BAGHDAD (Reuters) - Iraqi Prime Minister Nuri al-Maliki suggested on Wednesday the U.S. embassy stop using American security firm Blackwater after a deadly shooting and said he would not allow Iraqis to be killed in “cold blood”.

Iraq has said it would review the status of all security firms after what it called a flagrant assault by Blackwater contractors in which 11 people were killed while the firm was escorting a U.S. embassy convoy through Baghdad on Sunday.

With emotions running high, U.S. civilian officials have been barred from road travel in Iraq outside Baghdad’s heavily fortified Green Zone because of possible attacks.

The two governments also set up a joint commission to review diplomatic security.

“We will not allow Iraqis to be killed in cold blood ... What happened was a crime. It has left a deep grudge and anger, both inside the government and among the Iraqi people,” Maliki told a news conference.

“It is in (our) interests to freeze the work of this company and the embassy can travel with other companies.”

The shooting has incensed Iraqis who regard the tens of thousands of security contractors working in the country as private armies that act with impunity.

At issue for many Iraqis is sovereignty, given that security firms appear to have immunity from Iraqi law under a 2004 regulation written while Iraq was under U.S. administration following the toppling of Saddam Hussein the year before.

The Interior Ministry has said Sunday’s incident was sparked when Blackwater guards opened fire indiscriminately after mortar rounds landed near their convoy in western Baghdad.

Blackwater is one of the biggest private security operators in Iraq and protects the U.S. embassy. It said its guards reacted “lawfully and appropriately” to a hostile attack. Maliki said that account was “not accurate”.

Maliki said Blackwater’s work had been halted but he did not say its license had been revoked. He said the Interior Ministry had recorded seven violations against the firm. He did not elaborate.

Iraqi government spokesman Ali al-Dabbagh said on Tuesday the cabinet had backed an Interior Ministry decision to “halt the license” of Blackwater.

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INCREASED THREAT

In a statement seen by Reuters and sent to Americans in Iraq, the U.S. embassy in Baghdad said the temporary ban on road travel was imposed to reassess security procedures.

“In light of the serious security incident involving a U.S. embassy protection detail ... the embassy has suspended official U.S. government civilian ground movements outside the International Zone (IZ) and throughout Iraq,” it said.

“This suspension is in effect in order to assess mission security and procedures, as well as to assess a possible increased threat to personnel traveling with security details outside the International Zone.”

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The sprawling International Zone, also known as the Green Zone, houses the U.S and other Western embassies as well as many Iraqi government ministries.

National security adviser Mowaffaq al-Rubaie said the review of security firms would examine their rules of engagement and also the 2004 rule that gave such firms immunity from Iraqi law.

He said there were more than 180 security companies in Iraq. Estimates of the number of security contractors employed by mainly U.S. and European firms range from 25,000 to 48,000.

State Department deputy spokesman Tom Casey said the joint commission would examine “the broader question of security and safety issues” of diplomatic operations in Iraq.

“The commission’s goal is to make joint policy recommendations, including specific suggestions for improving U.S. and Iraqi procedures regarding government-affiliated personal security details,” Casey said.

Maliki has his hands full trying to keep his 16-month-old government together. Around a dozen Shi’ite and Sunni Arab ministers have quit this year.

At his news conference, Maliki proposed forming a cabinet of technocrats and called for greater powers to push through his nominations, alluding to the influence that various political blocs had in naming the current administration.

“Instead of the current number of cabinet ministers we could form a technocratic, smaller government,” Maliki said.

“To form such a government the prime minister should be given the full authority to nominate the minister he chooses.”