraqis dead and dozens of Coalition soldiers wounded. 316 Coalition soldiers, including 267 Americans, killed by hostile fire since declared end of combat operations on 1 May 2003.

U.S. looking to amend plan for handover of power to provisional Iraqi government as pressure mounting for elections to be held in June. Pressure coming chiefly from Ali Hussein al-Sistani, leading Shiite cleric, and his followers: 100,000 marched through Baghdad 19 January. American and UN officials discussed possible modifications to original plan, which calls for transitional assembly to be selected by local caucuses rather than directly; all options reportedly back on table, including elections. Sistani said would not drop election demand unless UN agreed with U.S. contention that elections not feasible; UN assessment likely to be completed in February. Lakhdar Brahimi appointed special adviser to Kofi Annan and expected to devote much time to Iraq. Two-man team arrived in Baghdad to inspect security situation for potential UN return. Attacks continue unabated: 18 January suicide bombing outside CPA HQ killed 25, and attacks across Iraq 31 January left at least 18 dead. 300 Coalition soldiers, including 253 Americans, killed by hostile fire since declared end of combat operations on 1 May 2003.

U.S. troops captured hiding Saddam Hussein 13 December, setting off both clashes and celebrations in Iraqi streets. Impact of capture on anti-Coalition insurgency still uncertain; at present, attacks continue unabated, with 22 Coalition soldiers killed by hostile fire since capture. Day after capture, car bomb exploded in town of Khaldiya, killing 17 policemen. Attacks in Karbala 27 December killed 12, including 4 Bulgarian soldiers, 2 Thai engineers. U.S. followed up capture with large-scale arrests, claiming better intelligence, including from documents found with Hussein, helping piece together structure of resistance. U.S. says no decision made on whether new Iraqi war crimes court will try Hussein. Anger at U.S. move to exclude countries who did not send troops from bidding on reconstruction contracts; France, Germany, and Russia nonetheless agreed to major write-off of Iraqi debt, as did Britain, Japan, and others. UN Secretary-General Kofi Annan called 15 January meeting with Governing Council and U.S. to seek clarity about role they thought UN might play; said in 10 December report that security situation made quick return unlikely. 261 Coalition soldiers, including 214 Americans, killed by hostile fire since 1 May, declared end of combat operations

Major revision of U.S. political plan for Iraq, as timetable for handing over sovereignty moved up and decoupled from constitutional process. Under new plan, provisional assembly to be selected by local councils by 31 May 2004, and assembly to elect executive by 30 June 2004, at which time Coalition Provisional Authority (CPA) to dissolve. Adoption of permanent constitution and holding of elections left till 2005. Iraq’s most powerful cleric, Grand Ayatollah Husseini Ali al-Sistani, called for elections in June 2004, but expected to compromise. New plan emerged amid mounting pressure in Washington for exit strategy. Anti-Coalition attacks said to have decreased toward end of month, but sophistication increasing; November bloodiest month since start of war. Two helicopters, and likely third, shot down by insurgents, killing 39. Attackers also targeting U.S. allies: Italian military police HQ, in Nasiriyah, bombed 12 November, claiming 25, including 19 Italians. Seven Spanish intelligence agents and two Japanese diplomats killed 29 November, and two South Korean civilians shot dead following day. Meanwhile, international exodus from Iraq continues: Spain announced withdrawal of diplomats 4 November, and CARE Australia pulled foreign staff after grenade attack on its office 22 November. 229 Coalition soldiers, including 189 Americans, killed by hostile fire since 1 May, declared end of combat operations.

UN voted unanimously 16 October in favour of U.S.- sponsored resolution authorising multinational, American-led force for Iraq. But resolution unlikely to result in major contributions. Turkey offered up to 10,000 troops, but strong resistance to potential Turkish military presence from Iraqi Kurds. Significant but insufficient cash pledged at Madrid donors conference. Resolution set 15 December deadline for Iraqi Governing Council to lay down timetable for drafting constitution and holding elections. Meanwhile, intense violence continues to plague country, predominantly Sunni triangle. Wave of suicide bombings struck Baghdad Red Cross building and police stations 27 October, first day of Ramadan, killing at least 35 and wounding over 200. Barrage of rockets hit Al-Rashid hotel 26 October, where Deputy Sec. Defense Paul Wolfowitz staying. Hundreds of other attacks kept tensions high throughout month. 131 Coalition soldiers, including 120 Americans, killed by hostile fire since 1 May, declared end of combat operations. National Security Council under Condoleezza Rice reportedly taking increased role in post-war stabilisation effort.

Vigorous diplomatic manoeuvring at United Nations as U.S. pushes resolution authorising multilateral force for Iraq and seeks help in bearing cost of reconstruction. U.S. president Bush failed to garner support from foreign leaders in two days of talks at UN. France urging quick turnover of power to Iraqis; U.S. says proposed timeframe unrealistic: Colin Powell announced six-month deadline for new Iraqi constitution, with elections to follow sometime in 2004. In Iraq, violence continued. Aquila al-Hashimi, member of Iraqi Interim Governing Council, died after being shot by gunmen on 20 September. Two days later, a second suicide bombing outside UN headquarters killed two. UN continues to withdraw staff from Iraq. 192 Coalition soldiers, including 172 Americans, have died since 1 May, declared end of combat operations.