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KABUL (Reuters) - Afghanistan's main opposition on Wednesday criticized President Hamid Karzai's removal of foreign observers from a U.N.-backed electoral watchdog as "autocratic" and urged international pressure to ensure impartial elections.

The five-member Electoral Complaints Commission (ECC), tasked with reviewing voting fraud, previously had three foreign members appointed by the United Nations and last year nullified a third of Karzai's votes in the presidential poll as fraudulent.

Karzai's decree to change the law could raise doubts over the panel's independence and set off new political tensions as foreign and local troops press ahead with an offensive against the Taliban in an early test of U.S. President Barack Obama's build-up of troops.

It could also put him in a new conflict with Western donors who have said they will not fund September 18 parliamentary elections without electoral reforms.

The opposition National Front urged donor nations, legislators and other political parties to develop a mechanism to guarantee transparent elections.

"This shows that Mr. Karzai is using one of his autocratic methods by not consulting with parliament, civil society and political parties," Front spokesman Fazel Sangcharaki said.

Once a darling of the West, Karzai has been under fire over poor governance and for failing to clamp down on corruption and the illegal drugs industry, both of which are seen to be feeding the Taliban-led insurgency.

Yet Karzai has overcome crises. He has secured the support of regional power brokers belonging to various ethnic groups and won the presidential poll by giving them positions in the government.

Sayed Yousuf Halim, head of the Justice Ministry's legislation department, said the decree took effect on February 13. Karzai now has the power to choose the ECC's members after consulting with the chief justice and heads of parliament's two chambers, he said.

Karzai's most important backer, the United States, did not criticizethe move but NATO coalition member Canada expressed concern it could weaken the watchdog and imperil the credibility of the parliamentary elections.

"A strong and independent ECC is vital for the future of a democratic Afghanistan, and any efforts to weaken this body are disturbing," Canadian Foreign Minister Lawrence Cannon said.

British Foreign Secretary David Miliband said his government will be "extremely concerned" to see who is nominated.

"We will have to see who he appoints, because that will obviously be a very important indication of the sort of independence that might exist or not," he said in London.

Free and fair elections are part of a Western strategy to return the nation to stability while a NATO-led military operation battles a renewed Taliban insurgency with the aim of returning all of Afghanistan to the Karzai-led government.

"This is a blow to the process of universal, fair and free elections," Afghan opposition lawmaker Fawziya Koufi said.

On Tuesday, Karzai's spokesman, Siamak Herawi, said the Afghan government had long wanted to "Afghanize" the electoral process. He said parliament could not overturn the law, since Karzai signed it into effect when the legislature was in recess.

Analysts say the election watchdog move could play into the hands of the Taliban if its triggers more controversy.

"He (Karzai) saw how the presidential election played out and is now trying to ensure that he doesn't face the same problems in the parliamentary polls, one where he will be dealing with multiple opponents as opposed to one," said Kamran Bokhari, regional South Asia director at global intelligence firm STRATFOR.

"Ultimately, this works to the advantage of the Taliban, especially in the context of the U.S. surge."

Opponents criticized the national elections body for failing to halt last year's fraud, which the ECC documented before throwing out nearly a million votes. That left Karzai faced with a runoff until his opponent pulled out.

(Additional reporting and writing by Michael Georgy; Editing by Bryson Hull and Angus MacSwan)