By Aws Qusay and Peter Graff

BAGHDAD, Oct 1 (Reuters) - Eyed with suspicion by the state but credited with dealing al Qaeda a heavy blow, Iraq's largely Sunni Arab neighbourhood guards cautiously welcomed their transfer from U.S. to government control on Wednesday.

Baghdad has taken responsibility for paying the 54,000 guards stationed in the capital, the first step in a plan to absorb 20 percent of them into the Iraqi security forces and offer the rest civilian jobs and vocational training.

The U.S.-backed movement numbers some 100,000 men across Iraq. It was formed in 2006 as a backlash against the indiscriminate violence and austere version of Islam that al Qaeda had inflicted on many parts of Iraq.

In a statement on Wednesday, government spokesman Ali al-Dabbagh praised the "defeat of terrorists and criminals in face of the heroic Sahwa (guards)," adding: "the government values and respects these efforts, and expresses its commitment to the inclusion of these (Sahwa) members in public life."

But some officials in the Shi'ite-led government are wary of the guards, many of whom are former insurgents.

Abu Merna, a spokesman for the guard movement in Baghdad's Fadhil district, welcomed the handover, but said more of the guards, known as the "Sahwa" in Arabic, should be absorbed.

"Twenty percent inclusion in the security forces is too little ... We don't have complete confidence in government, because it does not have confidence in us," he said. "Without the Sahwa, al Qaeda would return within hours, not days."

The government has said it cannot absorb all its members into the security forces. It has also said it must weed out former insurgents who are accused of murders and other crimes.

The neighbourhood guard movement has helped cut violence in Iraq to four-year lows in recent months, and was instrumental in driving al Qaeda and other Sunni militants from their former strongholds in Iraq's western Anbar province and elsewhere.

In the mainly Sunni Arab Doura area on Baghdad's southern outskirts, Sattar al-Dulaimy, 24, stood with an old AK-47 rifle by a sandbagged checkpoint, wearing a camouflage print T-shirt and a bright orange reflector strap, the guards' only uniform.

He supports his parents and seven brothers and sisters on the salary of $300 a month, which until now has come from the U.S. military but will come from the Iraqi government in future.

"It's very good news because we are serving our country," he said of the handover to Iraqi control. But so far a promised job in the police has yet to materialise.

"I am worried: We had all of our screening a few months ago but it still hasn't happened," he said of the police job.

Neighbourhood guard leaders have warned that members who are not given a security forces job or a civilian post could be become targets for al Qaeda, either for recruitment, or revenge. (Writing by Mohammed Abbas: Editing by Keith Weir)

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