Baghdad, Iraq ? Iraq’s new leaders reclaimed their nation two days early, accepting limited power Monday from U.S. occupiers, who wished them prosperity and handed them a staggering slate of problems — including a lethal insurgency the Americans admit they underestimated.

With the passing of a sheaf of documents and a prime minister’s oath on a red Quran, the land once ruled by Saddam Hussein received official sovereignty from U.S. administrators in a secretive ceremony moved up to thwart insurgents’ attempts at undermining the transfer.

“The Iraqi people have their country back,” President Bush said at a NATO summit in Istanbul, Turkey.

On paper, the U.S.-led Coalition Provisional Authority granted power to Iraq’s interim government at 10:26 a.m., 467 days after the U.S. invasion began. The reality is more complicated: Some 145,000 foreign forces — most of them American — remain in charge of keeping rebellion at bay.

There were no major attacks throughout the day. But Al-Jazeera television reported early today that militants had killed a U.S. soldier held hostage since early April. It was not known when the American was killed. And after nightfall Monday, four heavy explosions rang out in central Baghdad, near the U.S.-held Green Zone — a near daily occurrence in the capital. The military said there were no injuries in the blasts, which were caused by mortar fire.

U.S. officials depart

The U.S. civilian authority, which rode in on a swift military victory that swept away Saddam’s generation-long regime, withdrew quietly. Its leader, L. Paul Bremer, left Iraq aboard a military plane two hours after the transfer and was swiftly succeeded by U.S. Ambassador John Negroponte.

Hours later, NATO leaders agreed to help train Iraq’s armed forces — a decision that fell short of U.S. hopes that the security alliance would take a larger role in Iraq.

The shift of authority was held in Baghdad’s heavily guarded Green Zone against a backdrop of Louis XIV furniture and a row of Iraqi flags — the same green-black-red banner that flew over the nation while Saddam was in power.

“Please let us not be afraid of those outlaws that are fighting Islam,” interim Prime Minister Iyad Allawi said in his inaugural address. “Some of them have already gone to the fires of hell and others are waiting their turn.”

Restrained celebration

On the streets of the Iraqi capital, there was no sign of unusual activity or celebratory gunfire.

Iraq’s tentative step toward democratic rule will operate under major restrictions — some imposed at the behest of the country’s influential Shiite Muslim clergy, which wanted to limit the powers of an unelected administration.

The interim government will hold power for seven months until, by U.N. Security Council resolution, elections are held “in no case later than” Jan. 31. The Americans retain responsibility for security.

Bush raised no objection to Allawi’s possibly imposing martial law in Iraq or other hard-line measures to deal with the insurgency, including Abu Musab al-Zarqawi, the most wanted militant in the country.

“He may take tough security measures to deal with Zarqawi, but he may have to,” Bush said. “Zarqawi is the guy who beheads people on TV. He’s the person that orders suiciders to kill women and children.”

Some world leaders expressed cautious enthusiasm at the developments. German Chancellor Gerhard Schroeder, an outspoken opponent of the U.S.-led invasion, sent congratulations and offered “trusting collaboration.” Jordan’s King Abdullah II praised a “landmark in history of Iraq.”

Others said the event was a sham. “Occupation will wear a new dress,” said Syrian political analyst Haitham Kilani.

Ali Hussein Ali, a retired teacher, held blue prayer beads as he played dominoes at a Baghdad cafe.

“People are afraid to express their happiness,” Ali said. “When security prevails, Iraqis will be very happy. They will celebrate when the American troops leave and when they are no longer taking orders from the Americans.”