David E. Sanger and Douglas Jehl
New York Times
December 11, 2003

Washington: President Bush found himself in the awkward position Wednesday of calling the leaders of France, Germany and Russia to ask them to forgive Iraq’s debts, just a day after the Pentagon excluded those countries, and others such as Canada and China, from $18 billion in U.S.-financed Iraqi reconstruction projects.

White House officials were fuming about the timing and the tone of the Pentagon’s directive, even while conceding that they had approved the Pentagon policy of limiting contracts to the 63 countries that have given the United States political or military aid in Iraq.

Many countries excluded from the list, including close allies such as Canada, reacted angrily Wednesday to the Pentagon action.

They were incensed, in part, by the Pentagon’s explanation in a memorandum that the restrictions were required “for the protection of the essential security interests of the United States.”

Countries excluded were seething. Russia’s defense minister, Sergei Ivanov, when asked about the Pentagon decision, responded by ruling out any debt write-off for Iraq.

Canada expressed shock, with Deputy Prime Minister John Manley suggesting crisply that “it would be difficult” to add to the $190 million already given for reconstruction in Iraq.

White House officials said that Bush and his aides had been surprised by both the timing and the blunt wording of the Pentagon’s declaration.

But they said that the White House had signed off on the policy, after a committee of deputies from a number of departments and the National Security Council agreed that the most lucrative contracts must be reserved for political or military supporters.

Those officials apparently did not realize that the memo, signed by Deputy Secretary of Defense Paul Wolfowitz, would appear on a Defense Department Web site hours before Bush was scheduled to ask world leaders to receive James Baker III, the former secretary of state, who is heading up the effort to wipe out Iraq’s debt. Baker met with Bush on Wednesday.

Several of Bush’s aides, speaking on condition of anonymity, said they feared that the memo would undercut the White House’s efforts to repair relations with traditional allies who had opposed the invasion of Iraq.

White House officials declined to say how Bush explained the Pentagon policy to President Vladimir Putin of Russia, President Jacques Chirac of France and Chancellor Gerhard Schroeder of Germany.

France and Russia were two of the Saddam Hussein government’s largest creditors.

But officials hinted by the end of the day that 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.

A senior administration official described Bush as “distinctly unhappy” about dealing with foreign leaders who had just learned of their exclusion from the contracts.

Under the Pentagon rules, only companies whose countries appear on the U.S. 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 prime contracts, but China, whose prime minister just left the White House with promises of an expanded trade relationship, is excluded, along with Israel.

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

“What we did was toss away our leverage,” one senior U.S. diplomat said.

A senior official at the State Department was asked during a meeting Wednesday how he expected the move to affect the responses of Russia, France and Germany to the U.S. request.

He responded, “Go ask Jim Baker,” according to another senior official, who said of Baker, “He’s the one who’s going to be carrying the water and he’s going to be the one who finds out.”

In public, however, the White House defended the approach.

Scott McClellan, the White House spokesman, said that “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.”