U.S. Embassy spokeswoman Mirembe Nantongo said the decision was made after consultations with the Iraqi governments and the convoys will be allowed to leave the heavily-fortified Green Zone on a select basis.
"All movements supported by the PSDs have to be mission-essential," she said, referring to an acronym for personal security details run by Blackwater and other security contractors protecting Westerners and other dignitaries in Iraq.
Secretary of State Condoleezza Rice said Friday she had ordered a "full and complete review" of security practices for U.S. diplomats.
Rice said she had directed the State Department to examine "how we are providing security to our diplomats."
Rice had no comment about Friday's resumption of Blackwater-protected convoys but paid tribute to the guards from the firm, one of three that provide security for U.S. diplomats and other civilian government officials in Iraq.
"We have needed and received the protection of Blackwater for a number of years now, and they have lost their own people in protecting our people in extremely dangerous circumstances," she said.
"We take very seriously what happened," Rice said, noting she had called Iraqi Prime Minister Nouri al-Maliki on Monday to express regret.
A top aide to Maliki conceded it may prove difficult for the Iraqi government to expel Western security contractors.
The aide, who spoke on condition of anonymity because the investigation into Sunday's incident was ongoing, said a way out of the Blackwater crisis could be the payment of compensation to victims' families and an agreement from all sides on a new set of rules for their operations in Iraq.
An Interior Ministry spokesman, Maj. Gen. Abdul-Karim Khalaf, said Friday that a report had concluded that Blackwater guards opened fire from four positions on a square in western Baghdad after a vehicle near their convoy failed to stop.
Iraqi witnesses and officials have offered several conflicting versions of events and it was not clear how the Interior Ministry report would affect a joint U.S.-Iraqi investigation.
Today in Washington, Jeremy Scahill, author of the book "Blackwater: The Rise of the World's Most Powerful Mercenary Army," told the Democratic Policy Committee that these private security firms have a long history of being particularly aggressive and abusing their power in Iraq.
"While the headlines of the past week have been focused on the fatal shootings last Sunday, this was by no means an isolated incident nor is this simply about a rogue company or rogue operators. This is about a system of unaccountable and out of control private forces that have turned Iraq into a Wild West from the very beginning of the occupation - often with the stamp of legitimacy of the U.S. government."
Senate Majority Leader Harry Reid, D-Nev., said Congress must take a look at what happened and hold these companies accountable for their actions.
"Regardless of how one might feel about the war, there should be no disagreement about this that it is long past time to confront and constrain these contracting abuses," Reid said.
Kathryn Helvenston-Wettengel, whose son Scott was killed while working for Blackwater, told the committee that the company's failed promises to provide adequate protection for its guards put her son in peril that might have been avoided.
Helvenston-Wettengel's son was killed March 31st, 2004 when their convoy was ambushed while picking up empty kitchen equipment from the 82nd Airborne Division. She said had Blackwater provided a rear gunner as it had promised, their convoy would have seen the insurgents ambushing from behind.
"The day Scottie died was his first day ever in Iraq. Scottie and the others that died with him were promised so many things - not one of those promises were kept. For example, it was undisputed that they did not have armored vehicles. They did not have heavy machine guns. They did not have a team of six. They did not have three people in each vehicle. They did not have a rear gunner that would have allowed them to see people approach from the rear."
CBS News national security correspondent David Martin reports that, shortly before he died, Scott Helvenston e-mailed the owner of Blackwater to complain about "extreme unprofessionalism."
"We must have laws that apply to these contractors," Kathryn Helvenston-Wettengel told the committee today. "Please, I implore you, do not allow them to continue to get away with murder."
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