Wreckage of an Iraq policy

The head of the American-appointed Iraqi Governing Council was assassinated in a car bombing in central Baghdad yesterday, delivering a stunning blow to the United States administration's policy in Iraq, just weeks before it plans to hand over sovereignty to a new Iraqi government.

The head of the American-appointed Iraqi Governing Council was assassinated in a car bombing in central Baghdad yesterday, delivering a stunning blow to the United States administration's policy in Iraq, just weeks before it plans to hand over sovereignty to a new Iraqi government.

Izzedin Salim was killed at the entrance to the green zone, the US headquarters in Baghdad and the most heavily guarded place in Iraq, and US forces were powerless to prevent it.

The Americans also said they found a trace of a chemical weapon in Iraq. US forces said a roadside bomb that exploded near an American convoy contained a shell which gave off a small trace of sarin nerve gas, a single drop of which can cause quick, agonising death.

Brigadier General Mark Kimmitt, the chief military spokesman in Iraq, said he believed the insurgents who rigged the bomb did not know it contained the nerve agent. To disperse the sarin, it would need to have been fired from an artillery piece. The shell is believed to be a stray relic overlooked when Saddam Hussein said he had destroyed his chemical weapons in the 1990s.

There are few more potent symbols of the disaster that the occupation is turning into than the burning and twisted wreckage of cars that lay outside the green zone yesterday.

More than a year after the fall of Saddam's regime, and 44 days before they plan to hand over sovereignty, the Americans cannot protect the head of their appointed government on the doorstep of their headquarters in Baghdad. It bore all the hallmarks of an assassination. The suicide bombers knew the time Mr Salim's car would pass through the series of checkpoints to enter the green zone. Witnesses said a red Volkswagen was waiting outside the checkpoint, and a driver inside detonated explosives just as Mr Salim drove up.

"All I could see was a ball of fire rising into the air and there were body parts all around. We picked up the pieces and some of them were burnt," said Abdul Razaq Abdul Karim, a gardener who was on a street near by. Some witnesses spoke of a second car bomb.

As well as Mr Salim, seven other Iraqis were killed in the blast and ensuing fire, which was so hot it melted the tarmac of the road. Five of the dead were members of Mr Salim's entourage; the other two were members of the Iraqi security forces. Two American soldiers were wounded, along with 14 Iraqis and one Egyptian. There was a claim of responsibility from a previously unknown group, the Arab Resistance Movement, which said the attack was carried out by its al-Rashid Brigades, and that it killed "the traitor and mercenary Izzedin Salim".

Mr Salim is the highest-ranking Iraqi official to have been killed under the occupation and the second council member. It appears almost certain he was targeted because of his role at the head of the council. The council was set up by the Americans to give a semblance of Iraqi involvement in running the country, but its powers have been strictly limited.

It is due to be disbanded and replaced with an appointed government of technocrats, as part of the planned handover on 30 June. The killing appeared to be a warning from the bombers of what awaits the government. Members of the council have been repeatedly denounced as "collaborators" by Iraqis, most recently over their decision to replace the Iraqi flag with a new design said by critics to resemble the Israeli flag.

The council members could not agree on a permanent president; the position is held on a rotating basis by different members for a month each. Mr Salim was only president for May.

He was on his way to the daily meeting of the council inside the green zone, a huge area of central Baghdad around Saddam's former palaces where the US has set up its headquarters. It is cordoned off with blast walls of 10ft-tall concrete blocks.

To get inside, Mr Salim and other council members had to pass through three checkpoints, the first two manned by Iraqi security forces, and the last by American soldiers. All cars and passengers are meticulously checked. But the bombers knew the weak spot: the council members would have to queue up outside while they waited to pass. At least two other council members are believed to have been passing the checkpoints when the bombers struck, but they escaped unharmed.

The timing of the attack suggests that the bombers had inside information. It was the latest in a series of attacks that indicate that whoever is behind attacks on US forces and their Iraqi allies has advance knowledge about officials' schedules. There have been several spectacular near-misses, including a missile attack on the hotel where the US deputy defence secretary, Paul Wolfowitz, had beenstaying.

The Bush administration is facing accusations that the "handover" on 30 June will be purely cosmetic, allowing it to claim, before November's presidential election, that the occupation of Iraq is over. Colin Powell, the Secretary of State, let the cat out of the bag at the weekend when he said the handover was "so that it no longer looks like an occupation".