A shaky peace settled on the holy city of Najaf in early September, following the ceasefire between the security forces and followers of Shia cleric Moqtada al-Sadr. However, the spate of hostage-taking incidents besetting the country took a particularly violent turn, as 12 Nepalese workers were executed by a militant group calling itself the Army of Ansar al-Sunna. In spite of the continued unrest, the transitional national assembly managed to gather for the first time.

Sporadic fighting continued between the authorities and Al-Sadr's Mehdi army in Baghdad's Sadr City district and elsewhere, but on nothing like the scale of the month-long battle for Najaf's Imam Ali shrine. The star of leading Shia cleric Grand Ayatollah Ali Sistani is high after he brokered the truce with Al-Sadr and was handed the keys to the mosque.

However, the standing of interim Prime Minister Iyad Allawi has not been helped by his government's failure to reach a deal with Al-Sadr. Instead, Allawi accepted the five-point peace plan agreed by the two clerics. Provisions included the Mehdi army leaving the shrine and disarming in Najaf and Kuf and the handover of security control to local rather than US forces. Aides to Al-Sadr said that their leader was again considering a move into the mainstream political arena.

The political process took a further step forward with the convention of the transitional national assembly on 1 September for its inaugural four-day session. A president, two vice-presidents and other senior figures were due to be appointed and sworn in. Ahmed Chalabi, head of the Iraqi National Congress and a former Pentagon favourite, attended the gathering in Baghdad. However, he had a narrow escape en route when his car was ambushed by gunmen. Chalabi was unhurt in the attack, but several of his companions sustained injuries.

Lawlessness continues to plague the country, leading in late August to the first admission by US President Bush that he had miscalculated the scale of the post-war challenges. Several militant groups have delivered on their threats to kill foreign hostages. But the scale of the slaughter on 31 August of the Nepalese civilians, reportedly in Iraq to seek work, marked a new departure, as did the fact that no demand was made of the Nepalese government. The deaths sparked attacks against Arab and Islamic targets in Kathmandu.

Another change of direction emerged with the kidnap of two French journalists on 28 August. Rather than seeking to alter Paris' policy on Iraq, the Islamic Army of Iraq took aim at French domestic policy. The two are being threatened with execution unless the government lifts a ban on the wearing of headscarves by Muslim pupils in French schools. On 27 August, a different group executed Italian journalist Enzo Baldini after Rome refused to withdraw its contingent of coalition troops. Seven truck drivers employed by Kuwait's Gulf Link Transport Company were released on 1 September after their captors abandoned political demands and accepted a ransom payment by the firm. The men were seized in July.

Washington continues to blame suspected senior Al-Qaeda member Abu Musab al-Zarqawi for orchestrating such incidents. US fighter jets on 2 September launched a missile strike against a house in Fallujah believed to be used by his associates, killing more than a dozen people. Several children were reported to be among the dead.