Sahwa or Awakening Councils have been a critical factor in the fall in violence
By Andrew North
BBC News, Baghdad
Thousands of members of local militias set up by the Americans to provide neighbourhood security and fight against al-Qaeda's Iraq franchise are now being paid by the Iraqi government - a key test of what is a cornerstone in US efforts to restore stability.
The US military is highlighting the transition of what it calls the Sons of Iraq programme, saying it is proof the Iraqi authorities are "keeping their word".
What the Iraqis call Sahwa, or Awakening Councils, have been a critical factor in the fall in violence over the past year.
Many of these men are former Sunni insurgents, but with the promise of regular jobs they have switched sides.
However, some Sahwa leaders have complained their pay has been cut, and some still doubt the Iraqi government's commitment to re-integrating these men.
Although it has publicly backed the US programme, some in the Shia-dominated government remain suspicious of Sahwa members because of their past, fearing they could present a future threat.
Over a year ago, a senior government official speaking to the BBC described the Sahwa militias as "a baby crocodile which will eventually bite us".
However, over the past few days - under the close watch of US forces - Iraqi officials have handed out millions of Iraqi dinars in payments to almost all the 26,000 registered members of these local militias in Baghdad.
Most Sahwa members received 354,000 Iraqi dinars, equivalent to $300 - the same monthly payment they had before from the Americans.
Several thousand others have been paid outside Baghdad and the plan is for all the estimated 100,000 Sahwa militiamen to be on the Iraqi payroll by early next year.
Because of past irregularities, only Sahwa members who show up get paid
Leaders in several Baghdad districts are unhappy though - including some in especially violence-prone areas - because salaries have been reduced to the same level as their men.
"I used to get $340 a month from the Americans, now they are paying me $300 like everyone else," said Mahir Nidawi, a mid-level Sahwa commander in Adhamiyah, where al-Qaeda used to have a tight grip.
The BBC heard similar complaints from two other old hotspots - the southern Baghdad suburb of Dora and Fadl, both of which have seen heavy sectarian clashes.
The deputy commander in Fadl, Ali Adbul Razzaq, said he was $150 short on his usual $450 pay packet. He warned there would be "trouble" if the difference was not made up.
But the US military spokesman for Baghdad, Lt Col Steven Stover, called these underpayments a temporary "speed bump" in the transition, because in some areas the "Iraqi army didn't draw enough money".
The leaders will get their missing cash soon, he said. "Every indication is they [the Iraqi government] are keeping their word."
And, he points out, "everyone is watching".
The key test is whether the government makes good on promises to give jobs in the police and army to the better qualified Sahwa members, and help for the rest in getting civilian jobs.
As important as their security role has been the fact that they now have regular paid work.
US commanders acknowledged several years ago that a lack of jobs was a key factor in driving the insurgency - the biggest single cause of that being the early US decision to disband the old Iraqi army, providing thousands of potential recruits overnight.
While the Sahwa began as a tribal rebellion against al-Qaeda in Iraq in late 2006, the US military has in effect turned it into a massive programme to buy out large chunks of the insurgency - in many cases re-employing former Saddam Hussein-era soldiers they sacked five years ago.
So the Americans have kept up the pressure on the Iraqi government to embrace these militias, whatever their past.
The pay cuts for some may be a sign of the government flexing its muscles as it now takes over.
In Baghdad's south Dora district, officials claim to have discovered significant corruption among its local leaders.
According to police Colonel Abdul Ridha, they used to get one bulk sum of cash from the Americans to distribute among their men.
But many "repeat names" and "invented names" were found when they checked the lists of people to be paid. Out of 160, 40 were false, he said.
So only those Sahwa militia men who turned up got any cash. "We know these people, we know their ways", said Col Ridha.
"We are getting more strict about their appearance as well," he said. "They will have to get haircuts."