The decision, posted on a Pentagon website, lists 63 countries eligible to compete for 26 prime contracts.

Deputy Defence Secretary Paul Wolfowitz cited "essential security interests" of the United States for the decision, taken on 5 December.

The Pentagon also intends to use the $18.6 billion in prime contracts as a bargaining chip to get more countries to send troops to Iraq.

The contracts range from equipping the new Iraqi army to rebuilding and upgrading power and water plants, roads, oil installations and communications systems.

Expectedly, France, Germany, Russia and Canada are among the countries not named on the list.

"It is necessary for the protection of the essential security interests of the United States to limit competition for the prime contracts of these procurements to companies from the United States, Iraq, coalition partners and force-contributing nations," the Wolfowitz finding said.

"Thus it is clearly in the public interest to limit prime contracts to companies from these countries," it said.

Expanding cooperation

The document said "every effort must be made to expand international cooperation in Iraq".

Paul Wolfowitz is seen as the main
player behind the document

"Limiting competition for prime contracts will encourage the expansion of international cooperation in Iraq and in future efforts," it said.

However, companies barred from competing as prime contractors could still work as sub-contractors on the Iraqi projects, said Major Joe Yoswa, a Pentagon spokesman.

The contracts will be funded from the $18.6 billion approved by the US Congress to underwrite a massive reconstruction programme in Iraq.

The Pentagon document also said that the number of troops from other countries had increased from 14,000 to 23,700 since major combat operations were declared closed.

Meanwhile, the US army has warned that returning divisions will be at a low state of readiness for up to six months, leaving only two combat ready divisions available in the event of a second war in Korea or elsewhere.