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Iraq freed a jailed Hezbollah commander wanted by the United States on Friday, his lawyer said, returning him home to Lebanon in a move that underscores Washington's waning influence in Baghdad since last December's troop pullout.

The U.S. believes Ali Mussa Daqduq is a top threat to Americans in the Middle East, and had asked Baghdad to extradite him even before two Iraqi courts found him not guilty of masterminding a complex raid that left five American soldiers dead in 2007. But Iraq's Shiite-led government, which is close to Hezbollah's top patron Iran, refused to hand him over.

The move vastly complicates the Obama administration's efforts to prosecute Daqduq, as Shiite Hezbollah dominates the Lebanese government and the U.S. has no extradition treaty with the country. State Department spokeswoman Victoria Nuland said the U.S. was upset with the decision and had made its feelings known to the Iraqi government.

"Daqduq should be held accountable for his crimes," Nuland told reporters, adding that the U.S. would pursue him with all legal means possible, and had been in contact with Lebanon on the issue.

Washington believes Daqduq worked with Iranian agents to train Shiite militias to target the U.S. military during the years of sectarian violence that gripped Iraq over the last decade, and that he was behind the raid on a U.S. military base in the holy city of Karbala where the five soldiers were killed — four of them shot after being kidnapped.

U.S. forces held Daqduq for four years, handing him over to Iraqi authorities when American troops left Iraq. Meanwhile, Iran has seen its influence in the country grow.

Two Iraqi courts, including the country's central criminal court, subsequently found him not guilty of the Karbala attack. However, until now he had been held under house arrest in the heavily fortified Green Zone in central Baghdad.

Analyst Hadi Jalo said Iraqi officials had likely sought to improve their standing among Iraq's Shiite-majority population by ordering the release, in a sign domestic concerns trumped the need to please Washington over the matter.

"This indicates how weak American pressure has become. Iraq is able to take decisions that are no longer in step with the Americans," Jalo said.

Daqduq's lawyer, Abdul-Mahdi al-Mitairi, said authorities had decided to free his client after U.S. elections, suggesting they had sought to avoid embarrassing President Barack Obama during his re-election campaign.

"He was supposed to be released once the court found him not guilty but because of the U.S. presidential elections, he was kept under house arrest," al-Mitairi said.

In the brazen attack Washington accuses Daqduq of masterminding, almost a dozen gunmen speaking English, wearing U.S. military uniforms and carrying American weapons killed one soldier and captured four at a provincial army headquarters, shooting the prisoners later. The assailants had traveled in black GMC Suburban vehicles — the type used by U.S. government convoys at the time.

Daqduq was captured in the southern Iraqi city of Basra months later along with the head of a hardline Shiite militia.

The Obama administration at the time faced sharp criticism for allowing Iraqi courts to try the Hezbollah militant. Republican politicians had called for Daqduq to be transferred to Guantanamo Bay; administration officials hoped to try him in regular U.S. military courts.

After hearing the news, Sen. John McCain, R-Ariz., called the decision an "outrage," urging the government to take "appropriate actions" with regard to the Iraqi government.

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Associated Press writers Sinan Salaheddin in Baghdad, and Lolita C. Baldor and Bradley Klapper in Washington contributed to this report.