UK Prime Minister Tony Blair says that after the transfer of power on 30 June, Iraq's interim government will have a veto on operations by coalition troops.
Who will decide what US and UK soldiers do?
"The final political control remains with the Iraqi government. That's what the transfer of sovereignty means."
But France - which has the power to block a US-UK resolution on Iraq at the UN - has expressed reservations.
President Jacques Chirac set out French concerns in a phone conversation with US President George W Bush on Tuesday.
The text of the draft resolution says that the interim Iraqi government that takes charge on 30 June will have sovereignty, but limited control over coalition military operations.
It does not specify that the troops will leave Iraq if the new government asks them to.
But Mr Blair on Tuesday stressed that an Iraqi government would have the "final political control" over action by coalition forces after 30 June.
Asked by reporters whether Iraqi ministers would be able to veto military action such as a renewed assault on the restive Iraqi city of Falluja, Mr Blair said any action would need "the consent of the Iraqi government".
And it would be up to the Iraqi government and its people to decide "whether the troops stay or not", he said.
Mr Blair's statement that the interim Iraqi government will have a veto over military operations is part of an effort by Britain and the United States to bolster the status of what was until recently looking like a very weak body, says BBC News Online's world affairs correspondent, Paul Reynolds.
Iraq's Governing Council has said the draft resolution, while positive, has fallen short of their expectations and the final version must guarantee Iraq's right to ask foreign troops to leave.
"We as Iraqis see the need for multinational troops to stay in Iraq in the short term," the council president Ghazi al-Yawer said.
"But we want to have the right to ask that these forces leave if we deem that to be in the best interests of the country."
Iraqis must also have control over the revenue from the country's oil sales, he said.
Iraq's Defence Minister Ali Allawi, after holding talks in London with his UK counterpart Geoff Hoon, said he expected foreign troops to remain in the country for "months rather than years".
On Tuesday Mr Bush called his French counterpart to discuss the US-British proposals.
Mr Chirac thought the plan was a "good basis for discussion" but that oil resources, security and the length of the multinational force's mandate needed discussion, his spokeswoman said.
HANDOVER: KEY DATES
24 May: US and UK table draft resolution
End of May: UN envoy Lakhdar Brahimi to name Iraqi interim government
Early June: Detailed agreement on control of foreign troops in Iraq
Early June: US, UK hope UN resolution can be adopted - maybe by D-Day celebrations on 6 June, or by the G8 Summit on 8 June
30 June: Handover from Coalition Provisional Authority to interim government
Earlier, French Foreign Minister Michel Barnier said the new Iraqi government would not be credible unless it was given real powers.
France, he said in an interview with Le Figaro newspaper, wanted to know whether the proposed transfer of sovereignty "concerns the power to run the economy, to manage the police and justice systems, or to exploit natural resources".
Russia, another veto-wielding member of the Security Council, also believes the draft raises questions and needs changes, a Russian diplomat quoted by the Interfax news agency said.
Foreign Minister Sergey Lavrov said Moscow would decide on the text after ensuring that the interim government being put together by UN envoy Lakhdar Brahimi would "look legitimate in the eyes of Iraqis".
China, which also has the power of veto at the Security Council, is studying the draft closely, a foreign ministry spokesman said.
There has also been a mixed reaction to the US president's keynote speech on Monday in which he defended his vision for Iraq.
Mr Bush said he was taking five "specific steps" to help Iraq achieve freedom and democracy.
He said that the UN would have an important role, but stressed that the US would keep its troops in Iraq at the current level as long as necessary because of the continuing unrest.
Strong US ally Australia praised this commitment, with Prime Minister John Howard saying his country's troops would also remain in Iraq.
Japan, which has long advocated more UN involvement in Iraq, welcomed the draft resolution which would "guarantee the reconstruction of Iraq by Iraqis", a government spokesman said.
But in Iraq, there appeared to be little faith in US promises to hand over power.
"We don't believe anything Bush says. The Americans have not done a thing for Iraqis, And now he promises to hand over power to Iraqis in a democracy after handpicking the people in the Governing Council," Haidar Majeed, a Baghdad trader, told Reuters news agency.
The UN envoy to Iraq, Lakhdar Brahimi, is expected to name several top interim leaders, including a president and prime minister, within a week or so.
The diplomatic debate comes as insurgents continue bloody attacks against foreign forces and their allies in Iraq.
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