Bush Defends Policy on Awarding Contracts to Rebuild Iraq:
"White House officials declined to say how Mr. Bush explained the Pentagon policy to President Vladimir V. Putin of Russia, President Jacques Chirac of France and Chancellor Gerhard Schröder of Germany. France and Russia were two of the largest creditors of Saddam Hussein's government. But officials hinted, by the end of the day, that Mr. Baker might be able to show flexibility to countries that write down Iraqi debt.

'I can't imagine that if you are asking to do stuff for Iraq that this is going to help,' a senior State Department official said late Wednesday."

Under the Pentagon rules, only companies whose countries are on the American list of "coalition nations" are eligible to compete for the prime contracts, though they could act as subcontractors. The result is that the Solomon Islands, Uganda and Samoa may compete for the contracts, but China, whose premier just left the White House with promises of an expanded trade relationship, is excluded, along with Israel.

Several of Mr. Bush's aides wondered why the administration had not simply adopted a policy of giving preference to prime contracts to members of the coalition, without barring any countries outright.

"What we did was toss away our leverage," one senior American diplomat said. "We could have put together a policy that said, `The more you help, the more contracts you may be able to gain.' " Instead, the official said, "we found a new way to alienate them."

In public, however, the White House defended the approach. Scott McClellan, the White House spokesman, said "the United States and coalition countries, as well as others that are contributing forces to the efforts there, and the Iraqi people themselves are the ones that have been helping and sacrificing to build a free and prosperous nation for the Iraqi people."

He said contracts stemming from aid to Iraq pledged by donor nations in Madrid last month would be open to broad international competition.

Richard A. Boucher, the State Department spokesman, said Wednesday that while the bidding restriction applied to prime contracts, "there are very few restrictions on subcontractors."

He also said the World Bank and International Monetary Fund "may have different, or their own, rules for how they contract."

When the committee was drafting the policy, officials said, there was some discussion about whether it would be wise to declare that excluding noncoalition members was in the security interests of the United States. As a matter of trade law, countries are often allowed to limit trade with other nations on national security grounds.

"The intent was to give us the legal cover to make the decision," one official said.

But the phrase angered officials of other nations because it seemed to suggest they were a security risk.…

http://www.nytimes.com/2003/12/11/international/middleeast/10CND-PREX.html?hp=&pagewanted=all&position=