THE US: The Bush administration scrambled yesterday to repair relations with furious allies whose firms have been banned by the Pentagon from bidding for lucrative reconstruction contracts in Iraq.
The decision has turned into a diplomatic debacle for the White House, and a deep embarrassment for President Bush - at least in its timing.
The leaders of France, Germany and Russia learned they had been excluded from the list of 63 favoured countries which had been posted on a Pentagon website just before Mr Bush called them on Wednesday to ask them to forgive Iraq's debts.
A senior administration official said Mr Bush was "distinctly unhappy" about having to deal with foreign leaders in such circumstances.
Foreign leaders and diplomats, in a flood of calls to the State Department and US embassies, expressed particular resentment about the exclusion of US allies as "necessary for the protection of the essential security interests of the United States".
US officials said this was inserted for legal reasons, but diplomats said the effect was to imply that firms in countries such as France and Russia could not be trusted in Iraq.
In Canada, incoming prime minister Mr Paul Martin - who has taken a pro-US line in foreign affairs - reminded Washington coldly that Canada had pledged nearly $300 million for Iraq reconstruction and Canadian troops had been killed fighting in Afghanistan.
While reaffirming the policy yesterday at a cabinet meeting, Mr Bush appeared to back down over Canada's exclusion in a telephone call to outgoing Prime Minister Jean Chretien.
Mr Chretien said afterwards that Mr Bush expressed gratitude for Canadian help in the war on terrorism, and was "working" to include Canada in major contracts to help rebuild Iraq.
Analysts said that the vast bulk of the $18.6 billion would go in sub-contracts and firms from France and Russia would be called upon to provide spare parts for pre-war equipment that had been installed.
The Pentagon decision was driven by Deputy Defence Secretary Mr Paul Wolfowitz, but US officials said it was approved by other senior officials, including Secretary of State Mr Colin Powell.
At the cabinet meeting, Mr Bush said he still hoped that Russia, France, Germany and others would agree to forgive Iraq's massive debt burden.
"It would be a significant contribution for which we would be very grateful," said Mr Bush. "The US people, the taxpayers, understand why it makes sense for countries that risked lives to participate in the contracts in Iraq. It's very simple. Our people risked their lives, friendly coalition folks risked their lives and therefore the contracting is going to reflect that." Domestic criticism mounted yesterday, however, with the New York Times calling it a "Bid for Isolation" and said in an editorial that no amount of "sweet deals" for American companies, including the "extra dollar or so a gallon that Haliburton charges for shipping fuel into Iraq" would repay American taxpayers for the cost of going it largely alone.
Former US trade representative Ms Charlene Barshefsky said: "This action will only feed the perception in the Middle East that Iraq is viewed in the US as a spoil of war." Mr Bush phoned the leaders of France, Germany and Russia to say he was sending former secretary of state Mr James Baker as an emissary to talk about Iraq's debt relief. Mr Baker is to leave the US on Monday to visit Russia, Britain, France, Italy and Germany.