BAGHDAD (Reuters) - The U.S. military said on Saturday its troops had shot dead a 12-year-old Iraqi boy suspected of throwing a grenade at them, and said it believed insurgents were paying children to help them.

Iraqi police, speaking on condition of anonymity, said however the boy, whom they named as Omar Moussa Salih, had not been involved in the grenade-throwing.

U.S. and Iraqi forces came under grenade attack Thursday in the western part of Mosul, the northern city seen as a final stronghold of al Qaeda and other insurgents, said Major Derrick Cheng, a U.S. spokesman in northern Iraq.

U.S. forces responded by firing at several people, killing the boy. He was found with 10,000 Iraqi dinars, or around $8.50, in his hand.

“We have every reason to believe that insurgents are paying children to conduct these attacks or assist the attackers in some capacity, but undoubtedly placing the children in harm’s way,” Cheng said.

Iraqi police in Mosul said the boy, who had sold sweets in the street, was shot more than once in the head. His eight-year-old brother ran away when Omar was shot, police said.

Cheng said another boy was briefly detained but released.

The incident in Mosul comes less than two months before U.S. combat forces are due to withdraw from Iraqi cities, including stubbornly violent Mosul, as part of a bilateral security pact that envisages a full U.S. withdrawal by the end of 2011.

Two weeks ago a U.S. raid in southern Iraq triggered a storm of condemnation from the Iraqi government, which demanded that U.S. soldiers be tried for the killings of “innocent citizens.”

Violence has declined sharply in Iraq since the peak of sectarian killing unleashed by the U.S.-led invasion in 2003, but suicide bombings and other attacks continue, especially in ethnically and religiously mixed areas.