The formal handover of sovereignty in Iraq has taken place at a low key ceremony in Baghdad.

The handover had been scheduled for Wednesday - but was secretly brought forward.

Paul Bremer, the US special administrator, left the country shortly after handing over to interim prime minister Iyad Allawi.

The move is being seen as an attempt to stop insurgents conducting a terror spectacular to overshadow the handover.

Meanwhile in Istanbul NATO leaders gathered amid tight security for a summit dominated by the future of Iraq.

Tony Blair joined world leaders including President Bush for the Istanbul talks.

Transfer welcomed

The two coalition leaders welcomed the handover of sovereignty.

Blair said that the move was "an important staging post on the journey of the people of Iraq towards a new future".

He said the Iraqi government, Iraqi people and the international community were now working together to deliver a free and democratic country.

Ranged against them were terrorists and extremists who wanted to stop "the possibility of the new Iraq happening".

"For those people who are there in Iraq causing this death and destruction, they have a very clear and simple objective," Blair said.

"Their objective is not just to destabilise Iraq...the strategy of these terrorists is to try and stop Iraq becoming a symbol of hope not just for the Iraqi people but for their region and the wider world."

Blair also reiterated his previous statements that tackling terrorism and weapons of mass destruction is the major security issue now facing the West.

He said Iraq was "the frontline in the battle against terrorism and the new security threat that we face".

President Bush said that after decades of brutal rule "the Iraqi people have their country back".

He said terrorists were trying to stop "the rise of a free Iraq"

"But their bombs have not prevented Iraqi sovereignty and they will not stop Iraqi democracy," the president added.

He said the transfer was also a "proud moral achievement" for the coalition.

And he welcomed NATO's decision to help train Iraq's security forces and paid tribute to Britain as a "staunch ally".

NATO talks

Discussions at the NATO talks in Istanbul are focusing on Iraq, Afghanistan, the future of the alliance and plans to train and equip the Iraqi army.

On Monday it was announced that NATO peace keeping operations in Afghanistan are to be expanded.

And agreement is also expected on moves for the transatlantic organisation to take a formal role in training Iraqi security forces.

Meanwhile, NATO secretary general  Jaap de Hoop Scheffer is seeking agreement on a radical plan to improve the organisation's ability to deploy forces for "out of area" missions.