UPDATE 3-Iraq passes election law, Obama hails milestone

* Election law delay had put poll date in doubt

* Legislation largely avoids fateful decision on Kirkuk

* Parliament chooses open list system for election

(Adds electoral commission on likely date, Maliki)

By Ahmed Rasheed and Muhanad Mohammed

BAGHDAD, Nov 8 (Reuters) - Iraqi lawmakers passed a long-delayed election law on Sunday to pave the way for a January poll, after parliament sidestepped a potentially explosive row over the oil-producing city of Kirkuk.

Prolonged wrangling over the law had thrown the election date into doubt, and U.S. officials had feared the row would hit plans to draw down U.S. troops next year.

"Tough challenges remain and I am sure there will be difficult days to come but this agreement advances the political progress that can bring lasting peace and unity to Iraq, and allow for an orderly and responsible transition of American combat troops out of Iraq by next September," U.S. President Barack Obama said. [nN08239560]

The parliamentary election is seen as a crucial test for the world's 11th largest crude oil producer as it emerges from carnage unleashed by the U.S. invasion in 2003.