The Iraqi Prime Minister has warned that the security situation in his country is likely to deteriorate as American troops prepare withdraw this month.

Nouri al-Maliki spoke after it was confirmed that a car bomb yesterday in Batha, near the southern city of Nasariyah, had killed more than 30 people and injured 56.

He raised the prospect that sectarian militia could increase the frequency of their attacks in the absence of US troops. Under the terms of the Status of Forces Agreement (SOFA) they must leave cities, towns and villages by June 30. Mr al-Maliki told a group of ministers and generals: “The attacks will be stronger, they will try to give the impression that Iraqi forces have failed in their duty with the withdrawal of multinational forces approaching.”

The bombing was an attempt to stir up sectarian hostility, he said. Iraqi police reportedly arrested two men in connection with the bombing, one of whom was believed to be a member of al-Qaeda.

Security has improved vastly in Iraq in recent months, with the total of 124 Iraqi deaths from US violence in May the lowest since the 2003 invasion.

Bombings in April killed more than 100 Shia pilgrims in and around Baghdad, however, raising fears of renewed sectarian violence.

The planned withdrawal of US troops from Iraqi cities has been in doubt in some areas where violence still persists, but US and Iraqi forces insist that a full transfer will go ahead.

Meanwhile, Iraqi authorities have released one of five American contractors arrested by Iraqi security forces in Baghdad in connection with the murder of another American, a US Embassy spokesman said today.

Abdul Sattar Beraqdar, the spokesman for the Iraqi Supreme Judicial Court, told The Times that two more of the contractors had been released on bail due to insufficient evidence, although the US Embassy was not able to confirm this.

All five men, who are believed to work for Corporate Training, are still under investigation. It is thought that they are no longer being investigated on charges related to the death of Jim Kitterman, who worked in Iraq and was found dead in the Baghdad Green Zone on May 22.

Neither the US Embassy nor Iraqi authorities would comment on reports that the men were being investigated on drugs charges.

The men were arrested on June 3. They were the first Americans to be held by Iraqi security forces since the SOFA agreement signed at the end of least year came into force and removed the immunity of US contractors from arrest by Iraqi police.

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