The New Nation - Internet Edition

AP, Baghdad

Small arms fire killed three U.S. soldiers conducting operations Wednesday in Salahuddin province north of the capital, the military said.

Two other soldiers were wounded and evacuated to a coalition hospital.

Meanwhile, the United Nations envoy to Baghdad said on Wednesday he would present a positive picture of progress in Iraq in a report to the Security Council despite earlier having serious misgivings about reconciliation efforts.

U.N. envoy Staffan de Mistura said the passing of a key law allowing former members of Saddam Hussein's Baath Party to return to government jobs had changed what had been a pessimistic view of progress in a crucial year for Iraq.

"At the beginning of the year we were worried t we were genuinely concerned by the lack of progress on national dialogue," de Mistura told Reuters by telephone.

"Today that has substantially changed. It has changed our mind from being worried or from being pessimistic," he said.

That view was echoed on Tuesday by visiting U.S. Secretary of State Condoleezza Rice, who said it was a time of hope because of a "spirit of cooperation" between Iraq's ethnic and religious groups.

The law on reintegrating former Baathists passed on Saturday. It was the first in a series of bills Washington has pressed the Shi'ite Islamist-led government to pass to draw minority Sunni Arabs who held sway under Saddam back into the political process.De Mistura had said in an interview with France's Le Figaro newspaper, published earlier on Wednesday but conducted almost a week before the bill was passed, that Iraq's sectarian groups lacked any true spirit of reconciliation.

He said in that interview that Iraq was running out of time and had six months to overcome distrust between the Shi'ite-dominated cabinet and Sunni Arabs and make political progress or risk a swift return to violence.