U.S. vacates Baghdad palace ahead of handover

The U.S. force in Iraq, now more than 140,000 strong, has operated since 2003 under a U.N. Security Council resolution which expires at midnight on New Year's Eve. From January 1, U.S. troops will 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 Tuesday 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 are planning a ceremony for the morning of New Year's Day 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, which looms over the Tigris River.