(Adds Condoleezza Rice comments, paragraphs 16-18)

By Aseel Kami and Dominic Evans

BAGHDAD, Sept 18 (Reuters) - Iraq will review the status of all security companies after this week's "flagrant assault" by contractors from the U.S. firm Blackwater in which 11 people were shot dead, the government said on Tuesday.

Government spokesman Ali al-Dabbagh said the cabinet backed an Interior Ministry decision to "halt the licence" of Blackwater, which provides security for the U.S. embassy, and launch an immediate investigation into the shooting.

He later said that the Iraqi and U.S. governments had set up a joint committee to investigate the killings which occurred when Blackwater contractors opened fire randomly after mortar rounds landed near to their convoy in western Baghdad on Sunday. U.S. officials in Washington said they expected to announce the plan to conduct the joint inquiry on Wednesday.

Fiery anti-American Shi'ite cleric Moqtada al-Sadr, adding his voice to Iraqi anger over the incident, urged the government to "cancel this company's work, and the rest of the criminal and intelligence companies."

A U.S. official said the United States had barred diplomatic convoys from leaving Baghdad's heavily fortified "Green Zone" which houses the U.S. embassy as well as many Iraqi ministries to permit a review of security procedures after the incident.

The official said the decision only affected non-military convoys that carry U.S. diplomats and civilian officials.

Estimates of the number of security contractors employed by mainly U.S. and European firms across Iraq range from 25,000 to 48,000.

FOUR CAR BOMBS

In fresh violence, four car bombs in Baghdad killed 17 people and wounded 50, police said.

An explosion near a U.S. patrol also killed three soldiers and wounded three others in Diyala province, north of Baghdad, the military said. It gave no details on the type of explosion, but many soldiers are killed by roadside bombs.

"Cabinet affirmed ... the need to review the situation of foreign and local security companies working in Iraq, in accordance with Iraqi laws," Dabbagh said.

"This came after the flagrant assault conducted by members of the American security company Blackwater against Iraqi citizens," he said in a statement after the cabinet meeting.

Blackwater said its guards reacted "lawfully and appropriately" to a hostile attack. It said late Monday it had received no official notice from Iraq's Interior Ministry.

The White House said it deeply regretted any loss of innocent life in Iraq but stressed that U.S. officials there needed to be protected.

U.S. State Department spokesman Sean McCormack said in Washington the U.S. government had not been officially informed that Blackwater's license had been withdrawn.

He told reporters that the jurisdiction over any crimes that might have been committed would depend on the circumstances and stressed the State Department does not know whether any rules or laws were broken despite the loss of "innocent" life.

U.S. Secretary of State Condoleezza Rice, speaking to reporters before landing in Shannon, Ireland, for a refueling stop en route to Israel, said she discussed the incident with Iraqi Prime Minister Nuri al-Maliki by telephone on Monday.

"I committed to him that we were as interested as the Iraqi government in having a full investigation into what happened, a transparent investigation into what happened and to working with the Iraqi government to make certain that this sort of thing doesn't happen," she said.

Rice said it was too early to talk about the role of private contractors in Iraq.

LEGAL STATUS UNCLEAR

U.S. officials in Baghdad have also yet to clarify the legal status of foreign security contractors in Iraq, including whether they could be prosecuted by Iraqi authorities.

Pentagon spokesman Bryan Whitman said it was important that security contractors behaved in a way "that is consistent with the laws and rules of the sovereign nation of Iraq," but declined to say whether they fell under Iraqi law.

Many Iraqis see the contractors, who have worked in Iraq since the U.S.-led invasion to topple Saddam Hussein in 2003, as private armies that have acted for too long with impunity.

Iraqi Interior Minister Jawad al-Bolani said on Monday that such incidents had happened before and "we can't keep silent."

A ministry spokesman said Iraq had the right to take action if the Blackwater force had fired on civilians. "Definitely we have the right. If they committed this act, they should be tried," Brigadier-General Abdul-Karim Khalaf said.

The latest bombings in Baghdad came after Sunni Islamist al Qaeda in Iraq militants pledged a renewed campaign of violence to mark the Muslim holy month of Ramadan, which began last week.

Police said Tuesday's deadliest car bomb attack killed eight people and wounded 22 near a market in the Ur neighborhood, not far from the Shi'ite district of Sadr City. Three other car bombs killed a total of nine people and wounded 28 in Baghdad, police said. (Additional reporting by Mariam Karouny and Paul Tait in Baghdad, Andrew Gray and Arshad Mohammed in Washington, Sue Pleming in Shannon)

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