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Two Iraqis were also wounded in Monday's blast but there were no US or British casualties, Centcom said.
Later Monday, a series of explosions ripped through another ammunitions depot in the central Shiite Muslim pilgrimage city of Karbala.
No casualties were reported but US forces established a four-kilometre (more-than-two-mile) buffer zone around the dump to protect residents.
Centcom said the Diwaniyah blast was in an Iraqi depot but the Karbala blasts were in a US one.
It said the multiple explosions at the American depot were not believed to be the result of hostile action but added that investigations were under way into both incidents.
US commanders have repeatedly warned of the dangers of the huge arsenals of military materiel that Saddam's forces, both regular and irregular, stashed in clandestine dumps in towns and cities across Iraq.
In late April, at least six people were killed after an explosion at a collection point for Iraqi munitions established by US troops in a residential area of south Baghdad sent rockets raining down on nearby homes.
Centcom blamed hostile action for the blast, saying an "assailant fired an unknown incendiary device into the cache, causing it to catch fire and explode."
But angry residents blamed the US army for storing the arms so near their homes and stoned troops who came to help with the rescue operation.
Since then the US Army has shipped huge convoys of arms out of Baghdad and other cities. Some are also made safe in almost daily controlled explosions in open spaces around the capital.
As of June 7, a coalition ground forces spokesman said a total of 6,348 tonnes of ammunition and other ordnance had been removed from Baghdad.
Troops have also been surveying open spaces where arms were buried. In one palm forest in northwestern Baghdad, 65 separate caches were found by troops of the 141st Field Artillery.
Large amounts of military weaponry have also made their way into civilian hands despite US efforts to clamp down on the open arms markets that operated in the weeks after Saddam's fall on April 9.
On June 1, the US-led coalition launched a two-week amnesty for Iraqis to hand in heavy weapons.
But 10 days in, commanders acknowledge that the response has been "light" in a society where everyone has a weapon and many people have acquired more amid the anarchy that followed the old regime's collapse.
As of Monday, just 44 pistols, 67 semi-automatic rifles or shotguns, 232 automatic rifles, 24 machine guns, 78 anti-tank weapons and 101 grenades or other explosive devices had been turned in, according to Centcom figures.
Coalition ground forces commander Lieutenant General David McKiernan last week played down the disappointing weapons turn-in, promising that his troops would launch a crackdown once the amnesty ended on June 14.
"I am sure that we will see a spike in arrests and once the word gets out that coalition forces are serious -- and believe me we are serious -- more weapons will be turned in," he told a news conference.
WAR.WIRE |