The US military today published a photograph of the Egyptian named to succeed Abu Musab al-Zarqawi as the leader of al-Qaeda in Iraq.

The image was released as the Pentagon confirmed a grim milestone - 2,500 American troops have died in the Iraq war since it began more than three years ago. There was no information on the identity of the 2,500th victim.

The latest death came as Congress agreed to a spending bill allocating a further $66 billion to pay for overseas military operations, bringing the total bill for the war in Iraq to $320 billion.

President Bush gave an upbeat assessment of the situation in Iraq after returning from a surprise visit to Baghdad determined that the tide was beginning to turn - although he has resisted calls from Congress to set a timetable for the withdrawal of some 130,000 troops.

According to the Pentagon totals, there have been 1,972 service members killed in action in Iraq, and another 528 died from other non-hostile causes. There have also been 18,490 troops wounded in action, including 8,501 who did not return to duty.

Al-Zarqawi, the Jordian terror chief renowned for his brutality, was killed in a US air strike on an al-Qaeda safe house last week.

Major-General William Caldwell, the chief spokesman for US forces in Baghdad, said that the new leader, Egyptian-born Abu Ayyub al-Masri, also known as Sheikh Abu Hamza al-Muhajer, was believed to be operating out of Baghdad.

He said al-Masri was believed to have become a militant in 1982 when he joined the Egyptian Islamic Jihad, once led by Ayman al-Zawahiri, the al-Qaeda No 2. Al-Masri met al-Zarqawi in

Afghanistan in 1999, when they were both at the Al-Faruq training camp where he became an explosives expert, something General Caldwell said made him the premier manufacturer of car bombs in Iraq.

"He eventually made his way back to Iraq after the fall of the Taleban," he said.

In Iraq, al-Masri originally worked with Zarqawi in the former insurgent stronghold of Fallujah before moving south of the capital and becoming the al-Qaeda leader for the south.

"Raids in April and May of this year in the area of southern Baghdad recovered some materials confirming his high-level involvement in the facilitaton of foreign fighters and attacks in Baghdad itself," the general added.

Al-Masri currently has a $200,000 bounty on his head and is expected to continue to follow al-Zarqawi’s tactics of targeting civilians.

General Caldwell emphasized that it was still not absolutely certain that Masri had taken over the organization or if he would be able to command the same loyalty as al-Zarqawi.

Two possible rivals were cited. One was Abdullah bin Rashed al-Baghdadi, the head of the Mujahedeen Council of insurgent organisations, which includes al-Qaeda. The other was Abdel Rahman al-Iraqi, whose name has appeared on the organisation’s websites.

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