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Last Updated: Wednesday, 10 December, 2003, 16:35 GMT
Critics condemn Iraq contract ban
Iraqi oil pipeline
Oil is vital to help repair the Iraqi economy

Countries set to be excluded from multi-billion reconstruction contracts in Iraq have questioned the logic of a formal ban being imposed by the US.

Old US allies and Russia stand to lose lucrative contracts because they opposed the US-led war.

France said it was studying the ban's legality, while the German Government described it as "unacceptable".

But Washington has firmly defended its decision, describing it as "appropriate and reasonable".

"Prime contracts for reconstruction funded by US taxpayer dollars should go to the Iraqi people and those countries who are working with the United States on the difficult task of helping to build a free... Iraq," White House spokesman Scott McClellan said.

He said that other nations that want to be eligible for a slice of the reconstruction money - approved by US Congress - can do so by participating militarily.

New UN bid?

Companies from the countries which opposed the US-led war stand to lose lucrative contracts worth some $18.6bn.

The 26 prime contracts in Iraq cover areas such as oil, power, communications, water, housing and public works centres.

It would not correspond... to the spirit of what we have agreed together, which is about looking together toward the future and not the past
Bela Anda
German Government spokesman

The French foreign ministry announced on Wednesday that it was studying the ban to see if it was in line with international competition law.

And in Canada, Deputy Prime Minister John Manley suggested that such a ban would make it difficult for his country to give further money for Iraqi rebuilding.

"To exclude Canadians just because they are Canadians would be unacceptable if they accept funds from Canadian taxpayers for the reconstruction of Iraq," he said.

Canada has to date contributed more than $190m to the reconstruction effort.

Apparently reacting to the US ban, Russian Defence Minister Sergei Ivanov said Moscow did not intend to write off Iraq's $8bn debt - despite earlier statements by Russian officials that they could consider restructuring it.

British officials said London believed in open bidding for contracts, with as much attention given to Iraqi contractors as possible.

GUIDE TO IRAQ RECONSTRUCTION
Basra oil refinery
26 contracts worth $18.6bn, including:
Water services
Power generation
Oil infrastructure
New Iraq army equipment

Officials refused to criticise the US position - but our world affairs correspondent Paul Reynolds says that there has been a difference of view between the US and UK for some time.

Our correspondent says the US and Britain plan to go back to the UN Security Council in the spring for a new resolution to get the UN involved in supporting the transitional Iraqi government due to take office by the end of June.

A spokesman for the German Government said that if reports of the US ban were confirmed, it would be "unacceptable".

"It would not correspond either to the spirit of what we have agreed together, which is about looking together toward the future and not the past," said Bela Anda.

The US ban will appease countries such as Britain, Italy and Spain, which provided troops to Iraq but whose companies were excluded from the first round of deals that went to US firms.

The biggest contractor in Iraq is Bechtel, the American construction firm that has an estimated $1bn contract to rebuild Iraq's infrastructure.

The other major US contractor is Kellogg, Brown & Root (KBR), a subsidiary of the oilfield services company Halliburton, whose former boss is US Vice President Dick Cheney.


WATCH AND LISTEN
The BBC's Nick Childs
"The guidelines state clearly that competition for the prime contracts should be limited"



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