World

Furor Over Iraq Contracts

December 12, 2003 / 6:58 AM EST / CBS/AP

President Bush, under fire from allies, defended an administration policy that excludes countries that opposed the war in Iraq from sharing in contracts for Iraq's reconstruction.

Mr. Bush said Thursday that countries that sent troops to Iraq were entitled to take part in the $18 billion in American-financed reconstruction projects while other nations are shut out.

"It's very simple," the president said. "Our people risked their lives, friendly coalition folks risked their lives and therefore the contracting is going to reflect that."

The policy effectively excludes countries such as Russia, France, Germany and Canada.

Critics said the move could complicate American efforts to restructure Iraq's estimated $125 billion foreign debt. But Mr. Bush said he still hoped that Russia, France, Germany and others would agree to forgive Iraq's debt burden.

"It would be a significant contribution for which we would be very grateful," Mr. Bush said, talking with reporters at the end of a Cabinet meeting at the White House.

In other recent developments:

The U.S. military says one soldier was killed and 14 others injured in a suicide bomb attack Thursday at the headquarters of the 82nd Airborne Division west of Baghdad.

Time magazine correspondent Michael Weisskopf and photographer James Nachtwey were wounded along with two U.S. soldiers when a grenade was tossed into their Humvee in Baghdad, the military and the magazine said Thursday. The military said one of the journalists was severely wounded and the other was slightly injured.

Also Thursday, Ghazi al-Talabani, director of the Northern Field Protection Force, which guards pipelines in northern Iraq, said an explosion set a pipeline ablaze, forcing officials to halt the flow.

U.S. forces in Tikrit arrested three men believed to be leaders of a guerrilla cell responsible for attacks against American troops and Iraqi civilians in Saddam Hussein's volatile hometown. The raiders seized weapons and bomb-making gear, a U.S. commander said Thursday.

In Samarra, another volatile city 60 miles north of Baghdad, two members of the U.S.-led paramilitary Civil Defense Corps were killed overnight by unidentified gunmen while on patrol, witnesses said Thursday.

In Baghdad, guerrillas struck a U.S. Air Force C-17 transport plane on takeoff with a ground-fired missile, forcing it to return to the capital's international airport, a senior Pentagon official said Wednesday.

Europe reacted swiftly and angrily to the administration's decision to bar opponents of the war in Iraq from reconstruction contracts.

French President Jacques Chirac, German Chancellor Gerhard Schroeder and Russian President Vladimir Putin all raised the contracting issue during previously scheduled telephone calls with President Bush on Wednesday, the White House said.

Amid the furor, the United States postponed a conference that was to have taken place Thursday for companies seeking reconstruction contracts in Iraq. The conference, at which the contract requests were to have been made public, is now scheduled for Dec. 19 at a Washington hotel. The delay was blamed on scheduling conflicts.

While the White House defended the policy on Iraq contracts, The New York Times reports officials were upset by the tone and timing of the directive, issued by deputy defense secretary Paul D. Wolfowitz just hours before Mr. Bush was scheduled to speak with foreign leaders about wiping out Iraq's debt.

The Times reports a senior administration official said the president was "distinctly unhappy" about having to talk with leaders who had just been told they would be excluded from the contracts.

Russia, which along with France is one of Iraq's biggest debtors, signaled it would take a hard line on restructuring after being excluded from contracts.

"Iraq's debt to the Russia Federation comes to $8 billion and as far as the Russian government's position on this, it is not planning any kind of a write-off of that debt," Defense Minister Sergei Ivanov told reporters. "Iraq is not a poor country," he said.

But Germany said Thursday there was "no direct link" between debt relief and the U.S. exclusion of German companies from reconstruction contracts.

"The stabilization of Iraq is also in Germany's strategic interest," said Bela Anda, spokesman for Chancellor Gerhard Schroeder.

The European Commission called the contract ban a "political mistake," and said it would examine the contracts to see if Washington had violated its commitments to the World Trade Organization.

"This is a gratuitous and extremely unhelpful decision at a time when there is a general recognition of the need for the international community to work together for stability and reconstruction in Iraq," Chris Patten, the European Union's commissioner for international relations, said through a spokesman.

The Pentagon directive said restricting contract bids was necessary to protect essential security interests. WTO rules allow for exemptions based on national security.

Canada's deputy prime minister, John Manley, said Wednesday that the decision would make it "difficult for us to give further money for the reconstruction of Iraq." Canadian officials said the country has contributed $225 million thus far.

But the German newspaper Der Tagesspiegel sympathized with the U.S. position. "It is childish to reject the war but to be offended when afterwards no profit is to be made from reconstruction," the newspaper said Thursday.

France has made no official comment on the contract ban, but political analysts said the French government was stunned, after what appeared to be months of warming ties between Paris and Washington following France's opposition to the U.S.-led war.

"Paris has the feeling that the (U.S.) Secretary of Defense has decided to use some kind of retaliation, which was considered four or five months ago, but didn't seem to be on the agenda right now," said Francois Gere, director of the Paris-based Diplomatic and Defense Institute.