BAGHDAD, Iraq, Dec 31 (Reuters) - A candidate standing in Iraq's provincial elections in January was shot dead in a cafe in the northern Iraqi city of Mosul on Wednesday, police said.

Mowaffaq al-Hamdani, a candidate for the Sunni Arab party Iraq for Us, was killed by gunmen who walked into the cafe in the centre of the city, 390 km (240 miles) north of Baghdad, they said.

One policeman was killed and another wounded when police gave chase to the fleeing gunmen.

The volatile city is home to a mix of religious and ethnic groups and the shooting raised the prospect of a resurgence of political violence before Iraq's first elections since 2005.

The U.S.-backed government of Prime Minister Nuri al-Maliki, a Shi'ite, has pledged to do all it can to ensure the elections on Jan. 31 are free of violence and fraud.

However, tension is rising as Shi'ite parties vie for influence in Iraq's south and political newcomers challenge the Sunni establishment in Iraq's western regions and elsewhere.

Violence has fallen sharply in Iraq in the past year but suicide bombings and other attacks continue. Mosul is seen as the last holdout for al Qaeda and other militant groups.

The results of the vote, which will choose provincial council leaders in 14 of Iraq's 18 provinces, will set the tone for parliamentary elections due at the end of 2009.

The government of Nineveh province, where Mosul is located, has been in the hands of minority Kurds since many of the Sunni Arab majority boycotted the last provincial elections in 2005.

Hamdani, in his late 50s, was nominated governor after a former holder of the office was assassinated in 2004, but was not ultimately appointed. (Writing by Missy Ryan; editing by Andrew Dobbie)

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