Events in mid-June sent out mixed signals on the prospects of imminent peace in Iraq. Radical Shia cleric Moqtada al-Sadr ordered his militiamen to lay down their arms, while Grand Ayatollah Ali Sistani moved to mend fences with the Kurds. But the period was also marked by bomb attacks and assassinations of senior officials.

Al-Sadr on 16 June delivered on a ceasefire agreement with US forces, issuing an edict telling his Mehdi Army to 'return to their provinces' from Najaf and nearby Kufa, the centres of a two-month uprising by his supporters against the occupying forces. The cleric has given a cautious welcome to the transitional government due to assume power on 30 June, and dissuaded followers from attacking local security forces in a sermon on 11 June. Al-Sadr has even indicated ambitions to join mainstream politics. However, new Iraqi Prime Minister Iyad Allawi decreed in early June that candidates associated with paramilitary organisations would be barred from standing in future elections.

Sistani dispatched a delegation in mid-June to visit Kurdish leaders in the north of the country to rebuild relations damaged by arguments in March over the draft constitution. Allawi said during recent debates at the UN that the dispute over the rights of the three Kurdish provinces to exercise an effective veto over legislation had been resolved.

However, the outbreak of peace has yet to reach the troubled city of Fallujah. Hard on the heels of a stand-off between US forces and local fighters in April, six Shia drivers from Baghdad were killed by Sunni militants in early June. Their funerals in the capital on 15 June sparked protests by the Shia community, vowing revenge for the deaths. Baghdad itself remains a dangerous place. More than 30 Iraqis were killed on 17 June when a suicide bomber targeted a crowd of potential recruits to the fledgling local security services. Deputy foreign affairs minister Bassam Qubba was assassinated in the city on 12 June. The dangers of high office were emphasised four days later when the head of security for the northern oil fields, Ghazi al-Talabani, was shot dead in Kirkuk.

Relations between the US authorities and Iraqis also remain fraught in the wake of the Abu Gharib prisoner abuse scandal, which is beginning to appear more akin to official policy than the work of a few rogue individuals. The extent of ill-treatment shown in the well-publicised photographs was shocking. But senior US military officials have been forced to acknowledge that harsh interrogation techniques were sanctioned.

A poll in mid-June by the Coalition Provisional Authority (CPA) found that the majority of Iraqis believed the country would be a safer place if the Americans left and that the behaviour illustrated by the prison photographs was typical. The CPA accepted the result with resignation. '[The poll] reflects the fact that Iraqis, like most people, don't like to be occupied,' said CPA spokesman Dan Senor in a televised interview. 'Of course Iraqis don't feel safe, and of course they say that it is happening under our watch.'

Potential for tension between Washington and the sovereign Iraqi government is also arising over the fate of former president Saddam Hussein, who has been in American custody since December. US President Bush told reporters on 15 June that he would not be handed over to face trial by his compatriots until the security situation improved. However, Allawi has said that he should be surrendered before the transfer of sovereignty.

Within Washington, the debate over the reasons for going to war has resurfaced. A cross-party commission charged with investigating the 11 September terrorist attacks issued preliminary findings on 16 June. Not only did it find no credible evidence of Iraqi involvement with Al-Qaeda, the panel also said that the terrorist network had sounded out Saddam Hussein's regime about collaboration in the mid-1990s, and had been rebuffed.