By Nadim Ladki
BAGHDAD (Reuters) - Saddam Hussein is a broken man and has supplied intelligence that helped capture two top wanted men, officials said on Monday, but violence raged on in Iraq despite his arrest and bombings killed nine people.
The U.S.-backed Iraqi Governing Council said Saddam would go on trial facing a possible death penalty for his three decades of ruthless rule, and President Bush said it was up to Iraqis to decide his fate provided the court hearing was fair.
"I found a very broken man," said Governing Council member Muwaffaq al-Rubaiye, who met Saddam on Sunday with Iraq's U.S. governor Paul Bremer a day after his capture by American troops.
"He was, I think, psychologically ruined and very demoralized," Rubaiye said. "He felt safer with the Americans."
A U.S. military spokesman, Captain Jason Beck, said intelligence from Saddam and documents in his briefcase "led to the capture of two important men," one a senior figure associated with the former president.
Pictures of a haggard Saddam in captivity were a far cry from the man who bludgeoned his way to power, invaded Kuwait and Iran and was accused of putting thousands to death in Iraq.
His whereabouts were unclear but officials dismissed reports U.S. forces had whisked him to another country.
BUSH SAYS TRIAL MUST BE FAIR
In Washington, Bush told a news conference the United States and Iraq would organize Saddam's trial but Iraqis would decide whether he would face possible execution.
"We will work with the Iraqis to develop a way to try him that will stand international scrutiny," Bush said.
"I've got my own personal views (on the death penalty). This is a brutal dictator... It's going to be up to the Iraqis to make those decisions," said Bush, former governor of Texas, the U.S. state with the most executions, 312, since 1976.
Bush, seeking re-election next year with Iraq high on the agenda due to a relentless rise in U.S. casualties from attacks blamed on Saddam supporters and foreign Islamic militants, said Iraq was on the right track.
But he added: "The terrorists in Iraq remain dangerous. The work of our coalition remains difficult and will require further sacrifice. Yet it should now be clear to all: Iraq is on the path to freedom."
Attacks have killed nearly 200 U.S. soldiers since Bush declared major combat over on May 1.
As many Iraqis celebrated Saddam's humiliation, two suicide car bombings at Baghdad area police stations killed both attackers and seven other people. Some 30 people were wounded.
With Washington demanding Iraq's neighbors stop anti-U.S. fighters entering the country, Iranian Foreign Minister Kamal Kharrazi said Tehran was trying to tighten border controls.
More details emerged of how Saddam was caught in a pit hideout near his northern home town of Tikrit.
Despite his unkempt, bewildered look seen around the world on a U.S. military film, he reacted as if still in power.
"I'm Saddam Hussein, I'm the president of Iraq and I'm willing to negotiate," a U.S. official quoted him as saying. "The response from soldiers was: 'President Bush sends his regards'."
U.S. troops were led to Saddam, hiding near a shepherd's hut in an orange grove, by a local Iraqi detained on Saturday.
Saddam, with a $25 million reward on his head, was said by the U.S. military to be disorientated when found. The pit was covered with polystyrene and a rug. He had $750,000 with him.
MARKETS SHRUG OFF SADDAM CAPTURE
He was captured in a so-called Sunni Muslim "triangle," including Baghdad, where most of the attacks have occurred. Saddam, a Sunni, repressed Iraq's Shi'ite majority.
In Tikrit, U.S. soldiers used batons to disperse protesters chanting: "We sacrifice our blood and souls for you Saddam." In Baghdad, Iraqi police fired into the air to disperse hundreds of people shouting: "We want Saddam back."
U.S. stock prices wiped out earlier gains triggered by Saddam's capture, and oil prices edged higher on fears sabotage attacks on Iraq's oil infrastructure could go on.
Near unanimous satisfaction among international powers at Saddam's arrest gave way to fresh diplomatic jostling over Iraq's fate.
As Bush's envoy James Baker set off to persuade European governments to waive $125 billion of debts run up by Saddam, France seized the initiative by offering the new Iraqi leadership a rapid deal.
But sources in the Paris Club of creditor nations said it would be conditional on Washington returning full sovereignty to Baghdad and on an internationally approved reconstruction plan.
Washington resisted pressure for it to hand control of Iraq to the U.N. Bush stuck to his guns on Monday in barring states that opposed the Iraq war such as France, Germany and Russia from lucrative reconstruction contracts worth $18.6 billion. A Saddam trial could be a legal and diplomatic minefield.
Asked if the death penalty could be considered, Governing Council leader Abdelaziz al-Hakim said: "Yes. Absolutely."
U.N. Secretary-General Kofi Annan joined voices against any execution of Saddam and said a trial would have to meet international standards. Rights groups say Iraq lacks judges, lawyers and institutions to conduct fair trials without help.
Time magazine, quoting a U.S. intelligence official, said Saddam denied having had weapons of mass destruction -- Bush's reason for waging war to oust him.