Oil is vital to help repair the Iraqi economy
The European Union is to examine the legality of a US decision to bar many countries from multi-billion-dollar reconstruction contracts in Iraq.
The ban includes leading EU members France and Germany, which, alongside Russia, stand to lose lucrative deals because they opposed the US-led war.
The EU's executive arm said it would examine if the ban was in line with US obligations under world trade rules.
The US has defended its decision, describing it as "appropriate".
White House spokesman Scott McClellan said that other nations that wanted to be eligible for a slice of the reconstruction money could do so by participating militarily.
Security v free trade
Companies from the countries which opposed the US-led war stand to lose out on bidding for 26 prime contracts worth $18.6bn.
They cover areas such as oil, power, communications, water and housing.
In a statement, the European Commission said it would examine the 26 contracts to determine whether they were in line with the commitments undertaken by the US in the context of the World Trade Organisation.
"As a first measure the European Commission will be requesting all necessary information from the US authorities concerned on the grounds for these limitations," it added.
US Deputy Defence Secretary Paul Wolfowitz has said the policy is necessary to protect America's "essential security interests".
But there has been a chorus of criticism of the US decision.
The French foreign ministry has announced that it, too, is studying the ban to see if it was in line with international competition law.
A spokesman for the German Government said that, if reports of the US ban were confirmed, it would be "unacceptable".
In its reaction, 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 might consider restructuring it.
GUIDE TO IRAQ RECONSTRUCTION
26 contracts worth $18.6bn, including:
New Iraq army equipment
And in Canada, Deputy Prime Minister John Manley suggested that such a ban would make it difficult for his country to give any more money for rebuilding Iraq.
Canada has to date contributed more than $190m to the reconstruction effort.
British officials said London believed in open bidding for contracts, with as much attention given to Iraqi contractors as possible.
Officials declined to criticise the US position - but our world affairs correspondent Paul Reynolds says that there has been a difference of opinion 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 a few months' time for a new resolution to get the UN involved in supporting the transitional Iraqi Government due to take office by the end of June.
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.