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BAGHDAD, Tuesday (AFP) As Iraqi leaders agree to try to form an interim government within a month, thousands of angry Shiites rallied demanding more influence over the country's future.

The Baghdad meeting of around 250 delegates with Jay Garner, the retired US general running Iraq, took place Monday, on the 66th birthday of toppled president Saddam Hussein, whose fate and whereabouts remain a mystery.

It also coincided with a trip to the Gulf by US Defense Secretary Donald Rumsfeld, who said US forces in the region could now be reduced.

Delegates in Baghdad agreed to hold a national congress within four weeks to elect the first Iraqi government since the fall of Saddam's regime on April 9.

The assembly, however, was split over the duration of the US occupation of Iraq.

"Hopefully, we will have this national meeting that will select or elect the interim authority," said Zalmay Khalilzad, the US envoy to Iraq's emerging political movements. "The decision here was to do the government within four weeks. There's a strong message to the coalition from the participants that an Iraqi government needs to be formed as quickly as possible," he said.

Shiite and Sunni religious leaders, Kurdish officials, tribal dignitaries, farmers and businessmen joined longtime exiles at the meeting, the second in a series of gatherings to map Iraq's political destiny.

"It is our responsibility to start the process of the birth of democracy in Iraq here today," Garner told the assembly.

But there were sharp divisions within the assembly over the duration of the US occupation, as well as the role Islam should play in a new government.

While some, including many exiles, appeared to favour a quick US exit, others who endured Saddam's brutal rule were sceptical over their own readiness to lead the nation. "We here prefer the Americans to rule us in the interim period. We are not ready to handle this yet," said Suheil al-Suheil, a Baghdad lawyer: "Saddam's orphans are still alive."

President George W. Bush vowed to see Iraq through to a full democracy, and said the US-led occupation was already improving the lives of Iraqis.

"Iraq can be an example of peace and prosperity and freedom to the entire Middle East," he said in a speech to a primarily Arab-American crowd in Dearborn, Michigan, where there is a large Iraqi community.

"It'll be a hard journey, but every step of the way, Iraq will have a steady friend in the American people," he said.

Bush's speech was aimed as much at the Middle East as the US Midwest. Yet many Iraqis have expressed frustration over the US-led military occupation, as well as the lack of a firm date for the forces to leave.

"We thank the forces that have freed us from the dictatorship," said tribal leader Hussein Shaanan, "but now we'd like them to leave as soon as possible." The Baghdad meeting had tremendous symbolic power for many Iraqis, falling on the day that has normally been reserved for massive state-backed demonstrations to mark Saddam's birthday during his 24-year dictatorship.

Joyous crowds in the Sadr neighbourhood of Baghdad subverted the orchestrated past birthday celebrations, dressing up a donkey as Saddam.

"For the first time in my life, I won't be forced to attend Saddam's birthday ceremonies. He was a dictator, he was nothing but a donkey ruling over Iraq," said Ali, a 24-year-old.

US forces have so far captured 13 of their 55 most wanted Iraqis, but it remains unclear if Saddam survived US bombing attacks aimed at him during the war.

As the leaders debated the future of Iraq, thousands of mainly Shiite Muslims rallied in Baghdad, in a further demonstration of their influence in postwar Iraq, where they make up 60 percent of the population. Led by dozens of religious leaders from the powerful Hawza Shiite school in the holy city of Najaf, they called for their own clerics to be given a role in running the country as they marched to al-Fardus Square, where Saddam's statue was toppled on April 9.

However Washington has rejected allowing a Shiite-led Islamic theocracy, similar to the system in neighbouring Iran, to take root in Iraq.

At US Central Command in Qatar, the US Defense Secretary announced that the United States will be able to reduce the size of its military forces in the Gulf now that Iraq no longer poses a threat.

Although no final decisions had been made, General Tommy Franks is thinking about changes in US basing requirements in the region, including a possible move of air operations command center from Saudi Arabia, he said.

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