The Iraqi Governing Council member, Ahmed Chalabi, has said his relations with the US-backed Coalition Provisional Authority were now 'non-existent'.
His comments follow raids by Iraqi police, backed by US military police, on his house in Baghdad and on the offices of the Iraqi National Congress, which Mr Chalabi heads. Computers and documents were seized in the raids.
Mr Chalabi, a former key Washington ally who was tipped to lead Iraq, has become increasingly distanced from the US.
Yesterday, before the raids, he said Iraqis should have complete control over oil, development and property currently in US hands.
At a news conference earlier today, Mr Chalabi said the raids were motivated by anger at his insistence that true sovereignty be returned to Iraqis.
Iraqi killed in convoy attack
Meanwhile, an Iraqi has been killed, a second seriously hurt and a Spanish soldier slightly injured after a convoy came under attack 50km south of Diwaniyah while on its way to Kuwait.
And a US soldier has been killed and three others injured in a grenade attack in central Baghdad.
The US has continued to reject reports that its forces targeted a wedding party in Qaim in western Iraq in an attack that killed more than 40 people yesterday.
A US military spokesman confirmed the number of casualties but said that US forces had targeted a suspected safe house used by foreign fighters near the Syrian border.
However, Arab media and Iraqi sources insist the casualties were civilians, including women and children.
Reports have suggested that the American troops may have confused celebratory gunfire from the wedding with hostile fire against them.
Coalition spokesman Brigadier-General Mark Kimmit said, however, that the operation was against a military target and items had been recovered.
