Tensions between US-led occupation authorities and Iraq's residents came to the fore yesterday as the government in the country's second-largest city was dismissed amid rising popular discontent.

But the top US civilian administrator, Paul Bremer, struck a more hopeful note on a visit to Iraq's only deep-water port at Umm Qasr, where he examined reconstruction efforts, and some public service workers were paid.

Bremer declared Iraq "open for business" as he watched ships unloading food aid just a few days after the lifting of UN sanctions.

"I think this is really a wonderful indication of how things are getting better in Iraq," he said: "What you see here is the first major food shipment in the first Iraqi port that is back under civilian management. It is a sign that Iraq is open for business".

Winding up his first two weeks on the job, which have seen him launch a flurry of initiatives after Washington felt his predecessor Jay Garner was moving too slowly, Bremer was cheered by workers on the Umm Qasr dockside.

In nearby Basra, British forces announced they would replace an Iraqi city council that had been hailed as a model of post-war cooperation with a committee of technocrats chaired by a British military commander in order to make it non-political.

The decision provoked an angry reaction from the 30-member council, which is headed by a local tribal chief and has laboured to re-establish civic order in the southern metropolis.

And in the northern city of Kirkuk a US commander also risked raising local hackles when he swore in six members of the local council whose nominations had been contested on grounds they were mostly from the majority Kurdish community.

The nomination by US officials of the six councilors – four Kurds, one Turkmen and one Assyrian, appointed to a council of 30, whose other members were elected, had brought protests from the minority Arab community.

In another headache for the US forces, the pro-Iranian Ayatollah Mohammed Baqer al-Hakim, a leading Shiite cleric who returned from exile earlier this month, lashed out at the US presence as he visited the holy city of Karbala for the first time in 23 years.

"Why is the running of the country and the government not transferred to Iraqis? Are they still minors who cannot govern their country?" he asked at the domed Imam Hussain mosque, one of Shiite Islam's holiest shrines.

At least some of the efforts by Bremer appeared to be bearing fruit, though.

The US-led administration has begun to pay state employees' salaries, and rubbish collection has started around Baghdad, where endemic looting and violence has marred the postwar outlook.

The payments to Iraq's civil workers, the first payment of back wages since the US coalition took control of the country on April 9, came amid mounting local frustration.

Meanwhile, French President Jacques Chirac, whose unapologetic stance against the war angered the White House and sparked a major trans-Atlantic rift, appeared to try to soothe frayed nerves ahead of a Group of Eight summit at Evian, in southeastern France June 1-3.

He urged G8 leaders to focus on kick starting global growth at the summit, saying in an interview with the Financial Times that all member states shared the same economic values despite differences over Iraq.

"What we have got to make clear to the world (is that) we are determined to use all our energy to work together," Chirac said in the interview published today.

Chirac will meet with US President George W Bush at the summit, as well as at the tri-centennial celebration of Saint Petersburg.

On the oil front, Iraq's extraction industry appeared to be waking up from its comatose state after the UN Security Council lifted the country's 13-year-old sanctions last week.

Iraq's largest refinery complex in the northern town of Baiji is close to getting back to full capacity, officials said yesterday, but problems with the power supply still have to be resolved.

Ryad Ghassab, the director of the state-run Northern Oil Refineries Company, said that output at the plant, which accounts for half of the nation's refining capacity, is now at 250 000 barrels a day (bpd) and could reach "full capacity" - some 290 000 bpd - "if we can have a stable power supply.

In Baghdad, the acting head of the nation's oil ministry, Thamir Ghadhban, said he hoped Iraq would be back on the international market in two weeks.

And he tried to assure anti-war countries like France and Russia that they would not be shut out of lucrative oil contracts.

The International Committee of the Red Cross, meanwhile, paid its first visit to prisoners held by the coalition in the Baghdad region, including many from the most-wanted list of 55 former Iraqi leaders.

French newspaper Le Journal du Dimanche claimed that one of Saddam Hussein's cousins, Special Republican Guard chief Maher Sufian al-Tikriti, betrayed the deposed Iraqi leader by ordering his elite forces not to defend Baghdad after making a deal with the US.

The paper quoted an Iraqi source close to Saddam's former regime to say the general, responsible for defending the Iraqi capital, left Baghdad aboard a US military transport plane, bound for a US base outside Iraq.

And Time magazine reported today that one of Saddam's sons had tried to contact US occupation officials in Baghdad through an intermediary to negotiate a safe surrender.

A relative of Saddam had approached an intermediary asking the US if Uday Hussein could "work out something" or "get some kind of immunity". – Sapa-AFP.