BAGHDAD (Reuters) -- U.S. officials have withdrawn from the Saddam Hussein-era palace they occupied in Baghdad since 2003, a sign of the change of power when their troops were to come under Iraqi authority at midnight.
The U.S. force in Iraq, now more than 140,000 strong, has operated since 2003 under a UN Security Council resolution expiring at midnight on New Year's Eve. From January 1, U.S. troops operate with authority granted by the Iraqi government under a pact agreed by Washington and Baghdad.
The pact -- viewed by both countries as a milestone in restoring Iraqi sovereignty -- requires U.S. troops to leave in three years, revokes their power to hold Iraqis without charge, and subjects contractors and off-duty troops to Iraqi law.
Iraq also reached a deal with Washington's main ally Britain on December 30, giving its 4,100 troops until the end of July to depart. Small contingents from Australia, El Salvador, Romania, Estonia, and the NATO alliance will also leave in 2009.
U.S. and Iraqi officials were planning a ceremony for the morning of January 1 to formally hand over control of the Green Zone, the heavily fortified central sector of the capital that houses Western diplomats and Iraqi government offices.
In recent weeks U.S. diplomats have gradually moved into a newly built compound, the world's largest U.S. Embassy, leaving behind a sprawling yellow marble palace of ousted dictator Saddam Hussein, which looms over the Tigris River.
"The palace will be in the possession of the Iraqi government from January 1, 2009," U.S. Embassy spokeswoman Susan Ziadeh said of the ornate building, where Americans worked beneath garish frescoes depicting Hussein's arsenal of missiles.
U.S. officials ruled Iraq directly from the palace for more than a year after toppling Hussein in 2003, and it has remained a symbol of what many Iraqis consider a military occupation even as their nascent elected government has gained confidence.
Iraq's security spokesman for Baghdad, Major General Qassim Mussawi, said Iraqi forces would take responsibility for guarding the Green Zone, with U.S. troops acting in support.
After years of extreme sectarian violence, Iraq has become far less bloody over the past year, although militants still launch bomb attacks frequently targeting civilians.
In the ethnically divided northern city of Mosul, a base for Sunni militants, gunmen on December 31 killed a candidate running in provincial elections due at the end of January. A car bomb killed four people and wounded 45 in the nearby town of Sinjar.
U.S. officials expect violence to rise as the poll nears.
The U.S. military announced the deaths of two soldiers, bringing the total killed by hostile action in December to seven, still among the lowest tolls since the war began.
Iraq Body Count, a group which monitors media reports of civilian deaths, says 2008 was the least deadly year of a war that has killed at least 90,000 Iraqi civilians. The group still tallied an average of about 25 civilians killed per day over the course of 2008, mostly in the first half of the year.
Under the bilateral pact taking effect from midnight, U.S. combat forces will withdraw from Iraqi towns and cities by mid-2009 and all troops must leave by the end of 2011.
They will remain under U.S. command but will require authorization from a joint U.S.-Iraqi committee to carry out military operations and can arrest people only with warrants from Iraqi judges.
Some 15,000 prisoners held at U.S. military detention camps must either be charged with crimes under Iraqi law or set free, although the procedure for doing so may take many months.
Contractors working for U.S. troops will be subject to Iraqi criminal law, and U.S. soldiers can be tried in Iraqi courts in narrow circumstances for serious crimes committed off duty.