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"These are Iraqi citizens who want to fight for a free Iraq, who will become basically the core of the new Iraqi army once Iraq is free," said General Peter Pace, vice chairman of the Joint Chiefs of Staff told ABC television.
"To speak specifically about where they are or what they're about to do would be inappropriate, but they are the beginning of the free Iraqi army."
The fighters were flown from northern Iraq to southern Iraq.
The US-backed Iraqi National Congress (INC) said in a statement sent to AFP in Dubai that it has sent 700 fighters to southern Iraq to join in "removing the final remnants of Saddams Baathist regime."
"Soldiers of the Iraqi National Congress arrived in southern Iraq today to join in the military campaign to remove Saddam Hussein's regime and liberate the Iraqi people," the statement said.
Pace called on Iraqi military leaders to themselves give up and spare themselves and the country continued war, saying the Iraqi army defending Baghdad was struggling to assemble 1,000 soldiers for each battle.
"They can surrender and become part of the future free Iraq, or they can fight and die," Pace said.
Pace said General Tommy Franks, who is in charge of the military campaign, had written letters to Iraqi commanders urging them to surrender. But no senior official from the divisions involved had given up, he added.
Even in a debilitated condition, he said that the Iraqi military still poses a threat.
"They are extremely weakened, but that does not mean they're finished. They will not be finished until either they are completely destroyed, which we are capable of doing, or that they surrender," said Pace.
After the war, the US military may have to run Iraq for more than six months before it hands over to an Iraqi authority, Deputy Defense Secretary Paul Wolfowitz said Sunday.
But he said that the United States wants to hand over the country to the Iraqi people.
Wolfowitz told Fox News Sunday that it took six months to form a government in northern Iraq after the 1991 Gulf War.
"This is a more complicated situation; it probably will take more time than that," he said.
The deputy defense secretary has played a key role in preparing the US effort to get humanitarian aid to Iraq and rebuild the country once the war finishes.
A Pentagon-supported Iraqi opposition leader meanwhile said US forces should remain in Iraq for at least two years after the collapse of Saddam's regime.
"The American military should stay in Iraq until the first elections and a democratic government established," said Ahmad Chalabi, who heads the London-based Iraqi National Congress (INC) umbrella opposition group, interviewed on the CBS news program "60 Minutes."
Chalabi suggested that US forces should stay for a minium of two years.
Wolfowitz said the United Nations would have an "important role" in post-war Iraq but gave no specific details.
"The reconstruction of Iraq, I think, is going to be one of the most important projects for the international community in many years. And the UN can be a mechanism for bringing that assistance to the Iraqi people.
"But our goal has got to be to transfer authority and the operation of the government as quickly as possible not to some other external authority, but to the Iraqi people themselves."
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