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Eyewitnesses said the complex in the heavily fortified green zone in the heart of Baghdad was hit by a rocket. One of the dead was a civilian, the other a sailor, an embassy official said. Four others were wounded, all of them Americans.
The explosion, which could be heard across the city centre, came less than 12 hours before the polls opened amid intense security early today in Iraq’s first multi-party election for half a century.
In the south of the country, British troops were on alert for 20 stolen lorries believed to be heading for Basra. It was feared that they could be used in a bombing campaign aimed at disrupting voting.
Police said the lorries and a number of cars had been seized in Karbala, southwest of Baghdad, and there was concern that they might be packed with explosives. Details were passed to officers from No 2 Company the Welsh Guards and a warning was issued to checkpoints around Basra.
Troops were also told to look out for terrorists using stolen ambulances, horse carts and even bicycles to get round a ban on the movement of cars.
The warnings were issued after more than 200 soldiers from the 1st Battalion the Scots Guards smashed a separate plot to blow up polling stations in the city.
They found explosives and weapons in four homes after coming under fire from insurgents hiding only 150 yards from one station. The raids, carried out jointly with the Iraqi army and codenamed Operation Cauldron, resulted from a tip-off.
The green zone in Baghdad has been a frequent target of rocket and mortar attacks in the past year. The US embassy was hit by mortar fire that wounded two people last August. Five American and Iraqi civilians died when a cafe and souvenir market near the embassy were bombed simultaneously in October.
A US spokesman said the rocket last night struck an embassy annexe in Saddam Hussein’s former Republican Palace, where most staff work.
The Iraqi interior ministry revealed yesterday that hundreds of suspected insurgents had been detained in the run-up to the election, in which up to 14m people are eligible to vote.
Iyad Allawi, the interim prime minister, appealed to Iraqis of all ethnic backgrounds to turn out in defiance of repeated threats from insurgents to kill voters. “They should take part because this is their future in the making and people have to take their fate in their own hands,” he said.
The scale of the task facing the 174,000 coalition troops who will join forces with 130,000 Iraqi soldiers and police to protect the electorate was emphasised earlier yesterday when at least 17 people died in bombings and rocket attacks. In the worst incident eight were killed in the suicide bombing of a police station in the town of Khanaqin, northeast of Baghdad.
Several polling stations were hit by mortar rounds, rocket-propelled grenades and automatic gunfire. A guard outside one station in Sharqat, near the northern city of Mosul, died when insurgents detonated explosives in a donkey cart.
Elsewhere, three Iraqi contractors working for US forces were found shot dead a week after being abducted; a woman and a child died when mortars fired at a US base hit their home instead; and American soldiers killed two Iraqis in a car near the western city of Ramadi.
President George Bush warned that the election would not put an end to terrorist violence in Iraq, but said the vote would mark the beginning of peace, stability and prosperity.
Insurgents’ leaders appear to be considering new tactics after the election, to increase pressure on Bush and other leaders who ordered troops into Iraq. According to a 30-page document on an Al-Qaeda website, they plan “large-scale military operations which will force the occupiers to send more and more troops to Iraq”. The document’s author says this will cause criticism in the troops’ countries and “might bring the end of the occupation ”.
However, last night one Iraqi citizen spoke for many when he expressed his determination to vote. Mohammed al-Timman, who was jailed for 3½ years under Saddam’s regime for selling more than his allocated quota of flour, said: “Democracy means freedom, and for that we must participate.”
Michael Evans is defence editor of The Times
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