IRAQ - Sept. 9 - Iraq Seizes Local Al-Qaeda Deputy.

Iraq says it arrested the country's second most senior figure in al Qaeda, "severely wounding" an organisation the US military says is spreading sectarian violence that could bring civil war. The announcement came as talks between the US and Iraq on transferring operational command of Iraq's forces to the Defence Ministry were deadlocked. PM Nuri al-Maliki was demanding more independence for the US-trained army that Washington hopes can take over and let Americans go home. Maliki was also at loggerheads with the leader of ethnic Kurds, who brandished the threat of secession in a growing row over the symbolic issue of flying the Iraqi national flag at government buildings in the autonomous Kurdish north. Hours after an "embarrassed" US military again postponed a ceremony to hand command of Iraqi troops to the government, the National Security Adviser Mowaffak al-Rubaie summoned reporters to a hastily arranged news conference to announce that Al Qaeda leader Hamid Juma Faris al-Suaidi had been seized some days ago. Hitherto little heard of, and also known as Abu Humam or Abu Rana, Suaidi was captured hiding in a building with a group of followers. "Al Qaeda in Iraq is severely wounded", Rubaie said. He said Suaidi had been involved in ordering the bombing of the Shi'ite shrine in Samarra in February that unleashed the wave of tit-for-tat killings now threatening civil war. Iraqi officials blame al Qaeda for the attack. The group denies it. Rubaie did not give Suaidi's nationality. He said he had been tracked to the same area north of Baghdad where US forces killed al Qaeda's leader Abu Musab al-Zarqawi in June. "He was hiding in a building used by families. He wanted to use children and women as human shields", Rubaie said. Little is publicly known about Suaidi. Rubaie called him the deputy of Abu Ayyub al-Masri, a shadowy figure, probably Egyptian, who took over the Sunni Islamist group from Zarqawi. The US military says al Qaeda is a "prime instigator" of the violence between Iraq's Sunni minority and Shi'ite majority but that US and Iraqi operations have "severely disrupted" it. Despite these reported successes, violence continues. A bomb in a market store killed four people and wounded 19 in the religiously mixed town of Khalis, north of Baghdad. Exactly a week ago, a bomb exploded inside a food market in Khalis and in the evening gunmen stormed the market in attacks that killed more than 20 people. A Pentagon report said this week attacks had risen by 24 percent in the past three months as violence spread north beyond Baghdad. Iraqi casualties soared by 51% over the quarter. Washington is anxious for Iraq's army to take over security and pave the way for a withdrawal of its 140,000 troops. But a handover ceremony on Sept 9 was postponed at the last minute, first to Sept 10, then indefinitely, after a dispute emerged between the government and Washington over the wording of a document outlining their armies' new working relationship. "There are some disputes", an Iraqi government source said. "We want thorough control and the freedom to make decisions independently". US spokesman Lt Col Barry Johnson played down any arguments and expected a signing soon: It is embarrassing but it was decided it was better not to sign the document". Practically, US troops remain the dominant force. Their tanks entered the southern, Shi'ite city of Diwaniya on Sept 10. The show of force came a week after Shi'ite militiamen killed 20 Iraqi troops in a battle that highlighted violent power struggles between rival Shi'ite factions in the oil-rich south. Maliki's Arab Shi'ite-led government was also locked in a dispute with the autonomous Kurdish regional government, which has banned the use of the Iraqi state flag on public buildings. The PM issued a blunt statement on saying: The Iraqi flag is the only flag that should be raised over any square inch of Iraq". But Massoud Barzani, president of the Kurdistan region, told the Kurdish parliament the national leadership were "failures" and that the Iraqi flag was a symbol of his people's past oppression by Baghdad: If at any moment we, the Kurdish people and parliament, consider that it is in our interests to declare independence, we will do so and we will fear no one". The dispute exposes a widening rift between Arabs and Kurds, the second great threat to Iraq's survival as a state after the growing sectarian conflict between Arab Sunnis and Shi'ites.