US defends ban on Iraq contracts

Oil contracts are among the lucrative tenders on offer

Washington has defended its decision to bar countries opposed to the Iraq war from bidding for prime reconstruction contracts worth $18.6bn.

It follows a wave of anger from rejected nations such as France, Russia and Germany over the US announcement.

The Pentagon has insisted the decision is not a punishment and the list of those eligible is not closed or fixed.

Spokesman Larry Di Rita said it was hoped more countries might consider joining the US-led coalition.

The 26 contracts - covering areas such as oil, power, communications and housing - are on offer to firms from the US, Iraq and countries involved in the coalition effort.

The decision was met with a chorus of disapproval from Europe and Canada as well as critics at home.

This is meant to be inclusive and potentially expansive, not punitive Larry Di Rita

Russia warned it may not write off Iraq's $8bn debt - as it had previously suggested.

Canada, which has so far given $190m to the reconstruction effort, said it might be difficult to give any more cash.

The European Union, whose leading members France and Germany stand to lose out, is to examine if the ban is in line with US obligations under world trade rules.

'Confrontation approach'

Critics fear Washington's move will discourage countries from helping to rebuild Iraq, and complicate US efforts to restructure Iraq's debt, much of it owed to France, Germany and Russia.

Democrat presidential candidate Howard Dean said the policy was an example of the Bush administration's "confrontation" approach "all over the world".

GUIDE TO IRAQ RECONSTRUCTION 26 contracts worth $18.6bn, including: Water services Power generation Oil infrastructure New Iraq army equipment Full list of US contracts

Mr Di Rita insisted the decision was not meant to punish opponents to the war, but to encourage more countries to join the coalition.

"This is meant to be inclusive and potentially expansive, not punitive," he said.

He said any country who decided to become a member of the coalition would be eligible for contracts.

"If a country wants to contribute forces to Iraq and decides to contribute forces to Iraq... they would immediately be eligible for this consideration," he said.

Telephone calls

White House spokesman Sean McCormack said President Bush had spoken by telephone to the leaders of Russia, France and Germany about the issue.

His calls were made in preparation for a visit to Europe by former US Secretary of State James Baker who will be discussing ways of reducing Iraq's debt.

President Bush "indicated he'd keep lines of communication open" with the three leaders, said Mr McCormack.

However, White House officials have made it clear the administration has no intention of changing its policy.

Another White House official, Scott McClellan, said President Bush fully supported the policy to award contracts to war allies.

"These are countries that have been with us from day one," he said. "These are countries that are contributing forces, that have been making sacrifices, and that's why this decision was made".

He said companies from anti-war countries could compete for contracts from a $13bn fund pledged at an international donors' conference in Madrid.

The ban does not prevent companies from winning subcontracts.