A suspected car bomb explosion yesterday killed at least seven people near a vehicle-choked entrance to the Baghdad compound housing Iraqi government offices and the US embassy.

The blast occurred just hours after news that militants led by suspected al Qaeda ally Abu Musab al-Zarqawi had killed a Bulgarian hostage in Iraq. They vowed to kill a second within 24 hours unless US-led forces freed prisoners.

“I saw seven dead”, said a US soldier at the scene of the blast in the Iraqi capital.

An Iraqi National Guardsman said two of his colleagues were among the dead. He said some of the wounded were from the Defence Ministry, but he had no overall casualty figures.

Black smoke billowed into the air after the explosion, which destroyed at least four cars and knocked pedestrians off their feet. Several bloodied people were receiving first aid. It was first major car bombing in Baghdad since the interim government led by Prime Minister Iyad Allawi took over from US-led occupiers on June 28.

The explosion took place at about 9.30 a.m. in an area where cars queue to drop visitors to the Green Zone, a huge, heavily defended complex in central Baghdad.

“My God, my God,” screamed one woman, when the bomb went off. She ran for cover, as did other visitors queuing for security checks at the entrance to the US-held zone.

Guerrillas often fire mortars and rockets at the Green Zone and car bombs have been detonated at its entrances. In May, the then head of Iraq’s now-defunct Governing Council was killed in a suicide car bombing as he entered the compound.

The Arabic television station Al Jazeera said on Tuesday it had decided not to broadcast a video tape from the militants showing the Bulgarian’s killing because it was too gruesome.

But Al Jazeera showed footage of three masked men with one of the Bulgarians kneeling before them in a blindfold and orange jumpsuit, typical of US jails and associated around the world with images of Muslims detained at Guantanamo Bay.

“I am speechless”, said Bulgarian Foreign Minister Solomon Passy, whose country has contributed 470 troops to US-led forces in Iraq. His deputy Gergana Grancharova said: “We all saw the cruel video scenes. The news is true and shattering.”

Government officials would not disclose which of the two truck drivers, Georgi Lazov, 30, and Ivailo Kepov, 32, had been killed. The men disappeared on June 27.

Lazov’s mother Maria was shown on Bulgarian television

weeping uncontrollably and saying: “I don’t blame anyone. There was nothing more anyone could do.”

Zarqawi’s Tawhid and Jihad group has already claimed responsibility for beheading an American and a South Korean.

Washington has branded the Jordanian militant its top target in Iraq, saying he is behind much of the violence there.

<B>Edmund Blair</B>