By Waleed Ibrahim and Tim Cocks
BAGHDAD (Reuters) - U.S. forces in Iraq came under an Iraqi mandate on Thursday, an event the country's leader said had finally restored Iraq's sovereignty nearly six years after the invasion that toppled Saddam Hussein.
In one immediate change, U.S. forces handed over responsibility to Iraqi troops for the Green Zone, a fortified swathe of central Baghdad off limits to most Iraqis, who widely view it as a symbol of foreign military occupation.
Prime Minister Nuri al-Maliki declared the day a national holiday in a ceremony at central Baghdad's Republican Palace. The lavish marble building looming over the banks of the Tigris -- the U.S. political headquarters in Iraq since 2003 -- was handed over to the Iraqi government at midnight.
"A year ago, anyone who thought this day would happen would have been seen as a dreamer. Now the dream has come true," Maliki said. "This is the day we have been waiting for ... Sovereignty has been restored."
While violence has dropped sharply, Iraq's security remains fragile, a fact underscored on Thursday by a suicide attack in the northern city of Mosul that killed three policemen. Five civilians were wounded in the attack.
The U.S. force in Iraq, now more than 140,000 strong, had operated since 2003 outside of Iraqi law under a U.N. Security Council resolution which expired at midnight on New Year's Eve.
The U.N. authorisation was replaced by one granted by Iraq's government, giving it say over the international troops on Iraqi soil for the first time since the fall of Saddam Hussein.
The pact gives U.S. troops three years to leave Iraq, revokes their power to detain Iraqis without charge, and subjects contractors and some U.S. troops to Iraqi law, tough terms secured last year by an increasingly confident Maliki.
U.S. troops across Iraq remain under U.S. command but their operations must now be authorised by a joint committee. They can detain Iraqis only with a warrant from an Iraqi judge and are to leave the streets of Iraqi towns and cities by mid-2009.
Some 15,000 prisoners held at U.S. military detention camps must now be charged with crimes under Iraqi law or freed.
Over recent weeks U.S. officials vacated the Republican Palace, where for years diplomats sipped lattes at a cafe beneath ceiling frescoes of Saddam's missile arsenal. They have decamped to a newly built U.S. embassy, the world's largest.
The handover of the Green Zone was marked at a small ceremony on a street surrounded by concrete blast walls and razor wire, where an Iraqi band played bagpipes.
"The armed forces ... are able to take full responsibility, so ... Iraq again will be secured by the hands of its own citizens," Defence Minister Abdel Qader Jassim told dignitaries assembled under a marquee festooned with tinsel and balloons.
Colonel Steven Ferrari, the commander responsible for U.S. troops in the Green Zone, said the U.S. military and Iraqi government would seek to cut the 14,000 U.S. troops and private contractors working in the zone by about half over 2009.
U.S. forces would train Iraqis and jointly man checkpoints in the zone "until at some point they're ready to take over fully and we'll begin to draw down," he said.
Iraqi officials say they will be cautious in opening up the Green Zone -- which contains government buildings as well as Western missions. Private mini-armies of Peruvian and Ugandan guards who patrol the zone will remain in place until September.
In a separate ceremony in the southern city of Basra, British troops turned over control of the airport to Iraqis.
Britain, the main U.S. ally in Iraq, has signed its own pact requiring its 4,100 troops to leave in seven months, ending its biggest military campaign since World War Two.
"The security situation (in Basra) is good and improving quickly," said British commander Major-General Andy Salmon.
Iraqi forces take over a dramatically different Iraq from the one ravaged by sectarian violence in 2006 and 2007.
Attacks have dropped sharply, thanks partly to an increase in troops ordered by President George W. Bush in 2007 and also to newfound cooperation from Sunni Arab tribal leaders.
But militants continue to strike with bombs that often target civilians. According to Health Ministry figures, 5,379 civilians were killed during 2008, less than a third of the 16,232 killed in 2007 but still an average of nearly 15 a day.
In December, 238 civilians were killed. During the height of fighting two years ago, monthly tolls often ran close to 2,000.
This month will see provincial elections that U.S. and Iraqi officials bill as a milestone towards democracy. But Iraq remains deeply scarred. Baghdad neighbourhoods are divided by concrete walls. Millions who fled have yet to return home.
Majid Mola, an engineer, dismissed as meaningless the handover billed by Maliki's government as a major victory.
"Where are the government services? Where is the electricity? People want practical things," he said.
(Additional reporting by Khalid al-Ansary in Baghdad and Aref Mohammed in Basra; Writing by Tim Cocks; editing by Peter Graff and Mark Trevelyan)