Bush sticks with Iraqi contract ban

updated 7:34 p.m. ET Dec. 11, 2003

WASHINGTON - President Bush rebuffed growing criticism Thursday, most recently from U.N. Secretary-General Kofi Annan, on the U.S. policy banning opponents of the war in Iraq from receiving billions of dollars in reconstruction contracts.

"It's very simple," he told reporters at the White House after a Cabinet meeting. "Our people risked their lives, friendly coalition folks risked their lives, and therefore the contracting is going to reflect that."

The administration's policy effectively excludes companies from countries such as Russia, France, Germany and Canada.

The president said he still hoped those countries and others would agree to forgive Iraq's crushing debt burden. "It would be a significant contribution for which we would be very grateful," Bush said.

In telephone conversations Wednesday, Bush asked the leaders of Russia, France and Germany to forgive Iraq's debts. He said he would send former Secretary of State James Baker next week as an emissary to talk about debt relief. The leaders used the conversations to air their concerns about the contracting policy.

Asked about the European Union's claim that the policy might violate the World Trade Organization commitments, the president said, "I'd better consult my lawyer."

'Work together,' Annan urges
Annan, speaking at a joint news conference in Berlin with German Chancellor Gerhard Schroeder, urged the Bush administration to reconsider, calling the limiting of contracts unfortunate and not helpful for restoring transatlantic relations hurt by the war.

"It is up to those who took the decision to reverse it or maintain it, and I hope something will be done about it," Annan said. "It is time we tried to rebuild international consensus and work together and pool our efforts ... to stabilize Iraq."

Schroeder, for his part, said that international law must apply and that it was the task of all countries to help with reconstruction in Iraq.

"It makes little sense to discuss who can and who cannot individually participate economically in reconstruction," he said. "International law must apply here, and it does not help things to look backwards and ... more directed at the past."

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

A Pentagon directive says countries wanting a share of the $18.6 billion in reconstruction contracts in the 2004 U.S. budget must participate militarily in the postwar effort.

The European Commission called the contract ban a "political mistake" and said it would examine the contracts to see whether Washington had violated its commitments to the WTO.

"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 French Foreign Ministry has declined to comment on the U.S. decision. However, the conservative French newspaper Le Figaro said Thursday that the exclusion was "bordering on provocation."

"For the United States, it is truly a shame that the politics of George W. Bush be presented, once again, in such a petty manner," the newspaper said. "The anti-Americanism that needs to be combated is going to be revived."

Britain backs U.S.
However Britain, which says it will award contracts on merit and has not excluded any countries, expressed support for the U.S. policy. Foreign Secretary Jack Straw said it was up to the United States to decide how it spent its tax revenue.

"The United States Congress is fully entitled to say the tax dollars are spent in one way, which in this particular case is contracts limited to those active allies in Iraq, rather than another way," Straw said. "We have talked to them about it, but the decision is for them, not ours."

The ban could complicate U.S. efforts to restructure Iraq's estimated $125 billion debt, largely owed to France, Germany and Russia — all shut out of the bidding because they opposed the war.

Russia signaled that 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."

Foreign Minister Igor Ivanov suggested that the contract ban could undermine the international campaign against terrorism.

"The activities in Iraq split the international community and reduced its possibilities in the fight against international terrorism," Ivanov said. "No further steps or activities that would lead to a further division can be allowed today."

Other contracts open
White House press secretary Scott McClellan said companies from anti-war countries could compete for contracts being financed by a separate international fund that the White House estimates will be worth $13 billion. The ban also does not prevent companies from winning subcontracts.

Such prospects, however, did little to assuage international anger over the directive, which was  issued by Deputy Defense Secretary Paul Wolfowitz in a memo dated Friday and was posted on a Pentagon Web site Tuesday.

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, which did not sent troops to Iraq, had contributed $225 million thus far.

Paul Martin, who becomes Canada's prime minister Friday, said that the Pentagon decision was "really very difficult to fathom" and that he would raise the issue with U.S. officials.

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