BAGHDAD, Iraq (CNN) -- Ground movements of American civilians in most of Iraq were on hold Tuesday after an uproar over a Baghdad firefight involving American security firm Blackwater USA.
Blackwater USA is headquartered in Moyock, North Carolina.
"This suspension is in effect in order to assess mission security and procedures, as well as a possible increased threat to personnel traveling with security details outside the International Zone," the embassy said in a notice to Americans.
Earlier Tuesday, Iraqi government ministers backed the Iraqi Interior Ministry's decision to shut down Blackwater USA's operations in Iraq.
They also stressed the need to ensure foreign security firms operate within Iraqi laws, according to a statement from spokesman Ali al-Dabbagh.
It is unclear whether the shutdown is permanent, and the Interior Ministry put no time frame on the ban of Blackwater operations.
Al-Dabbagh said the ban will remain in effect while the incident is investigated and there is no intention of revoking Blackwater's license indefinitely. He added, "We do need them to respect the law and the regulation here in Iraq."
The firm has defended itself, saying its employees acted "heroically" and were merely defending themselves after the State Department convoy they were protecting came under fire.
"Blackwater's independent contractors acted lawfully and appropriately in response to a hostile attack in Baghdad on Sunday," said a statement from the Moyock, North Carolina-based company. "Blackwater regrets any loss of life, but this convoy was violently attacked by armed insurgents, not civilians, and our people did their job to defend human life."
The U.S. State Department has called the killings a "terrible incident," and Secretary of State Condoleezza Rice has called Prime Minister Nuri al-Maliki to offer her regrets.
More than 25,000 employees of private security firms are working in Iraq, guarding reconstruction workers and government officials.
Blackwater said in its statement that the Interior Ministry has taken no official action to revoke its operating license. Iraqi officials say the firm is barred from working in the country. Watch why the Interior Ministry wants to yank Blackwater's license »
"As of now, they are not allowed to operate anywhere in the Republic of Iraq," said Gen. Abdul Kareem Khalaf, an Interior Ministry spokesman. He added that Blackwater would be notified of the ministry's decision soon.
Sunday's gunfight erupted about noon (4 a.m. ET) in Nisoor Square, which straddles the Sunni neighborhoods of Mansour and Yarmouk.
An industry source said Blackwater bodyguards were escorting a State Department group to a meeting with U.S. Agency for International Development officials in Mansour before the shootings. After a car bomb detonated near the meeting venue, the contractors evacuated the officials, the source said.
Unidentified gunmen opened fire on a convoy of sport utility vehicles in the square, and the men in the SUVs returned fire, the Interior Ministry said. The firefight left eight people dead and 14 more wounded, most of them civilians, said an Interior Ministry official.
Blackwater USA Vice President Marty Strong said the convoy was hit with "a large explosive device, then repeated small-arms fire, and to the point where it disabled one of the vehicles and the vehicle had to be towed out of the firefight."
Between eight and 10 people opened fire on the convoy "from multiple nearby locations, with some aggressors dressed in civilian apparel and others in Iraqi police uniforms," according to a State Department report.
The guards tried to escape, but the route was blocked by insurgents who fired machine guns at one of their vehicles, the report states. A U.S. Army force, backed by air cover, arrived 30 minutes later to escort the convoy back to the Green Zone, the report states.
Rice promised a "fair and transparent" investigation of the killings, al-Maliki's office said late Monday.
• Founded in 1997 by former Navy SEAL Erik Prince
• Based in Moyock, North Carolina
• One of three private security firms contracted by the U.S. State Department to protect its personnel in Iraq
• Many personnel are former military and law enforcement workers
• Holds at least $800 million in government contracts for its work in Iraq
• Employs an estimated 1,000 people across Iraq
• Sources close to the company estimate 30 employees have been killed in Iraq, including four who were ambushed and mutilated in Falluja in 2004
Sources: CNN, The Associated Press
"Rice assured al-Maliki in this evening's call that the United States will take immediate action to show their determination that such acts will not be repeated," the statement said.
Iraqi authorities have been concerned about private security firms and have complained about shootings by private military contractors -- four of them involving Blackwater, according to a July report from the Congressional Research Service.
Courts in Iraq do not have the authority to bring contractors to trial, the report states.
Government spokesman al-Dabbagh said Tuesday he understands the risks private security companies face, but "an Iraqi law should be implemented on everybody."
"Now [that] Iraq is under a sovereign government, they have the liberty to take any action and any steps against any security company as long as they are not complying with the Iraqi regulations and the Iraqi laws," he said.
A U.S. congressional report estimates that 200 private security guards have been killed on the job.
In one of the more highly publicized incidents, four American Blackwater contractors were mutilated and killed in Falluja in March 2004. Two of their bodies were hung from a bridge over the Euphrates River, setting off two battles to reclaim the city from insurgents.
Sunday's firefight has prompted the U.S. Congress to cast a critical eye on private security firms.
Rep. Henry Waxman, whose House Oversight and Government Reform Committee held hearings on contractor operations in February, said he will hold new hearings on the issue.
"The controversy over Blackwater is an unfortunate demonstration of the perils of excessive reliance on private security contractors," said Waxman, D-California.Almost $4 billion has been spent on security contracts since the U.S. invasion of Iraq in 2003, Waxman's committee estimates
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