Iraq is insisting on the right to veto any US military operations throughout its territory under a "status of forces" agreement currently being negotiated between Baghdad and Washington, according to a senior member of the Iraqi government.

The agreement will last for a maximum of two years and can be terminated by either side with six months' notice, Hussain al-Shahristani, Iraq's oil minister, told the Guardian yesterday.

His remarks come amid intensive closed-door negotiations between the Iraqi and US governments which have led to complaints in the US Congress as well as Iraq that the Bush administration is tying the next US president's hands by seeking to maintain long-term bases in Iraq for possible attacks on Iran and other neighbouring states.

But Shahristani insisted yesterday: "Neither the constitution nor our people will allow any violation of our sovereignty. Obviously foreign troops on Iraqi soil carrying out operations without the prior consent and approval of the elected government is a violation.

"Any arrests, any operations internally or externally against our neighbours without prior agreement of the Iraqi government will be considered a violation ... Land and sea movements and air space is all part of Iraq's sovereignty."

The status of forces agreement, known as Sofa, will flesh out a more general "strategic framework" pact on all aspects of the US-Iraqi relationship that is also being worked out secretly. The two agreements are seen as "legacy issues" allowing Bush to claim success and a legitimation of the US occupation when the UN mandate runs out at the end of this year.

Before the talks started this spring, Robert Gates, the US defence secretary, sought to remove nationalist suspicions in Iraq by saying the US had "no interest in permanent bases". Shahristani's disclosure that Iraq wants the Sofa to be "only short, for one or two years" is designed to put a time limit on the US presence and remove ambiguity about what constitutes a temporary or a permanent base.

US commanders have warned repeatedly that the relative peace which has prevailed in Baghdad is fragile because extremists, including al-Qaida in Iraq and Shia militant groups, remain capable of high-profile attacks, the latest of which took place yesterday afternoon on a busy street in a Shia area in west Baghdad when a car bomb exploded, killing at least 51 people. The blast shattered the relative calm experienced in Baghdad since a ceasefire on May 11 ended fighting between US and Iraqi forces and Shia militants.

The Sofa has aroused fierce controversy in Iraq. No drafts have been published and only a handful of MPs have seen it. The Iraqi government has been forced to give parliament a vote on the final text, although Washington says it need not go to the US Senate as it is not a treaty. A letter denouncing various leaked provisions, signed by more than 100 of the 275 Iraqi MPs was handed to US senators recently.

Since the talks began in March, Washington has reduced its demands. "The first US draft wasn't even remotely acceptable," said Shahristani, who is a member of the United Iraqi Alliance, the Shia movement that is the largest bloc in parliament.

The prime minister, Nuri al-Maliki, was given full control over negotiations by Iraq's political council for national security last weekend. Recent US concessions will allow Iraqi courts to have jurisdiction over thousands of private contractors in Iraq, currently immune from prosecution. They will also transfer the 21,000 detainees in US jails to Iraqi custody. But with Iraqi prisons already overcrowded, this may involve a paper transaction. Iraq is still insisting US troops be chargeable in Iraqi courts. The US is unlikely to concede this.

The Bush administration is putting the Iraqi government under intense pressure to agree to the security pacts by July 31. But Shahristani said: "There is no way for the Sofa to be presented to parliament before its summer recess."

The oil minister also disclosed that the Iraqi government expects to sign its first contracts with western oil companies within the next two weeks. These will be for technical support and repair.

Bidding for developing new fields is under way but "it will be open to competitive tendering". Shahristani denied this was backdoor privatisation, since the Iraqi National Oil Corporation would retain control of 80% of Iraq's discovered reserves.

He criticised the Kurdistan regional government for signing agreements with small oil firms for developing fields in northern Iraq without Baghdad's consent.

Backstory

The US wants to cover its military presence in Iraq with a bilateral pact with Baghdad once the annually renewed UN resolution runs out on December 31. This requires the Iraqi parliament's approval, and has aroused suspicion and opposition. Moqtada al-Sadr's nationalist movement is holding weekly protests calling for an end to the occupation. Other parties are uncertain whether to accept a deal. Major issues are whether the roughly 50 US bases would be permanent, and under whose control. Disputes also centre on whether the US could use them freely, and for what operations - inside Iraq, or against other countries. The Iraqi government wants US crimes to be tried in Iraqi courts. The US says yes for US contractors, no for US troops. Bush wants a deal by July 31 before the US party conventions. The Iraqi parliament is unlikely to review the text until the autumn.