The row between Iraq and the US over security contractors intensified yesterday as Baghdad refuted the US version of a shooting incident and demanded the expulsion of the American Blackwater company.

As Nouri al-Maliki, the Iraqi Prime Minister, called on Washington to replace the private security firm involved in the deaths of at least 11 Iraqis.

8,000 US personnel were stranded inside the heavily fortified green zone in Baghdad after the Government ordered Blackwater to halt operations.

Mr al-Maliki said that the shootout “had generated a lot of hatred in the Government and the people” against the company, which guards all the top US officials in Iraq. Mr al-Maliki, who is due to meet President Bush at the UN General Assembly meeting in New York on Tuesday, also disputed Blackwater’s claim that the guards opened fire in self-defence.

A preliminary review by the Iraqi Interior Ministry found that security guards, while escorting US diplomats through Baghdad on Sunday, fired at a car when it did not heed a call to stop, killing an unarmed couple and their infant. An ensuing firefight left at least 11 Iraqis dead and 13 wounded.

The report also states that a Blackwater helicopter opened fire – a finding the company denies – and that 20 Iraqis were killed. The security firm employs about 1,000 people in Iraq and has the contract to protect American embassy staff in Baghdad.

Condoleezza Rice, the US Secretary of State, said that it was too early to tell what effect the ban would have on US operations. Officials insisted that 25 US-led reconstruction teams would be unaffected because troops would be drafted in to protect them.

Mr al-Maliki said that the firm’s version of events was “not accurate” and that the shooting was the “seventh of its kind” involving the American company. The incident has caused widespread anger in Baghdad and could jeopardise the future of the 30,000 foreign security contractors in Iraq. Fuelling the anger is that American security guards, under a 2004 US-drafted regulation, were granted full immunity from prosecution under Iraqi law. Iraqi officials said they now wanted that immunity rescinded.

Witnesses, including an Iraqi soldier, said that the guards opened fire first. They then threw nonlethal sound bombs to keep a crowd at bay. That drew fire from Iraqi soldiers and Iraqi police officers.

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