A U.S. military commander in Iraq says an agreement has been reached with leaders in the city of Fallujah that could ease a two week standoff between Sunni militants and 1,200 American Marines encircling the city.

U.S. Marines have kept Fallujah sealed off for two weeks as they engage in some of the heaviest fighting during the past year in Iraq, aimed at restoring order to the city where four American contractors were ambushed last month.

Now, General Mark Kimmitt says an agreement has been reached with Fallujah community leaders in which Marines will hold their fire if gunmen turn in heavy weapons.

"We are trying to use peaceful negotiations to try to bring the situation in Fallujah to an end, and it would appear by the agreed statement made today that there is an agreed political track," he said.

In Washington, President Bush expressed regret to Spain's incoming prime minister over his decision to pull all 1,300 Spanish troops out of Iraq. He made his comments just a day after the top U.S. official in Baghdad, Paul Bremer, said outside forces are going to be needed to keep order in the country, even after the scheduled handover of power on June 30.

"Events of the past two weeks show Iraq still faces security threats and needs outside help to deal with them," said Mr. Bremer. "It is clear that the Iraqi forces will not be able, on their own, to deal with these threats by June 30 when an Iraqi government assumes sovereignty."

But Abdel Aziz-al-Hakim, a Shiite cleric and a member of the U.S. installed Iraqi Governing Council, disagrees with the Bremer assessment.

"He says Iraqis do not need Spanish troops or any other outside force to do the job that Iraqis themselves are capable of doing," said Mr. al-Hakim. "But in battles during the past two weeks with Iraqi insurgents, U.S. military officials say in many instances Iraqi police either refused to fight or joined in with rebels."