The U.S. Embassy in Baghdad yesterday suspended all ground travel for its diplomats across Iraq following a deadly shootout over the weekend involving its private security guards from Blackwater USA.

The decision to ban U.S. government officials' movement in Iraq outside Baghdad's fortified Green Zone came as the Iraqi government vowed to challenge the immunity of private security contractors from prosecution under Iraqi law and review the operations of all such companies in Iraq.

The decision effectively halted Blackwater's operations because a main task of the company is to escort diplomats, including Ambassador Ryan Crocker. Embassy officials did not say whether they were seeking a replacement security company, but any extended suspension of travel could impair diplomats' work in Iraq, limiting their scope of direct influence to the walled Green Zone.

The crisis began Sunday when Blackwater employees guarding a U.S. State Department motorcade opened fire in downtown Baghdad, killing at least nine people and as many as 28, according to Iraqi officials. Several witnesses said in interviews yesterday that Blackwater guards fired without provocation and indiscriminately.

Iraq's Interior Ministry said Monday that it had revoked Blackwater's license and launched an investigation, with which U.S. officials said they would cooperate. Blackwater officials have said the employees acted "lawfully and appropriately" in self-defense.

The issue has raised fundamental questions over whether Iraq has the ability to regulate the use of force within its borders or whether U.S. officials can supersede that authority.

Iraqi government spokesman Ali al-Dabbagh said that civilian hired guns "should not have immunity" from Iraqi law. "We are a sovereign country, and there is no country in the world where security companies could move so freely without being subjected to local laws."

An order created during the tenure of the U.S.-led Coalition Provisional Authority, still in effect, gives immunity to civilian private contractors from prosecution in Iraqi courts.

The facts of Sunday's violence remain in dispute. Blackwater says the convoy through the Mansour district of western Baghdad came under attack by "armed enemies," prompting its employees to defend themselves. U.S. officials said an initial car bomb explosion near the convoy triggered the response.

But five witnesses at the scene of the shootout, including one man who was shot in his car, said in interviews that Blackwater guards opened fire without provocation and killed innocent civilians.

Around the traffic circle at Nisoor Square in Baghdad yesterday, bullet holes pocked lampposts, traffic lights and the concrete curbs painted yellow and white. The remains of a charred sedan lay on the sidewalk.

Traffic police officer Sarhan Dhia, 34, said he was standing under the Iraqi flags next to his white guard shack along the traffic circle when he saw the convoy of at least four armored vehicles approach, traveling against the flow of traffic. He said he jumped out into an intersecting street to prevent cars from entering the circle while the convoy passed. The next thing he knew, he said, gunfire erupted.

"There was no bombing," he said. "They were shooting everywhere."

A man in a white sedan near Dhia was shot in the head, he recalled.

"His mother was sitting right next to him. I heard her screaming. She was hugging her son and screaming," he said.

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