A foreign security company said it was involved in a shooting in central Baghdad, making it the second time a private contractor has been accused of killing Iraqi civilians in less than a month.

Dubai-based Unity Resources Group said in a statement its guards had opened fire on a car which failed to stop. Government spokesman Ali Al Dabbagh said two women were shot dead in their car by foreign security guards in what he called an "unprovoked" attack.

The Iraqi government has accused US security firm Blackwater of "deliberately killing" 17 Iraqis on Sept. 16.

The Blackwater shooting in western Baghdad last month caused outrage among Iraqis who see security contractors as private armies that act with impunity.

"The first information that we have is that our security team was approached at speed by a vehicle which failed to stop despite an escalation of warnings which included hand signals and a signal flare," Unity Resources Group, said in a statement. "Finally shots were fired at the vehicle and it stopped."

US embassy spokeswoman Mirembe Nantongo, referring to Tuesday's incident, said "there may be a contractual relationship" with a US non-governmental organisation (NGO). She did not elaborate.

The killing in the district of Karrada came the same day the Iraqi government demanded US security company Blackwater pay families of 17 people killed in a shooting last month $8 million each in compensation.

According to Unity Resources Group's Web site it has worked in Iraq since 2004 and has an operating licence to work as a private security company.

Shopkeeper Basim Mohammed said four or five vehicles were driving down the road when the shooting happened.

"An Oldsmobile came out of this side road and it had two women in the front and children in the back," he said.

"They fired a warning shot when they were about 80 metres away, which probably made them panic because they went forward a little bit, and (the security guards) started firing at her from all directions," Mohammed told Reuters Television.

Video footage showed shattered glass and pools of blood on the pavement. Traffic police said the car had been towed away.

Unity Resources Group is on a US State Department list of security firms doing business in Iraq.

The State Department Web site said the company was staffed and managed by experienced security professionals drawn from the special forces and police SWAT communities of the US, United Kingdom, Australia, New Zealand and Europe.

"We deeply regret this incident and will continue to pass on further information when the facts have been verified and the necessary people and authorities notified," the company said.

Foreign security firms have immunity from Iraqi law under a 2004 regulation written while Iraq was under US administration following the toppling of Saddam Hussein.

The Sept 16 incident sparked a larger US inquiry into private contractors in Iraq, while US Secretary of State Condoleezza Rice has ordered tighter controls on Blackwater.  Reuters