The British troops, who withdrew to an airport outside the city, were hoping their exit from Iraq's second-largest city would let Iraqi authorities take charge and resolve simmering conflicts. But Iraqi civilians and analysts warned that Basra had become a symbol of Shiite infighting and corruption centered on the region's lucrative oil fields, which account for the majority of Iraq's estimated 1.5 million barrels of oil exported daily.

Iraqi Prime Minister Nouri al- Maliki, a Shiite, has struggled to bring the area under control since he became premier last year. Al- Maliki officially fired the region's governor, Mohammed Waeli, after the regional council voted to dismiss him earlier this summer amid charges that he was involved in corruption, including oil smuggling. But Waeli has defied the order and remained in power.

The 550 British soldiers moved out of the one- time residence of former dictator Saddam Hussein on Monday, but the keys to the palace were handed over Wednesday. The British vacated two other main bases in the city this year.

"Having a foreign army on the streets is not going to be part of the end stage here; the nationalist feeling is strong here, and people do not tolerate foreigners too kindly," said British military spokesman Maj. Mike Shearer.

Army Lt. Gen. Raymond T. Odierno, the day-to-day commander of U.S. troops in Iraq, told reporters Tuesday that the British move was a "solid plan." But a war of words has erupted away from the battlefield, between former British and U.S. military officials. Retired U.S. Gen. Jack Keane, who advised the Pentagon on Iraq earlier this year, has criticized the British performance in Basra. In turn, the former head of the British Army, r etired Gen. Mike Jackson, has derided the U.S. policy in Iraq as bankrupt.

Al- Maliki congratulated Iraqis for taking full control of the city and urged them to "hold on to national unity and to seek the country's high interests rather than the narrow group and political interests."

Iraqi n ational s ecurity a dvise r Mowaffak Rubaie, who attended the hand-over of the palace, urged Basra residents to keep the peace. "I am calling on the people of Basra to cooperate and leave (behind) the division and conflict," he said.

Al- Maliki dispatched two strongmen to Basra to bring order to the city: Gen. Mohan al Freiji, who is described by some western officials as having possible links with the Badr Corps militia, has been put in charge of Basra's security plan; Gen. Jalil Khalaf, a confidant of Iraq's defense minister, is to lead the police corps.

Until recently, Basra' security forces have been marred by controversy. Last Christmas, the British blew up the Serious Crimes Unit police station, which allegedly had been used by local militias for illegal detentions and torture. This spring, the defense ministry removed the commander of the Iraqi army's 10th Division, Gen. Abdul Latif, for failing to act decisively against Basra's militias and criminal gangs.

As the national government attempts to assert itself, Britain hopes to reduce its 5,500 forces in Iraq to 5,000 by the end of the year. It seeks to transfer security responsibility in Basra province to the Iraqi government this fall.

"Nothing has changed by way of what we do. The only difference is that we have reduced operation forces in the city of Basra to allow local forces to take the lead," Shearer said. "We will come in if needed."

Despite the assurances, locals and Iraq analysts said they feared the situation could become more volatile.

Reidar Vissar, a research fellow at the Norwegian Institute of International Affairs who runs the Web site Historiae.org, worries that the Supreme Islamic Iraqi Council, a Shiite political party, might use the army against the rival Fadila party and against Shiite cleric Muqtada al- Sadr's Mahdi Army.

"There is a real possibility that a conflict may erupt in Basra between SIIC and an alliance of the Sadrists and Fadila," Vissar said.

Locals said the British forces already had become a non entity in the city, rarely intervening during battles among political factions.

"The British forces did not have any active role. ... Many armed clashes have taken place in Basra and no British interference was witnessed in such cases," textile merchant Omar Dawood said .

The Mahdi Army celebrated Britain's abandonment of the palace as a military victory.

"The Mahdi Army's role of resistance ... is what forced them to leave the city," said local al- Sadr official Sheikh Ali Suadi.

One western official said Basra's violence would calm only when political parties and smugglers worked out how to split the province's riches.