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Iraq Contract Policy Complicates Planned Debt Talks

Several of the leading war critics, including France, Germany and Russia, are among the country’s biggest creditors whose help Washington needs if it is to reduce Iraq’s $127 billion foreign debt.

“As for the Russian government’s position on this, it is not planning any kind of a write-off of that debt. Iraq is not a poor country,” Russian Defense Minister Sergei Ivanov said at a Thursday news conference, according to the Moscow Times. “When the Soviet Union fell apart, did anyone write off Russian debt?”

In a memo released by the Pentagon earlier this week, U.S. officials said $18.6 billion in U.S.-funded contracts to rebuild Iraq’s infrastructure are available only to companies from the United States, Iraq, coalition partners and force contributing nations.

The memo, signed by Deputy Defense Secretary Paul Wolfowitz, said the policy was in the “essential security interests of the U.S.”

The European Union said it would investigate the validity of the U.S. decision and whether the restrictions violate World Trade Organization rules.

“My reaction is that certainly it doesn’t help harmonize our relations especially,” said Romano Prodi, president of the European Commission.

U.N. Secretary-General Kofi Annan called the decision “unfortunate” and “not unifying” at a time when diplomats were trying to rebuild international cooperation on the issue of Iraq.

The decision produced a sharp exchange between German Chancellor Gerhard Schroeder and President Bush.

“International law has to be applied and restrictions are not helpful on the issue,” Schroeder said Thursday to which President Bush retorted to reporters in Washington, “International law? I better call my lawyer.”

A German government spokesman played down the remarks, saying “one should not dramatize” the debate over the Iraq contracts and pointed to an upcoming diplomatic trip by former U.S. Secretary of State James Baker that includes a stop in Berlin and a meeting with Schroeder.

“No decisions have been made yet and we should wait to see what the results are of the meetings with James Baker,” said German government spokesman Thomas Steg.

The White House is sending presidential envoy Baker, a Bush family friend, to France, Germany, Italy, Russia and Britain next week to discuss Iraq’s debt and how some of it might be relieved or restructured.

“I asked [French] President Chirac and Chancellor Schroeder and [Russian] President Putin to see Jim Baker to talk about debt restructuring. If these countries want to participate…in helping the world become more secure, by enabling Iraq to emerge as a free and peaceful country, one way to contribute is through debt restructuring,” President Bush told reporters Thursday.

Prime Minister Tony Blair of Britain, a steadfast U.S. ally which stands to benefit from Iraqi contracts, defended President Bush’s decision.

“It’s for the Americans to decide how they spend their money. This is American money,” Blair told reporters.

Meanwhile, mortars pounded the heavily fortified headquarters of the U.S.-led coalition in the so-called Green Zone of downtown Baghdad early Friday.

“There were four points of impact within the Green Zone,” a U.S. military spokeswoman said. “Two coalition force members were slightly wounded from flying debris, but the injuries are not life-threatening.”

It was the first attack on the headquarters, which is surrounded by concrete walls, since mid-November when guerrillas fired on the area on several consecutive nights. It was also the first assault on the complex since U.S. forces launched a major counteroffensive against insurgents last month.

A bomb also exploded on the outskirts of the southern city of Mahaweel, some 50 miles southeast of Baghdad, on Friday wounding two Polish soldiers on patrol in the area. A military spokesman said the soldiers’ injuries were not life threatening and that the attack was under investigation, according to wire reports.

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